Illicit financial flows primarily through trade fraud in developing countries

Between US$620 billion and US$970 billion of illicit financial outflows (IFOs) were from the developing world in 2014, primarily through trade fraud according to a report published by Global Financial Integrity (GFI).

The Washington-based research and advisory organisation estimates in its report, ‘Illicit Financial Flows to and from Developing Countries: 2005-2014’, that illicit financial inflows (IFIs) in 2014 reached an estimated US$1.4 trillion to US$2.5 trillion, and these are as harmful as IFOs.

The report reckons that combined, illicit outflows and inflows accounted for 14.1 to 24 per cent of total developing country trade between 2005 and 2014.

Global picture

Sub-Saharan Africa still suffers the largest illicit financial flows as a percentage of GDP.

Globally, IFOs accounted for between 4.2 and 6.6 per cent of developing country total trade in 2014, the last year for which comprehensive data are available.

Inflows and outflows

The report is the first global study at GFI to equally emphasise illicit outflows and inflows.

Each is found to have remained persistently high over the period between 2005 and 2014.

Trade focus

An average of 87 per cent of illicit financial outflows over the 2005 to 2014 period were due to fraudulent trade misinvoicing.

IFOs from Sub-Saharan Africa ranged from 5.3 per cent to 9.9 per cent of total trade in 2014, a ratio higher than any other geographic region studied.

The report, ‘Illicit Financial Flows to and from Developing Countries: 2005-2014’ can be found here.

Categories: Trade Based Financial crimes News

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