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Global Conference on Illicit Financial Flows and Trade Mis-Invoicing

25 mayo 2018

Over 100 participants representing Customs administrations, international organizations and the private sector attended the WCO’s Global Conference on Illicit Financial Flows (IFFs) and Trade Mis-invoicing which took place at WCO Headquarters on 23 May 2018.

Since the WCO was referred to in the outcome documents from the 2016 and 2017 G20 Summits in Hangzhou and Hamburg, respectively, the Secretariat has concentrated its efforts on the production of a Study Report on the topic of IFFs and Trade Mis-invoicing. That Report, which is the culmination of many months of empirical analysis and collaboration between Administrations, the Secretariat and other industry experts, provided a narrative background to the Conference, and the WCO was pleased to welcome many of the co-authors of the Report to present their research, with thanks to funding provided by the Korean Customs Service.

The Conference aimed to provide a platform and food for thought on a multitude of IFF-related topics, and although unanimous agreement concerning definitions, methodologies and even the extent of the problem has proven challenging given the diversity of the stakeholders; from Tax and Customs administrations to Financial Intelligence Units to international organizations, and the sensitivity of the information involved, there was resounding agreement amongst participants that Customs needed to be better equipped, in terms of material and human resources, to deal with this scourge.

The opening session, which focused on assessing the magnitude of IFFs via trade mis-invoicing, was chaired by Secretary General Kunio Mikuriya, and encompassed the theoretical assessment methodologies that underpin the academic field of study devoted to IFFs; the Partner Country Method and Price Filter Method, in addition to high-level remarks from H.E. Mr. Baso Sangqu, South African Ambassador to Belgium, Luxembourg and the European Union. South Africa first raised the issue of IFFs during the G20 Summit held in Hangzhou, China, in 2016, and Ambassador Sangqu reminded participants of the real and devastating impact IFFs have on the entire continent of Africa, and urged Customs and policymakers to do all within their power to counter the flow of illicit finances, in all guises. Academics from three American universities; the University of Maryland, Central Michigan University and Pennsylvania State University, outlined the Price Filter and Partner Country Methods, concluding that the methods were not mutually exclusive, neither were they fail-safe, their application depended on the type of data available to researchers. Their analysis concurred with one of the principle conclusions of the WCO’s Study Report; cross-referencing of the two methods can be a useful mechanism to detect suspicious trade transactions.

Moving from the academic realm to the practitioner’s perspective, the second session of the Conference showcased best practices with engaging presentations featuring representatives from the Korea Customs Service and the Nigeria Customs Service, who advocated for a shift in the focus from undervaluation to overvaluation. A representative of the Financial Action Task Force outlined practical policies that Customs could implement in order to facilitate the sharing of information, such as standardizing data formats and centralizing data for operational use. A representative from the Organisation for Economic Co-operation and Development spoke about the necessity to adopt a whole-of-government approach in order to develop a coherent strategy and to avoid a scenario whereby agencies operate in silos. Inter-agency cooperation is the subject of an entire chapter of the WCO’s Study Report, and its chief recommendation in this respect is that inter-agency cooperation is paramount in the fight against IFFs.

The WCO Report also advocates for Customs to avail of the potential offered by new technologies such as blockchains, and the third and final session of the Conference explored the possibilities and potential limitations of the application of the new technology. A representative from the Institute for Austrian and International Tax Law, Vienna University of Economics and Business acknowledged that the WCO was one of the only international organisations seriously examining blockchains, and presented an overview of the principle features of the technology; the fact that it allows for the creation of immutable records and the decentralization and distribution of ledgers, in addition to a potential increase in transparency, would make it a very attractive option for Customs administrations, particularly those wishing to engage in information sharing with other agencies such as Tax administrations. A representative of Delft University of Technology outlined the principle features and benefits of a pilot project undertaken in the Netherlands by Maersk, IBM and with the cooperation of Dutch Customs; an example of cooperation and collaboration across industries and agencies, which enabled all stakeholders to leverage knowledge from the supply chain. All panelists agreed on the importance for the WCO and Customs to keep abreast of the changes in the rapidly-evolving technological realm.

The WCO’s Study Report is a living document which will be shared with Members for their comments and input, before being assessed and approved by the Council, the Organization’s highest decision-making body, in June 2018. An excerpt of the Report will be presented to the G20 for their consideration.