*Poor Countries Robbed Of 6 Trillion Dollars*
<
http://www.addthis.com/bookmark.php>
By Jaya Ramachandran | IDN-InDepth NewsReport
BERLIN (IDN) - Crime, corruption, and tax evasion recorded near-historic
highs in 2010, with illicit financial outflows costing the developing world
$859 billion in 2010, just below the all-time high of $871.3 billion in
2008, the year preceding the global financial crisis. Besides, nearly $6
trillion (6000 000 000 000 000 000 U.S. dollars) were stolen from poor
countries in the decade between 2001 and 2010, says a new report and urges
world leaders to increase transparency in the international financial
system.
"Astronomical sums of dirty money continue to flow out of the developing
world and into offshore tax havens and developed country banks," said
Raymond Baker, Director of the Washington-based advocacy organization, Global
Financial Integrity <
http://www.gfintegrity.org/index.php> (GFI).
"Regardless of the methodology, it’s clear: developing economies are
hemorrhaging more and more money at a time when rich and poor nations alike
are struggling to spur economic growth. This report should be a wake-up
call to world leaders that more must be done to address these harmful
outflow," he adds.
Co-authored by GFI's lead economist Dr Dev
Kar<
http://www.gfintegrity.org/index.php?option=com_content&task=view&id=16&Itemid=137#dev>and
economist Sarah
Freitas<
http://www.gfintegrity.org/index.php?option=com_content&task=view&id=16&Itemid=137#sarahf>,
the study, Illicit Financial Flows from Developing Countries:
2001-2010<
http://iff.gfintegrity.org/iff2012/2012report.html>points
out that as developing countries begin to relax capital controls,
the possibility exists that the methodology utilized in previous GFI
reports – known as the World Bank Residual Plus Trade Mispricing method –
could increasingly pick-up some licit capital flows.
The methodology introduced in this report – the Hot Money Narrow Plus Trade
Mispricing method – ensures that all flow estimates are strictly illicit
moving forward, but may omit some illicit financial flows detected in the
previous methodology, the study's authors say.
"The estimates provided . . . are still likely to be extremely conservative
as they do not include trade mispricing in services, same-invoice trade
mispricing, hawala <
http://en.wikipedia.org/wiki/Hawala> transactions, and
dealings conducted in bulk cash," explained Dr Kar, who previously served
as a senior economist at the International Monetary Fund<
http://www.imf.org/>
.
“This means that much of the proceeds of drug trafficking, human smuggling,
and other criminal activities, which are often settled in cash, are not
included in these estimates,” he added.
The study, released on December 17, 2012, finds that the $858.8 billion of
illicit outflows lost in 2010 is "a significant uptick" from 2009, which
saw developing countries lose $776.0 billion under the new methodology. It
estimates the developing world lost a total of $5.86 trillion over the
decade spanning 2001 through 2010.
"This has very big consequences for developing economies," explained the
report's co-author Freitas. "Poor countries lost nearly a trillion dollars
that could have been used to invest in healthcare, education, and
infrastructure. It’s nearly a trillion dollars that could have been used to
pull people out of poverty and save lives."
The authors' research tracks the amount of illegal capital flowing out of
150 different developing countries from 2001 through 2010, and it ranks the
countries by magnitude of illicit outflows. According to the report, among
the 20 biggest exporters of illicit financial flows over the decade are:
*China* recording unlawful outflows of $274 billion average ($2.74 trillion
cumulative); *Mexico* ($47.6 billion average and $476 billion cumulative); *
Malaysia* ($28.5 billion average and $285 billion cumulative); *Saudi Arabia
* ($21.0 billion avg. and $210 billion cum.); *Russia* ($15.2 billion avg.
and $152 billion cum.); *Philippines* ($13.8 billion avg. and $138 billion
cum.); *Nigeria* ($12.9 billion avg. and $129 billion cum.); *India* ($12.3
billion avg. and $123 billion cum.); *Indonesia* ($10.9 billion avg. and
$109 billion cum.); and *United Arab Emirates* ($10.7 billion avg. and $107
billion cum.)
Others include: *Iraq* ($10.6 billion avg. and $63.6 billion cum.); *South
Africa* ($8.39 billion avg. and $83.9 billion cum.); *Thailand* ($6.43
billion avg. and $64.3 billion cum.); *Costa Rica* ($6.37 billion avg.
$63.7 billion cum.); *Qatar* ($5.61 billion avg. and $56.1 billion cum.); *
Serbia* ($5.14 billion avg. and $51.4 billion cum.); *Poland* ($4.08
billion avg. and $40.8 billion cum.); *Panama* ($3.99 billion avg. and
$39.9 billion cum.); *Venezuela* ($3.79 billion avg. and $37.9 billion
cum.); and *Brunei* ($3.70 billion avg. $37.0 billion cum.).
The report, funded by the Ford Foundation <
http://www.fordfoundation.org/>,
also reveals the top exporters of illegal capital in 2010: China ($420.36
billion); Malaysia ($64.38 billion); Mexico .($51.17 billion); Russia
($43.64 billion); Saudi Arabia ($38.30 billion); Iraq ($22.21 billion);
Nigeria ($19.66 billion); Costa Rica ($17.51 billion); Philippines ($16.62
billion); Thailand ($12.37 billion); Qatar ($12.36 billion); Poland ($10.46
billion); Sudan ($8.58 billion); United Arab Emirates ($7.60 billion);
Ethiopia ($5.64 billion); Panama ($5.34 billion); Indonesia ($5.21
billion); Dominican Republic ($5.03 billion); Trinidad and Tobago ($4.33
billion); and Brazil ($4.29 billion).
*Connections to previous reports*
China, the largest cumulative exporter of illegal capital flight, as well
as the largest victim in 2010, was the topic of an October 2012
country-specific report by Dr Kar and Freitas. Using the older
methodology, 'Illicit Financial Flows from China and the Role of Trade
Misinvoicing <
http://www.gfintegrity.org/content/view/581/70/>,' found that
the Chinese economy suffered $3.79 trillion in illicit financial outflows
between 2000 and 2011.
"Our reports continue to demonstrate that the Chinese economy is a ticking
time bomb," said Dr Kar. "The social, political, and economic order in that
country is not sustainable in the long-run given such massive illicit
outflows."
Mexico, the second-largest cumulative exporter of illicit capital over the
decade, was also the topic of a January 2011 GFI report by Dr. Kar. The
study, 'Mexico: Illicit Financial Flows, Macroeconomic Imbalances, and the
Underground Economy <
http://www.gfintegrity.org/content/view/493/70/>',
found that the country lost a total of $872 billion in illicit financial
flows over the 41-year period from 1970 to 2010. Furthermore, illicit
outflows were found to drive Mexico’s domestic underground economy, which
includes – among other things – drug smuggling, arms trafficking and human
trafficking.
*Possible solutions*
Global Financial Integrity report urges world leaders to increase the
transparency in the international financial system as a means to curtail
the illicit flow of money highlighted by the organization's research.
In particular it stresses the need for addressing the problems posed by
anonymous shell companies, foundations, and trusts by requiring
confirmation of beneficial
ownership<
http://www.financialtaskforce.org/issues/beneficial-ownership/>in
all banking and securities accounts, and demanding that information on
the true, human owner of all corporations, trusts, and foundations be
disclosed upon formation and be available to law enforcement.
The report also calls for reforming customs and trade protocols to detect
and curtail trade
mispricing<
http://www.financialtaskforce.org/issues/trade-mispricing/>;
requiring the country-by-country reporting
<
http://www.financialtaskforce.org/issues/country-by-country-reporting/>of
sales, profits and taxes paid by multinational corporations; requiring
the automatic
cross-border exchange of tax
information<
http://www.financialtaskforce.org/issues/automatic-tax-information-exchange/>on
personal and business accounts; harmonizing predicate offenses under
anti-money
laundering laws
<
http://www.financialtaskforce.org/issues/money-laundering/>across all
Financial Action Task Force cooperating countries; and ensuring
that the anti-money laundering regulations already on the books are strongly
enforced <
http://www.gfintegrity.org/content/view/588/70/>.
[IDN-InDepthNews – February 2, 2013]
2013 IDN-InDepthNews | Analysis That
Matters<
http://www.indepthnews.info/index.php/>
Received on Mon May 06 2013 - 10:30:55 EDT
