Developing countries lost US$903 billion in illicit financial outflows in 2009 despite the massive slowdown in economic activity which rocked world markets in late 2008, finds a new study by Global Financial Integrity (GFI), a Washington-based research and advocacy organization and partner of Tax Research UK in the Task Force on Financial Integrity and Economic Development.
The new report, “Illicit Financial Flows from Developing Countries over the Decade Ending 2009,” is GFI's annual update on the amount of money flowing out of developing economies via crime, corruption and tax evasion, and it is the first of GFI's reports to include data for the year 2009.
“This is a breathtakingly large sum at a time when developing and developed countries alike are struggling to make ends meet,” said GFI Director Raymond Baker. “This report should be a wake-up call to world leaders that more must be done to address these harmful outflows.”
While US$903 billion marks a drop from the US$1.55 trillion1 that illicitly flowed out of the developing world in 2008, the study finds the decrease is almost entirely attributable to the global financial crisis rather than any governance improvements or economic reforms.
The study, which was co-authored by GFI Lead Economist Dev Kar and GFI Economist Sarah Freitas, tracks the amount of illegal capital flowing out of 157 different developing countries over the 10-year period from 2000 through 2009, and it ranks the countries by magnitude of illicit outflows. According to the report, the 20 biggest victims of illicit financial flows over the decade are:
- China .............................................$2.74 trillion
- Mexico ............................................$504 billion
- Russia ............................................$501 billion
- Saudi Arabia .................................$380 billion
- Malaysia ........................................$350 billion
- United Arab Emirates..................$296 billion
- Kuwait ............................................$271 billion
- Nigeria ...........................................$182 billion
- Venezuela .....................................$179 billion
- Qatar ..............................................$175 billion
- Poland ............................................$162 billion
- Indonesia .......................................$145 billion
- Philippines ....................................$142 billion
- Kazakhstan ...................................$131 billion
- India ...............................................$128 billion
- Chile .............................................. $97.5 billion
- Ukraine .........................................$95.8 billion
- Argentina ......................................$95.8 billion
- South Africa ..................................$85.5 billion
- Turkey............................................$79.1 billion
For a complete ranking of average annual illicit financial outflows by country, please refer to Table 5 of the report's appendix.
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Would any of this money now be offered by the ‘bond markets’ to indebted countries to fund their debts? In other words, first smuggled out past the taxman thus creating an increased deficit then offered back?
At a higher rate of interest, of course, as high debts increase the risk. Not their fault, it’s though profligate politicians who run up these debts.
Or am I too cynical?
Foreign banks with branches in Athens were facilitating the cash flight, the newspaper claimed, by encouraging Greek depositors to set up bank accounts abroad. The Swiss banking groups UBS and Credit Suisse had made it much easier for investors to open accounts in Geneva and Zurich by simplifying procedures.
The above in the Guardian re Greeks taking cash out of their country.
This is part of the problem, the Global banks encourage local country customers to deposit funds which then can be transferred out of the country.
In India there are 8 Italian Banks with branches, why, if not to transfer funds out of the country. You can see UBS who has been fined by the US Government plus for example it’s employees fined for setting up illlegal offshore funds in Mauritus for wealth customers to invest in the Indian Stock markets.
The Banks need to be stopped from these activities, the markets will not do it, self regulation is not working.