illicit financial flowS and micro data

who is the largest investor in spain?

who is the largest investor in brazil?

who is the largest investor in south africa?

why?

Spoiler: Tax avoidance/evasion

professionals

corporate entities

state

PARt 1: The corporations

corporate ownership is complex

Work with Valeria Secchini (PhD candidate at COPTAX, Charles University)

modeling corporate structures with higher-order dependencies

First order

Second order

...

Xu, Jian, Thanuka L. Wickramarathne, and Nitesh V. Chawla. "Representing higher-order dependencies in networks." Science advances 2.5 (2016): e1600028.

Q: Is PH a better representation of the data than PL?

Test: are the two distributions different?

Kullback-Leibler divergence > δ

Problem: overfitting

(high number of false positives)

On realistic synthetic data:

Precision: 7%

Sensitivity: 62%

Our solution: Train/Validation approach

Find pattern in train dataset, keep if it holds in validation

On realistic synthetic data:

Precision: 90%

Sensitivity: 60%

Validation

Training

60%

50%

40%

50%

100%

40%

60%

We want to find if PH is different from PL:

* Divergence between PH and PL in training > δ1

...

We want that distance to be reliable:

* Divergence between PH in training and validation > δ2

* Divergence between PL in training and validation > δ3

Which thresholds to use?

1. Create synthetic data at the path level

2. Fit a model on that data

Open questions:

How to best create synthetic data?

How to handle heterogeneity? Higher-order dependencies may be "owner dependent" (the first node in the chain)

How to handle time series? (e.g. detect changes in structures, measure effect of policy)

(lots on results: community, ranking, simulation)

Results:

Applied to multinational corporations

70 patterns, 75% containing a tax haven

PARt 2: the professionals

Corporate structures are created by tax professionals:
- Set up the entity
- Provide directors
- Manage the accounts
In the Netherlands: Trust Industry (trustkantoren)
- 94% of the services are provided to foreign companies
- 250,592 entities in 100 addresses
Providing trust services requires a license
- But it is expensive + compliance

8150 companies

9.3/window

facilitators are key

How many illegal trust service providers are in the netherlands?

detect them based on their network

Garcia-Bernardo, Javier, Joost Witteman, and Marilou Vlaanderen. "Uncovering the size of the illegal corporate service provider industry in the Netherlands: a network approach." EPJ Data Science 11.1 (2022): 23.

Strategy:

Build network features
Find similar directors to those from a licensed trust
Manually annotate a sample
Robustness test

Open questions:

Better way to find illegal directors? (GNNs? MSc of Andrea Longobucco)

Motifs mining: What are some motifs linked to providing trust services

(lots on applications: e.g., suspicious transactions)

Results:

Illegal trust service providers:

31-51% of total number of trust service providers
19-27% of all companies managed

PARt 3: The state

what type of country lose the most from tax avoidance?

Garcia-Bernardo, Javier, and Petr Janský. "Profit shifting of multinational corporations worldwide." arXiv preprint arXiv:2201.08444 (2022).

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.

Garcia-Bernardo, J., Haberly, D., Janský, P., Palanský, M., & Secchini, V. (2022). The indirect costs of corporate tax avoidance exacerbate cross-country inequality (No. 2022/33). WIDER Working Paper.