Tuesday, April 2, 2013

Top 10 countries with the highest measured cumulative illicit financial outflows between 2001 and 2010

Illicit Financial Flows from Developing Countries: 2001-2010
A December 2012 Report from Global Financial Integrity

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PDF Download Executive Summary [Low-Res] (54 KB)
PDF Download Abstract [Low-Res] (32 KB)

Illicit Financial Flows Report Update: In the third update of its original report, Global Financial Integrity introduces a new, more accurate, methodolgy to estimate illicit financial flows from the developing world.

The report for the first time includes a special analysis of sovereign wealth funds and their relationship to illicit financial flows.

Media Resources

Contact: Clark Gascoigne
+1 202-293-0740 ext 222

About the Authors

The authors would like to thank intern Simon Ramirez for his assistance with data research as well as Raymond Baker and other staff at Global Financial Integrity (GFI) for helpful comments. Any errors that remain are the authors’ responsibility.

Dev Kar, formerly a Senior Economist at the International Monetary Fund (IMF), is Lead Economist at GFI.

Sarah Freitas is an Economist at GFI.

Primary Findings

The developing world lost US$859 billion in illicit outflows in 2010, an increase of 11% over 2009. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity.

The report finds that illicit financial flows. From 2001 to 2010, developing countries lost US$5.86 trillion to illicit outflows.

Conservatively estimated, illicit financial flows have increased in every region of developing countries. Real growth of illicit flows by regions over study period is as follows:

  • Africa 23.8 percent,
  • Middle East and North Africa (MENA) 26.3 percent,
  • developing Europe 3.6 percent,
  • Asia 7.8 percent, and
  • Western Hemisphere 2.7 percent.
Top 10 countries with the highest measured cumulative illicit financial outflows between 2001 and 2010 were:

  1. China: US$2.74 trillion
  2. Mexico: US$476 billion
  3. Malaysia: US$285 billon
  4. Saudi Arabia: US$210 billion
  5. Russia: US$152 billion
  6. Philippines: US$138 billion
  7. Nigeria: US$129 billion
  8. India: US$123 billion
  9. Indonesia: US$109 billion
  10. United Arab Emirates: US$107 billion

New Methodology

The report presents four different methodologies for estimating illicit financial flows from developing countries, including the methodology used in Global Financial Integrity's previous research, and encourages scholars and experts to weigh in which best estimates illicit financial flows.

All analysis unless otherwise noted refers to the GER+HMR method, which represents a highly conservative estimate for illicit financial outflows.

Under the previous GFI methodology, the developing world lost US$1.138 trillion in 2010, a 26% increase over 2009.

IFF Drivers & Trends

  • Trade mispricing was found to account for an average of 80 percent of cumulative illicit flows from developing countries over the period 2001-2010 and is the major channel for the transfer of illicit capital from China and Mexico.
  • China continued to lead the world in illicit outflows, losing $420.4 billion in 2010.
  • Bribery, kickbacks, and the proceeds of corruption continued to be the primary driver of illicit financial flows from the Middle East and North Africa, while trade mispricing was the primary driver of illicit financial flows in the other regions.
  • Qatar, Kuwait, Venezuela, and Poland were all displaced from the top-10 illicit financial flow rankng, and were replaced by the significantly poorer countries Philippines, India, Indonesia, and Nigeria.

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