Illicit Outflows Growing at 15% Per Year

December 16, 2011 International Tax Cooperation

Illicit outflowsWASHINGTON, D.C. – -The extent of illicit capital flows around the world is growing every year, and has cost developing countries over USD 8 trillion since the year 2000.

On December 15th the international advocacy organization Global Financial Integrity released Illicit Financial Flows from Developing Countries Over the Decade Ending 2009, a new report examining the extent of illicit capital outflows from developing nations.

According to the report, countries around the world lost over USD 903 billion to illicit outflows during 2009. Previous reports found that in 2008 the extent of illicit flows reached USD 1.55 trillion, however the drop seen in 2009 is being attributed to a decrease in international trade and restricted credit conditions, and not due to direct action by governments.

Over the period between 2000 and 2009, China was found to have the highest level of illicit capital outflows, with a cumulative amount of USD 2.74 trillion. Mexico saw the second highest total amount of outflows, followed by Russia, with USD 504 billion and USD 501 billion respectively. In total, developing countries across the world lost an approximated USD 8.44 trillion to illicit outflows over the years between 2000 and 2009.

The authors of the report calculated that illicit capital movements across the world are growing at approximately 14.9 percent per annum. Regionally, the highest growth levels are being seen across the African continent, where the growth of illicit outflows is approximately 22.3 percent per annum. In the Middle East and North African regions the growth in outflows is approximately 19.6 percent. The countries of Eastern Europe are undergoing average growth levels of 17.4 percent. In Asia the rise of capital outflows is approximately 6.2 percent.

Comparatively, according to thr report, illicit capital movements in developed countries across the world are growing at approximately 4.4 percent.

Across Asia, and in particularly in China, the illicit outflows were derived predominantly from trade mispricing. Bribery and payoffs to public officials were the most common sources for illicit capital in the Middle East, North Africa and Eastern Europe.

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