Mitch Cohen, Chief Security Officer, eCurrency
The IMF has decided to shine a spotlight on corruption. At its fall meetings, the IMF held a series of meetings on the subject of corruption pointing out that corruption has a real and measurable impact on society, promoting their new framework for combatting corruption and launching their anti-corruption challenge. This focus represents a shift in willingness to openly discuss corruption.
Corruption is the abuse of public office for private gain and comes in many forms:
Embezzlement, money laundering, corrupt legislation, ghost workers, conflicts of interest, etc. The IMF estimates the cost of bribery alone at 1.5 to 2 trillion USD per year or 2% of GDP. Countries on the most corrupt end of the spectrum collect 4% of GDP less in tax revenues (footnote 1). This corruption takes money away from drinking water, electricity, healthcare, education and other public good initiatives. It distorts government priorities, weakens trust in governments, and adds to inequality.
Conversely, the reduction of corruption increases tax revenues. In Georgia, efforts to reduce corruption resulted in doubling tax revenues, from 12% to 25%, over a 5-year period (footnote 2).
Reducing corruption requires political will, prioritizing transparency and supporting free press. The IMF believes the social and economic benefits and increased tax revenues can help create the political will to fight corruption. They have also developed and announced a new framework to assist governments in reducing corruption (footnote 3).
Technology can add to the challenge or help with the challenge. Technologies such as cryptocurrencies can reduce transparency and facilitate money laundering whereas big data can increase transparency and improve anti-money laundering efforts.
eCurrency’s CBDC technology can also greatly improve transparency and AML efforts and support governments’ and the IMF’s anti-corruption campaigns. Especially useful is the eCurrency Information and Supervision (eISS) component of its CBDC platform that allows Central Banks to monitor currency transactions and integrate with AML systems.
eCurrency’s eISS provides both CBDC supervision functions and information functions.The supervision functions manage workflows related to the issuance and distribution of the CDBC and supervision of the distributed security hardware. The information functions gather real-time statistics on currency movement, velocity, wallets, transactions, etc. It provides a robust dashboard that allows access to macro-economic statistics as well as individual transactions or wallets. The platform can be used to increase transparency and help curb money laundering, funding of terrorism, and corruption.
Footnotes:
Christine Lagarde, IMF Speech, Addressing Corruption with Clarity, September 2017 https://www.imf.org/en/News/Articles/2017/09/18/sp091817-addressing-corruption-with-clarity
Vitor Gaspar, Paolo Mauro, and Paolo Medas, IMF Blog, Tackling Corruption in Government, April 2019 https://blogs.imf.org/2019/04/04/tackling-corruption-in-government/