EFCC Chairman, Mrs Farida Waziri
A United Nations Development Program (UNDP) commissioned report from Global Financial Integrity (GFI) on illicit financial flows from the Least Developed Countries (LDCs), has revealed that a huge sum of $6.5 trillion was removed from the developing countries between 2000 and 2009.
The report, which was presented for discussion last week at the United Nations IV Conference on Least Developed Countries in Turkey, showed that Asia produced the largest portion of total outflows.
The report, which was presented for discussion last week at the United Nations IV Conference on Least Developed Countries in Turkey, showed that Asia produced the largest portion of total outflows.
The report, “Illicit Financial Flows from the Least Developed Countries”, examined how structural characteristics of LDCs could be facilitating the cross-border transfer of illicit funds, discussed methodological issues underlying estimates of illicit flows, presents an analysis of the magnitude of such flows, and makes policy recommendations for the curtailment of these illicit flows.
The report revealed that bribery, theft, kickbacks, and tax evasion were the greatest conduits for the illicit financial flows from the major exporters of oil such as Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.
According to the report top 10 countries with the highest measured cumulative illicit financial outflows include: China- $2.18 trillion; Russia- $427 billion; Mexico-$416 billon; Saudi Arabia- $302 billion; Malaysia- $291 billion; United Arab Emirates- $276 billion; Kuwait- $242 billion; Venezuela-$157 billion; Qatar- $138 billion and Nigeria- $130 billion.
Key findings showed that illicit flows divert resources needed for poverty alleviation and economic development.
Commenting on the report, UNDP Administrator Helen Clark said, “Illicit flows seriously impede LDCs’ efforts to raise resources for social and economic development. These flows are often absorbed into banks, tax havens, and offshore financial centers in developed countries.”
The report further showed that trade mispricing accounted for an average of 54.7 per cent of cumulative illicit flows from developing countries over the period 2000-2008 and is the major channel for the transfer of illicit capital from China.
GFI said, “oil exporting countries, like Russia, the United Arab Emirates, Kuwait, and Nigeria are becoming more important as sources of illicit capital. Mexico is the only oil exporter where trade mispricing was the preferred method of transferring illicit capital abroad.
“With half a trillion in illicit outflows in 2008 alone, Asia accounted for the largest portion of illicit financial flows from the developing world. Over the nine-year period examined, 89.3 percent, on average, of total illicit flows from Asia were transferred abroad through trade mispricing.
“Financial flows from Malaysia have more than tripled from $22.2 billion in 2000 to $68.2 billion in 2008. This growth rate, seen in few Asian countries, may be a result of significant governance issues affecting both public and private sectors.”
The GFI report also revealed that illicit outflows through trade mispricing grew faster in the case of Africa (28.8 per cent per annum) than anywhere else, possibly due to weaker customs monitoring and enforcement regimes.
The report indicated that that in 2009 alone illicit flows from developing countries grew to $1.30 trillion. As monumental as it was, the 2009 figure represents a significant slowdown from the 18.0 per cent rate of growth over the period 2000-2008.
GFI said the slowdown of illicit financial outflows was mainly due to a decline in trade mispricing resulting from a slowdown in world trade in the wake of the global financial crisis.
The report showed that illicit outflows increased from $1.06 trillion in 2006 to approximately $1.26 trillion in 2008, with average annual illicit outflows from developing countries averaging $725 billion to $810 billion, per year, over the 2000-2008 time period measured.
“Illicit flows increased in current dollar terms by 18.0 per cent per annum from $369.3 billion at the start of the decade to $1.26 trillion in 2008. When adjusted for inflation, the real growth of such outflows was 12.7 per cent.
“Real growth of illicit flows by regions over the nine years is as follows: Middle East and North Africa (MENA) 24.3 per cent, developing Europe 23.1 per cent, Africa 21.9 per cent, Asia 7.85, and Western Hemisphere 5.18 per cent, “GFI said.
The GFI added that Asia accounted for 44.4 per cent of total illicit flows from the developing world followed by Middle East and North Africa (17.9 per cent), developing Europe (17.8 per cent), Western Hemisphere (15.4 per cent), and Africa (4.5 per cent).
Global Financial Integrity (GFI) is a global financial watch dog that promotes national and multilateral policies, safeguards, and agreements aimed at curtailing the cross-border flow of illegal money. In putting forward solutions, facilitating strategic partnerships, and conducting groundbreaking research, GFI is leading the way in efforts to curtail illicit financial flows and enhance global development and security.
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