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Illicit financial flows: Top 10 nations

Last updated on: January 20, 2011 07:28 IST

Illicit financial flows: Top 10 nations

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India is one of the world's largest exporters of illicit capital with an estimated outflow of a whopping $104 billion between 2000 and 2008, according to a US-based think tank Global Financial Integrity (GFI).

Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities, and efforts to shelter wealth from a country's tax authorities.

Asia continues to produce the largest portion of illicit flows, almost half-a-trillion dollars in 2008 alone, states the GFI study.

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Image: An Afghan money changer counts money at his shop in Kabul.
Photographs: Bazuki Muhammad/Reuters.
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Illicit financial flows: Top 10 nations

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Bribery, theft, kickbacks, and tax evasion were the greatest conduit for the illicit financial flows.

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.

Asia accounted for 44.4 percent 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).

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Image: Illicit outflows rise.

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Illicit financial flows: Top 10 nations

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1. China

China tops the illicit outflow list. Between 2000 to 2008, the outflow of illicit money from China was a whopping $2.2 trillion.

Trade mispricing was found to account for an average of 54.7 percent 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, states the GFI study.

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Image: A Chinese woman sells enlarged copies of various currency notes.
Photographs: Reuters.
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Illicit financial flows: Top 10 nations

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2. Russia

Oil exporting countries, like Russia, the United Arab Emirates, Kuwait, and Nigeria, are becoming more important as sources of illicit capital.

Russia lost $427 billion as illicit outflows.

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Image: An employee of a bank checks the authenticity of Russian rouble banknotes.
Photographs: Reuters.
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Illicit financial flows: Top 10 nations

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3. Mexico

"Every year developing countries are losing ten times the amount of Official Development Assistance (ODA) remitted for poverty alleviation and economic development," said GFI director Raymond Baker.

Mexico lost $416 billon as illegal outflow. Mexico is the only oil exporter where trade mispricing was the preferred method of transferring illicit capital abroad.

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Image: Soldiers escort four detainees after seizing cash, drugs and vehicles.
Photographs: Tomas Bravo/Reuters.
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Illicit financial flows: Top 10 nations

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4. Saudi Arabia

Oil-rich Saudi Arabia is at the fourth place with an illicit outflow at $302 billion. Bribery, theft, kickbacks, and tax evasion were the min reasons for the illicit outflow of money.

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Image: A Saudi money exchanger counts Saudi riyals in Riyadh.
Photographs: Reuters.
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Illicit financial flows: Top 10 nations

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5. Malaysia

Financial flows from Malaysia have more than tripled from $22.2 billion in 2000 to $68.2 billion in 2008.

Malaysia lost a staggering $291 billion.

This growth rate, seen in few Asian countries, may be a result of significant governance issues affecting both public and private sectors, says the GFI study.

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Image: Sharifah Azwan Jamulullail arranges chocolates wrapped with currency notes.
Photographs: Zainal Abd Halim/Reuters.
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Illicit financial flows: Top 10 nations

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6. United Arab Emirates

The United Arab Emirates saw a huge loss of $276 billion.

The ratio of illicit financial flows coming out of developing countries compared to ODA is 10-1, meaning that for every $1 in economic development assistance which goes into a developing country, $10 is lost via these illicit outflows.

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Image: Currency.

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7. Kuwait

Increasing transparency in the global financial system is critical to reducing the outflow of illicit money from developing countries, the GFI study states.

The Gulf state of Kuwait lost funds to the tune of $242 billion.

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Image: Kuwait currency notes.

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Illicit financial flows: Top 10 nations

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8. Venezuela

Venezuela is ranked at the 8th position with a loss of $157 billion.

GFI suggests curbing trade mispricing for achieving greater transparency.

This would require country-by-country reporting of sales, profits and taxes paid by multinational corporations and  confirmation of beneficial ownership in all banking and securities accounts,

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Image: Venezuela currency.

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Illicit financial flows: Top 10 nations

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9. Qatar

Qatar lost $138 billion to illicit financial outflows.

In a bid to reduce such outflows, GFI suggest automatic cross-border exchange of tax information on personal and business accounts.

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Image: Qatar currency.

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10. Nigeria

Nigeria ranks tenth with a loss of $130 billion.

In real terms, illicit outflows through trade mispricing grew faster in the case of Africa (28.8 percent per annum) than anywhere else, possibly due to weaker customs monitoring and enforcement regimes.


Image: Nigerian currency.

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