GFI report identifies major role of misinvoicing in illicit financial flows

A report by Washington based Global Financial Integrity (GFI) analyses illicit financial flows from developing countries from 2003 through 2012, the latest year for which data is available.

The report entitled ‘Illicit Financial Flows from the Developing World: 2003-2012’ uncovers significant levels of growth in illicit outflows from developing and emerging economies.

Outflow growth
Illicit outflows have increased globally at a rate of 9.4 per cent per year, almost double the rate of global GDP growth.

The outflows have resulted in developing and emerging economies losing US$6.6 trillion over the decade, with an estimated US$991 billion lost by developing countries in 2012 alone.

Misinvoicing blamed
Sub-Saharan Africa has suffered the greatest loss of capital through illicit outflows, whilst China has the largest illicit outflows of any country, amounting to nearly US$250 billion in 2012 alone.

Perhaps most significantly, the report states that trade misinvoicing – intentionally over or under invoicing goods – so as to move capital either in or out of a country illegally, accounts for 77 per cent of illicit financial flows.

Policy recommendations
The report suggests several policies aimed at combating trade misinvoicing on a global scale, such as all countries taking the necessary steps to comply with the FATF anti-money laundering and counter terrorist financing.

Earlier this year, GFI called for the UN’s Sustainable Development Goals agenda to adopt a concise target: “By 2030, reduce illicit financial flows related to trade misinvoicing by fifty per cent.” (Newsflow, 1 October 2014).

The GFI report, ‘Illicit Financial Flows from the Developing World: 2003-2012’ can be found here:

Categories: Trade Based Financial crimes News

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