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Date: April 30, 2024 Tue
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Results for illicit financial flows
14 results foundAuthor: Kar, Dev Title: Illicit Financial Flows from Developing Countries: 2002-2006 Summary: This report shows that the developing world is losing an increasing amount of money through illicit capital flight each year. Moreover, the value of the illicit flows surpasses the amount of Official Development Assistance entering those countries by an order of magnitude. "Illicit financial flows siphon revenue out of poor countries, robbing them of much-needed assets and forestalling economic development,” said GFI director Raymond Baker. “These new figures reveal that illicit financial flows outpace Official Development Assistance by a ratio of nearly 10 to 1. This is critical to understanding global poverty and developing effective poverty alleviation and economic development strategies,” Baker said. Primary findings of the report include: Total capital flight exiting the developing world may be as much as $1 trillion dollars per year; Measured against the flow of Official Development Assistance in 2006 poor countries, in aggregate, are losing close to $10 dollars for every $1 dollar they receive in aid; The volume of capital flight from developing countries is increasing at an average of 18.5% a year. Over the five-year period of this study, illicit financial flows grew at the fastest pace in the Middle East and North Africa region (49.4 percent) followed by Europe (25.4 percent), Asia (15.7 percent), and the Western Hemisphere (2.8 percent). Illicit financial flows from Africa actually declined (-2.9 percent) but this decline is more the result of incomplete data than supportive economic or political factors. Illicit financial flows refer to money that is illegal in its origin, transfer or use and reflect the proceeds of corruption, crime and tax evasion. Corporate avoidance of customs duties, VAT and income taxes constitute an estimated 60% of the total outflow. The study utilized multiple economic models which were combined and “tested” to determine the most reliable estimates. The findings were based on macroeconomic trade and external debt data maintained by the International Monetary Fund and the World Bank. Details: Washington, DC: Global Financial Integrity, 2008. 45p. Source: Internet Resource: Accessed February 11, 2011 at: http://www.gfip.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf Year: 2008 Country: International URL: http://www.gfip.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf Shelf Number: 120746 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsTax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries: 2000-2009, Update with a Focus on Asia Summary: The report, “Illicit Financial Flows from Developing Countries: 2000-2009,” finds that approximately $6.5 trillion was removed from the developing world from 2000 through 2008. The report also examines illicit flows from Asia, which produced the largest portion of total outflows and makes projections for 2009. The report ranks countries according to magnitude of outflows with China ranking 1 ($2.18 trillion), Russia 2 ($427 billion), Mexico 3 ($416 billion), Saudi Arabia 4 ($302 billion), and Malaysia 5 ($291 billion). The report also shows the annual outflows for each country and breaks outflows down into two categories of drivers: trade mispricing and “other,” which includes kickbacks, bribes, embezzlement, and other forms of official corruption. The report also looks at the impact of the global economic recession—on both magnitudes and trends in illicit outflows, it makes policy recommendations, and it projects outflows for 2009 (for which complete data is not yet available). Details: Washington, DC: Global Financial Integrity, 2011. 64p. Source: Internet Resource: Accessed February 11, 2011 at: http://www.gfip.org/storage/gfip/documents/reports/IFF2010/gfi_iff_update_report-web.pdf Year: 2011 Country: International URL: http://www.gfip.org/storage/gfip/documents/reports/IFF2010/gfi_iff_update_report-web.pdf Shelf Number: 120748 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from Developing Countries Over the Decade Ending 2009 Summary: This report provides estimates of illicit financial flows (IFFs) from developing countries over the decade 2000-2009 based on balance of payments (BoP), bilateral trade, and external debt data reported by member countries to the IMF and the World Bank. It should be noted that estimates of IFFs at the developing world, regional, and country levels presented in this report could differ from those published in the 2010 report due to revisions to underlying data, reported by member countries. The most notable finding in this report is that in 2009 IFFs from developing countries, led by the top ten exporters of illicit capital, most of which are in Asia and the Middle East and North Africa (MENA) region, have declined by 41 percent over the last year. Principal components analysis seems to indicate that this decline was the result of the global economic crisis which tended to reduce the source of funds (new external loans and net foreign direct investments), increase the use of funds and reduce trade mispricing due to lower trading volumes. We find no reason to subscribe the wide-ranging reduction in IFFs to far-reaching economic reform or improvements in overall governance in major emerging markets. Details: Washington, DC: Global Financial Integrity, 2011. 100p. Source: Internet Resource: Accessed January 17, 2012 at: http://www.ciponline.org/images/uploads/publications/illicit_financial_flows_from_developing_countries_over_the_decade_ending_2009.pdf Year: 2011 Country: International URL: http://www.ciponline.org/images/uploads/publications/illicit_financial_flows_from_developing_countries_over_the_decade_ending_2009.pdf Shelf Number: 123640 Keywords: Corrupt PracticesFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows from China and the Role of Trade Misinvoicing Summary: The Chinese economy hemorrhaged US$3.79 trillion in illicit financial outflows from 2000 through 2011, according to a new report [PDF] released today by Global Financial Integrity (GFI), a Washington, DC-based research and advocacy organization. Amidst increased domestic concern over inequality and corruption, GFI’s study raises serious questions about the stability of the Chinese economy merely two weeks before the once-in-a-decade leadership transition. The research, conducted by GFI Lead Economist Dev Kar and GFI Economist Sarah Freitas, found that the illegal outflows—the proceeds of crime, corruption, and tax evasion—were largely due to a trade-based money laundering technique known as ‘trade misinvoicing ,’ which accounted for US$3.2 trillion, or 86.2%, of the total outflow of illegal capital over the 11 years studied. The trade misinvoicing figures were provided exclusively to The Economist, and appear in the latest edition of the magazine which hits newsstands tomorrow. Details: Washington, DC: Global Financial Integrity, 2012. 26p. Source: Internet Resource: Accessed December 17, 2012 at http://www.gfintegrity.org/storage/gfip/documents/reports/ChinaOct2012/gfi-china-oct2012-report-web.pdf Year: 2012 Country: International URL: http://www.gfintegrity.org/storage/gfip/documents/reports/ChinaOct2012/gfi-china-oct2012-report-web.pdf Shelf Number: 127237 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: Kar, Dev Title: Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009 Summary: This report analyses the volume and pattern of recorded and unrecorded capital flows to and from Africa and its various regions and country groups over the period 1980-2009. It also provides the main trends of resource transfers; it does not provide an analysis of the reasons underlying the flows. Further analysis on the dynamics of the flows will need to be based on indepth, country-specific work. For the purposes of this study, recorded “capital flows” are financial and non-financial transactions recorded in the balance of payments, whereas unrecorded capital flows primarily involve the “flight” of capital. The report assumes that unrecorded capital flows are illicit in nature and involve the transfer of money earned through corruption, kickbacks, tax evasion, criminal activities, and transactions of certain contraband goods. Likewise, legal funds earned through legal business but transferred abroad in violation of exchange control regulations also become illicit. More specifically, net recorded transfers (NRecT) are based fully on recorded balance of payments items. The narrow version of this measure, NRecT Narrow, is simply equal to the Financial Account Balance, whereas the broad measure, NRecT Broad, is equal to the Financial Account Balance plus the sum of net current and net capital transfers. Net resource transfers (NRT) are calculated by the difference between NRecT and illicit financial flows (IFF), which also have two versions, normalized (conservative) and non-normalized (robust). Hence, there are four alternate measures of NRT, corresponding to the version of recorded transfers and outflows of illicit capital. These concepts are important as they enable a comparison of NRecT against unrecorded outflows of illicit capital. Results indicate that Africa was a net creditor to the world, as measured by the net resource transfers, to the tune of up to US$1.4 trillion over the period 1980-2009, adjusted for inflation. While there were brief periods in the early 1980s and the 1990s, when Africa received small net resource transfers from the rest of the world, the continent has been a net provider of resources to the world with estimates of real NRT ranging from US$597 billion to US$1.4 trillion, depending on the definition used for the transfers (NRecT, Narrow or Broad, and IFF, normalized or non-normalized). The most optimistic estimate of NRT (or lowest negative NRT of US$597 billion) involves broadly defined recorded transfers net of conservatively estimated illicit outflows (BroadNRTNorm), while the most pessimistic scenario (negative transfers amounting to US$1.4 trillion) involves narrowly defined recorded transfers net of robust estimates of illicit outflows (NarrowNRTNon-norm). If we focus on recorded transfers, that is, not taking account of illicit outflows, we find that, according to the NRecT Narrow measure, there were net inflows to Africa over the period 1980-1999 and a sharp reversal to net outflows in the period 2000-2009. The NRecT Narrow measure shows that African countries received resources amounting to 2.3 percent of GDP in the 1980s and just under 1.0 percent of GDP in the 1990s. However, the continent became a net lender of resources to the world over the decade ending 2009. This sharp reversal from net inflows over the earlier two decades to net outflows over the last decade was mainly due to outflows associated with reserve accumulation, reflecting African countries’ desire to self-insure against financial crisis. The recorded outflows from Africa in the past decade were not evenly distributed across regions. They were largely driven by outflows from North Africa. Considering the period 2000-2009 alone, some US$30.4 billion per annum flowed out of Africa with 83 percent of such outflows originating from North Africa. Within Sub-Saharan Africa, the results from the NRecT Narrow measure were mixed. West and Central Africa experienced considerable outflows, which swamped resource transfers into other regions over the decade ending 2009. NRecT Narrow losses from the West and Central regions were mainly driven by outflows related to repayment of loans and trade credits, rather than reserve accumulation. The distribution of gains and losses of transfers among African countries was asymmetrical, resulting in a net loss of transfers from Africa. The top five countries that gained transfers (NRecT Narrow) over the period 1980-2009 are South Africa, Sudan, Tunisia, Morocco, and Cote d’Ivoire, while Algeria, Libya, Nigeria, Botswana, and Egypt lost such transfers. The volume of transfers lost from the latter five countries far outstripped those gained by the former five. The broader measure of recorded transfers (NRecT Broad) alters the long-run developments in net recorded transfers owing to the impact of current and capital transfers (which principally include remittances and debt relief). Based on the broad measure, Africa’s transfers (NRecT Broad) increased from an average inflow of about US$27 billion per annum in the 1980s and 1990s before declining to US$8.7 billion in the last decade ending 2009. The broad measure does not show that Africa swung from net debtor to net creditor to the world in the 2000s mainly due to substantial current and capital transfers such as remittances, migrant transfers, debt forgiveness and write-offs, and other non-financial transfers which provided off-setting effects. Every region of Sub-Saharan Africa received resources on a net basis throughout the three decades, based on the broad measure of transfers, with the largest gains going to the West and Central Africa region. West and Central Africa received the most resources over the 30-year period, in terms of GDP, increasing from 5.2 percent of GDP per annum in the 1980s to 5.7 percent in the 1990s, before declining to 2.3 percent in the last decade. Recorded transfers were mainly driven by remittances and debt forgiveness, rather than net foreign direct investments. Country resource endowment matters when transfers are measured on a broad basis. For instance, non-fuel exporters came out ahead of fuel-exporters in attracting net recorded transfers measured on a broad basis. Debt-relief also helped low-income countries to recapture some of the resources. Heavily Indebted Poor Countries (HIPC) experienced a modest increase in transfers over the three decades. On an average per annum inflation-adjusted basis, resource inflows to HIPC countries increased from US$14.0 billion in the 1980s to US$14.3 billion in the 1990s, before jumping to US$20.8 billion over the last decade ending 2009. North African countries dominated the top gainers over the 30-year period, based on broad categorization of net recorded transfers. Egypt, Morocco, Tunisia, Kenya, and Ghana were the top five gainers of broad-based recorded resource transfers over the 30-year period 1980-2009; Libya, Algeria, Gabon, Botswana, and Angola were the top five losers of recorded transfers. Illicit financial flows (IFFs) were the main driving force behind the net drain of resources from Africa of US$1.2 - 1.3 trillion on an inflation-adjusted basis. IFFs grew at a much faster pace over the 30-year period 1980-2009 than net recorded transfers, even accounting for the net inflows arising from the broad net recorded transfers. Illicit outflows were dominated by outflows from Sub-Saharan Africa, especially from West and Central Africa. Illicit outflows from Sub-Saharan Africa outstripped those from North Africa by over two times in nominal terms while in real terms, three African regions—West and Central Africa at US$494.0 billion (37 percent), North Africa at US$415.6 billion (31 percent), and Southern Africa at US$370.0 billion (27 percent)—account for 95 percent of total cumulative illicit outflows from Africa over the 30-year period. (See Chart 4 and Table 1). In terms of the volume of illicit financial flows, Nigeria, Egypt, and South Africa led the regional outflows. In West and Central Africa, outflows were largely driven by Nigeria, the Republic of Congo, and Cote d’Ivoire in that order of magnitude while North Africa outflows were dominated by Egypt, Algeria, and Libya respectively. Outflows from Southern Africa were mainly driven by South Africa, Mauritius, and Angola. The study concludes by offering policy recommendations with respect to (i) initiatives to restrict the absorption of illicit financial flows, (ii) policies to curtail illicit financial outflows from Africa, and (iii) policies to boost net recorded transfers by improving the business climate. To ensure greater effectiveness, it is imperative that there is policy alignment between African countries and “absorbing” countries in addressing the issue of illicit financial flows. Details: Tunis-Belvedère, Tunisia; African Development Bank: Washington, DC: Global Financial Integrity, 2013. 84p. Source: Internet Resource: Accessed June 21, 2013 at: http://www.gfintegrity.org/storage/gfip/documents/reports/AfricaNetResources/gfi_afdb_iffs_and_the_problem_of_net_resource_transfers_from_africa_1980-2009-web.pdf Year: 2013 Country: Africa URL: http://www.gfintegrity.org/storage/gfip/documents/reports/AfricaNetResources/gfi_afdb_iffs_and_the_problem_of_net_resource_transfers_from_africa_1980-2009-web.pdf Shelf Number: 129037 Keywords: Financial Crimes (Africa)Illicit Financial FlowsMoney Laundering |
Author: Baker, Raymond Title: Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011 Summary: Illicit flows of capital through developing countries due to trade misinvoicing is one of the most pressing challenges facing policymakers in these countries. The global figure for illicit financial outflows from developing countries is approximately $542 billion per year on average (over a 10-year time series), and trade misinvoicing makes up close to 80 percent of this or $424 billion. Capital flight, facilitated by a global network of secrecy jurisdictions and complex, opaque corporate and account structures, robs governments and societies of needed revenue for domestic investment in the private sector, infrastructure development, and the provision of vital social services. This translates into lost opportunities, lost jobs, and lost potential. This study explores the economic and the policy side of the issue of trade misinvoicing using case studies of Ghana, Kenya, Mozambique, Tanzania, and Uganda. Data on illicit flows for these five countries demonstrate the varying magnitudes, sources, and consequences of trade misinvoicing at the country level and provide hope and warning to other developing countries. We find that trade misinvoicing is a significant source of illicit outflows and inflows of capital in each country, resulting in billions of dollars of lost investment and hundreds of millions of dollars in unrealized domestic resource mobilization. The sources of trade misinvoicing varied across the cases, as did the policy environment in which this misinvoicing occurs. However, we also find significant facets of this issue that apply to all the countries, particularly with regards to customs invoice review procedures and access to on-the-spot information. These challenges represent opportunities for the five countries to improve their economic systems and accountability mechanisms through greater transparency. Details: Washington, DC: Global Financial Integrity, 2014. 72p. Source: Internet Resource: Accessed June 26, 2014 at: http://www.gfintegrity.org/wp-content/uploads/2014/05/Hiding_In_Plain_Sight_Report-Final.pdf Year: 2014 Country: Africa URL: http://www.gfintegrity.org/wp-content/uploads/2014/05/Hiding_In_Plain_Sight_Report-Final.pdf Shelf Number: 132540 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: Enough Project Title: Sudan's Deep State: How Insiders Violently Privatized Sudan's Wealth, and How to Respond Summary: The report details how President al-Bashir and his ruling National Congress Party have transformed Sudan into a system of violent kleptocracy that has endured for almost three decades. Regime elites, along with their enablers and facilitators, have amassed personal fortunes by looting and corrupting the country's oil, gold, and land resources in particular, along with other natural resource wealth, productive sectors of the economy, state assets, and the governing institutions that had been in place and largely functioned before this regime took power. For nearly three decades, President al-Bashir has maintained his position at the pinnacle of Sudan's political order after seizing power through a military coup in 1989. During his rule, the government of Sudan has perhaps been best known for providing safe haven to Osama bin Laden and other Islamic militants in the 1990s, for committing genocide and mass atrocities against its citizens in Darfur, for the secession of South Sudan in 2011, and for ongoing armed conflict-marked by the regime's aerial bombardment of civilian targets and humanitarian aid blockade-in South Kordofan and Blue Nile states. Often portrayed as a country wracked by intractable violence and hampered by racial, religious, ethnic and social cleavages, Sudan ranks consistently among the most fragile or failed states. At the same time, Sudan has considerable natural resource wealth and significant economic potential. Political standing and proximity to the country's ruling elites most often determines on which side of the poverty line a Sudanese citizen lives. The idea that Sudan is a classic failed state is not fully accurate. Sudan is a failed state for the millions of displaced people living in IDP camps in Darfur, for those living in conflict areas and cut off from humanitarian assistance in South Kordofan and Blue Nile, and for those struggling in marginalized communities in eastern Sudan or in the sprawling informal settlements outside Khartoum. However, Sudan is an incredibly successful state for a small group of ruling elites that have amassed great fortunes by looting the country's resources for personal gain. In that sense, Sudan is more of a hijacked state, working well for a small minority clique but failing by all other measures for the vast majority of the population. To more effectively support peace, human rights, and good governance in Sudan, U.S. policymakers should work with a range of Sudanese and other international partners to construct a new policy approach to counter Sudan's system of violent kleptocracy. Details: Washington, DC: Enough Project, 2017. 64p. Source: Internet Resource: Accessed May 3, 2017 at: http://www.enoughproject.org/files/SudansDeepState_Final_Enough.pdf Year: 2017 Country: Sudan URL: http://www.enoughproject.org/files/SudansDeepState_Final_Enough.pdf Shelf Number: 145254 Keywords: Illicit Financial FlowsLootingMoney LaunderingPolitical Corruption |
Author: United Nations Economic Commission for Africa Title: Illicit Financial Flows: Report of the High Level Panel on Illicit Financial Flows from Africa Summary: The 4th Joint African Union Commission/United Nations Economic Commission for Africa (AUC/ECA) Conference of African Ministers of Finance, Planning and Economic Development was held in 2011. This Conference mandated ECA to establish the High Level Panel on Illicit Financial Flows from Africa. Underlying this decision was the determination to ensure Africa's accelerated and sustained development, relying as much as possible on its own resources. The decision was immediately informed by concern that many of our countries would fail to meet the Millennium Development Goals during the target period ending in 2015. There was also concern that our continent had to take all possible measures to ensure respect for the development priorities it had set itself, as reflected for instance in the New Partnership for Africa's Development. Progress on this agenda could not be guaranteed if Africa remained overdependent on resources supplied by development partners. In the light of this analysis, it became clear that Africa was a net creditor to the rest of the world, even though, despite the inflow of official development assistance, the continent had suffered and was continuing to suffer from a crisis of insufficient resources for development. Very correctly, these considerations led to the decision to focus on the matter of illicit financial outflows from Africa, and specifically on the steps that must be taken to radically reduce these outflows to ensure that these development resources remain within the continent. The importance of this decision is emphasized by the fact that our continent is annually losing more than $50 billion through illicit financial outflows. Details: Addis Ababa, Ethiopia: The Commission, 2015. 126p. Source: Internet Resource: Accessed February 7, 2018 at: https://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf Year: 2015 Country: Africa URL: https://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf Shelf Number: 149020 Keywords: Financial CrimesFlow of FundsIllicit Financial FlowsMoney Laundering |
Author: Martin, Rowan Title: Assessing the Extent and Impact of Illicit Financial Flows in the Wildlife and Tourism Economic Sectors in Southern Africa Summary: This study on Illicit Financial Flows (IFFs) in the Wildlife and Tourism sectors in Southern Africa emanated from the TrustAfrica (TA) and the Open Society Initiative for Southern Africa (OSISA) project "Assessing the extent and impact of illicit financial flows in key economic sectors in Southern Africa". The three components of the project are mining, agriculture and wildlife. IFFs are illicit movements from one country to another of money or products that are illegally acquired. The money typically originates from three sources in the private sector: commercial tax evasion, trade misinvoicing and abusive transfer pricing. However, other types of criminal activity can produce IFFs, which in this study include the trafficking of live animals and plants and their products and associated corruption (bribery and theft by corrupt government officials) through which the proceeds end up in another country. This wildlife trade and tourism IFF study is the first of its kind and the methodologies involved a combination of population modelling, estimated product offtakes and open source trade data. The trade research is limited to eight species groups - elephants, rhinos, lions, pangolins, crocodiles, abalone, sharks and rays, and cycads. The study concluded that for the period 2006-2014, Southern Africa lost almost US$ 1.5 billion in illicit transfers of funds or products overseas, or close to 50% of all wildlife commodity exports. Surprisingly, illegal exports of abalone meat made up almost half of this amount. The IFFs in the wildlife tourism sector were much larger, estimated at over US$ 22 billion in the ten years 2006-2015, and deriving mainly from tax evasion and trade misinvoicing, sometimes involving offshore shell companies. We predicted that more than US$3 billion could have been lost in 2016 in the eight countries covered in this study. The main causes of the huge losses to the economies of Southern Africa in wildlife trade were CITES trade bans and the fact that local communities were not empowered to manage what should rightfully be their resources on their land. Trade bans and disenfranchisement led communities to harvest illegally and to sell wildlife products to illegal exporters. The only way to mitigate these losses would be to do away with trade bans, bring most species into the legal sector, and establish supply and demand regulatory systems that would ensure conservation of the species while also satisfying legitimate stakeholder interests, primarily those of communities and enterprises that live in association with the wildlife and which share common habitats. Note: Disclaimer: The findings in this report do not necessarily reflect the views of TA and OSISA. Details: TrustAfrica and the Open Society for Southern Africa (OSISA), 2017. 177p. Source: Internet Resource: Accessed February 8, 2018 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2996874 Year: 2017 Country: Africa URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2996874 Shelf Number: 149025 Keywords: Financial CrimesIllegal Wildlife TradeIllicit Financial FlowsTax EvasionTrafficking in WildlifeWildlife CrimeWildlife Trafficking |
Author: African Union Commission. Department of Economic Affairs Title: Mobilisation of Domestic Resources: Fighting against Corruption and Illicit Financial Flows Summary: Illicit financial flows and corruption have long been at the centre of discussions on development in Africa, particularly due to the existence of a wide consensus on their negative impacts on development financing in Africa. It is now so widespread that Africa loses USD 50 billion annually. However, this figure is well below reality due to the difficulty in obtaining reliable statistics, and the secretive nature of such funds. The African Union's initiative to dedicate the year 2018 to combatting corruption under the theme "Winning the Fight against Corruption: A Sustainable Path for Africa's Transformation" is eloquent proof of the willingness of the African Union to combat poor financial governance, which affects the Continent's inclusive socio-economic development of the, as illicit financial flows are obstacles to productive investments, resulting in distortions in allocations of budgetary resources, and systematically increasing inequalities. The mobilization of adequate resources is essential in order for Africa to emerge from its weak economic conditions, and increase the level of development of its populations. Indeed, after two decades (80s and 90s) of weak growth with a nearly zero average, Africa has experienced strong economic growth, despite the recent downturn observed with the decline in commodity prices. The average growth rate has been around 5% since 2000, with considerable heterogeneity in growth patterns between countries, at a time when other regions have experienced a decline or stagnation in their economic activity. However, this growth has not substantially reduced poverty and inequality or led to job creation. The processes for industrialization, economic diversification and the modernization of agriculture have also been very limited. Despite progress made, more than 50% of the African population is living on less than USD 1.9/day, that is, about 389 million people (World Bank, 2016). In terms of income distribution, six of the top ten most unequal countries in the world were located in Africa, particularly in Southern Africa, with a GINI coefficient increasing from 0.42 to 0.46 between 2000 and 2010 (African Development Bank, 2012). Africa's infrastructure needs range from USD 130 to 170 billion per year (Authorized Economic Operator, 2018). On the basis of these findings and in view of the current limited budgetary resources and the scarcity of development aid, African countries should explore options for mobilizing domestic resources to finance productive activities, generate growth and mitigate the increasing social demands as a result of the continuing unprecedented population growth. This should start with the recovery of funds lost through illicit financial flows to invest in the social sectors (education, health, social safety nets, etc.) in order to rapidly harness the demographic dividend, and to place the Continent on the path to rapid, inclusive and sustainable growth. The African Union could address the issue at political level by putting in place a common continental strategy on which national strategies will be anchored, and by advocating for the strengthening of international cooperation in combatting tax evasion, money laundering, crime, corruption, false invoicing and mispricing of imported or exported goods practices. This paper takes stock of illicit financial flows and corruption in Africa, with a detailed presentation at regional and country levels. It is structured as follows: the first part essentially discusses the importance of domestic resource mobilization, and combatting corruption and illicit financial flows (IFFs) to ensure the sustainable development of Africa. The second part takes stock of the IFFs in Africa based on data provided by the organization, Global Financial Integrity (GFI). The third part addresses the issue of corruption and financial mismanagement in Africa, and the last part proposes recommendations Details: African Union (Addis Ababa ), 2018. 24p. Source: Internet Resource: Accessed April 25, 2018 at: http://iffoadatabase.trustafrica.org/iff/paper_2018_mobilization_of_domestic_resources_fighting_against_corruption_iff_english_0.pdf Year: 2018 Country: Africa URL: http://iffoadatabase.trustafrica.org/iff/paper_2018_mobilization_of_domestic_resources_fighting_against_corruption_iff_english_0.pdf Shelf Number: 149884 Keywords: CorruptionFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Global Financial Integrity Title: Kenya: Potential Revenue Losses Associated with Trade Misinvoicing Summary: Trade misinvoicing is a reality impacting Kenya and every other country of the world. Imports coming into a country can be over-invoiced in order to shift money abroad. Or imports can be under-invoiced in order to evade or avoid customs duties or VAT taxes. Similarly, exports going out of a country can be under-invoiced in order to shift money abroad. And exports are occasionally over-invoiced, for example in order to reclaim VAT taxes. Global Financial Integrity finds that trade misinvoicing is the most frequently utilized mechanism facilitating measurable illicit financial flows. Misstating import and export values has become normalized in much of commercial trade, and the same facilitating shadow financial system is used to move money of criminal and corrupt origin. We are dealing with a systemic problem that merits serious concerted attention. Parties to trade who engage in misinvoicing do so because it is profitable to them. That is, they will incur some costs (including the expected cost of getting caught) but do so because the expected benefits to them of misinvoicing are larger than their expected costs. While those parties benefit from misinvoicing, there are additional social costs to nations affected by such activity. Trade misinvoicing redirects economic resources away from their most productive use (i.e., it is a type of "rent-seeking" activity) and that can result in social inefficiencies in the allocation and distribution of resources. While any country may be affected by misinvoicing, the problem is particularly acute for developing countries where productive capacities may already be limited. The social costs of misinvoicing can undermine sustainable growth in living standards in developing countries as well as exacerbate already pronounced inequities in the distribution of income and wealth. Moreover, by depressing government revenues and exacerbating inequality, those social costs can also impede progress in the developing world on important social goals, such as poverty reduction. In this analysis we seek to provide an approximate measure of revenues lost to the Kenyan government due to trade misinvoicing. We illustrate this in the first section of the report for 2013 (the last year for which comprehensive data for Kenya are available). For that year, we can reasonably identify potential revenue losses in excess of US$907 million, or about 8 percent of total Kenyan government revenues. That is a conservative figure, as it does not encompass many aspects of trade misinvoicing and other illicit financial flows that do not show up in official statistics. Moreover, the detailed data available for estimating trade misinvoicing in Kenya comprise a fraction of all of that country's trade flows. Furthermore, we take one aspect of this problem - import under-invoicing - and subject it to detailed analysis utilizing detailed bilateral trade data. We find that Kenyan imports of cereal from Pakistan, mineral fuels from India and, more generally, imports from China to be particularly prone to potential revenue loss to the government of Kenya due to under-invoicing. All researchers on this issue of trade misinvoicing are constantly seeking better data and better analytical methodologies. Even as we work toward these goals, what is most important is to appreciate the order of magnitude of the problem and the potential for development revenues if the problem is curtailed. Recognizing the shortcomings in data, Global Financial Integrity has developed GFTrade, a database of current world market prices of 80,000 categories of goods in the Harmonized System, as traded by 30 of the largest global economies. This enables emerging market and developing country customs and revenue authorities to assess instantly the risk that trade misinvoicing may be a reality in transactions as they are coming in or going out. GFTrade is in use in Africa now. Details: Washington, DC: Global Financial Integrity, 2018. 32p. Source: Internet Resource: Accessed October 10, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/GFI-Kenya-Potential-Revenue-Losses-Associated-with-Trade-Misinvoicing.pdf Year: 2018 Country: Kenya URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/GFI-Kenya-Potential-Revenue-Losses-Associated-with-Trade-Misinvoicing.pdf Shelf Number: 152890 Keywords: Corporate CrimeCorrupt Practices Financial Crimes Illicit Financial Flows Money Laundering Tax Evasion |
Author: Global Financial Integrity Title: A Scoping Study of Illicit Financial Flows Impacting Uganda Summary: Insufficient levels of financial transparency-globally and domestically-and government accountability in Uganda, coupled with a regulatory system that can incentivize financial crimes, are helping to drive high levels of illicit financial inflow and outflows in the country, which are undermining development efforts. Uganda will struggle to meet its goal of rising to middle income status and reducing its reliance on foreign debt unless it increases efforts to combat the commercial tax evasion, corruption, and money laundering of criminal proceeds and terrorist financing. Three policy areas should be the central focus for the government: eliminate the allowance and use of anonymous companies in the economy, reduce the ease and volumes of trade misinvoicing, and enforce anti-money laundering laws, particularly within the banking sector. Illicit financial flows (IFFs) in Uganda are part of a broader political economy dynamic where continued economic growth and development are hampered by corruption, impunity, and an opaque extractive sector. The growth in Uganda's economy and its role as a haven for legal and illegal activities stemming from neighboring countries like South Sudan, create perverse opportunities for illicit financial flows. The central government has a decent capacity to combat these opportunities for IFFs on paper, but its willingness or capacity to act to curtail IFFs is lagging. Trade misinvoicing is the most significant area of illicit financial flows in Uganda that can be estimated using publicly available data. From 2006-2015, the latest years for which the necessary data are available, potential trade misinvoicing amounted to roughly 18 percent of total Ugandan trade over the ten-year period. The figure for possible outflows is some 10 percent of total trade, and for possible inflows it is around 8 percent of total trade (2006-2015). Viewed in dollar terms, the potential over- and under-invoicing of imports from 2006-2015 was approximately US$4.9 billion, and over- and under-invoicing of exports may have reached US$1.7 billion. Uganda's laws and regulations on financial transparency and anti-money laundering have the strongest influence on illicit financial flows, and there are notable gaps in the framework the Government of Uganda has in place to address the sources, transfer methods, and motivations of IFFs in the country. In particular, laws governing corporations in Uganda are generally weak in so far as they do not require the official identification of the beneficial owners of companies or the complete identity of all shareholders in a company. The government's anti-money laundering regime mostly exists on paper and could do with strengthening. The Financial Intelligence Authority, which was only recently established, acknowledges this shortcoming and is working to enhance its performance in helping to prevent, track, and prosecute money laundering in the country. Uganda's extractive sector and the presence of numerous transnational crime markets add to the importance of both financial transparency and anti-money laundering. Details: Washington, DC: GFI, 2018. 80p. Source: Internet Resource: accessed October 16, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/A-Scoping-Study-of-Illicit-Financial-Flows-Impacting-Uganda.pdf Year: 2018 Country: Uganda URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/A-Scoping-Study-of-Illicit-Financial-Flows-Impacting-Uganda.pdf Shelf Number: 152979 Keywords: Corporate CorruptionCorporate CrimeFinancial CrimeIllicit Financial FlowsMoney LaunderingTax EvasionTerrorist financing |
Author: Global Financial Integrity Title: Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing Summary: Analysis of trade misinvoicing in Nigeria in 2014 shows that the potential loss of revenue to the government was approximately $2.2 billion for the year, according to a new study by Global Financial Integrity. To put this figure in context, this amount represents four percent of total annual government revenue as reported to the International Monetary Fund. Put still another way, the estimated value gap of all imports and exports represents approximately 15 percent of the country's total trade. The report, titled Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing, analyzes Nigeria's bilateral trade statistics for 2014 (the most recent year for which sufficient data are available) which are published by the United Nations Comtrade. The detailed breakdown of bilateral Nigerian trade flows in Comtrade allowed for the computation of trade value gaps that are the basis for trade misinvoicing estimates. Import gaps represent the difference between the value of goods Nigeria reports having imported from its partner countries and the corresponding export reports by Nigeria's trade partners. Export gaps represent the difference in value between what Nigeria reports as having exported and what its partners report as imported. The portion of revenue lost due to the misinvoicing of exports was $1.3 billion during the year which was related to a reduction in corporate income taxes. The portion of revenue lost due to the misinvoicing of imports was $880 million. This amount can be further divided into its component parts: uncollected VAT tax ($100 million), customs duties ($365 million), and corporate income tax ($415 million). Lost revenue due to misinvoiced exports was $1.3 billion for the year which is related to lower than expected corporate income and royalties. "The practice of trade misinvoicing has become normalized in many categories of international trade" according to GFI President Raymond Baker. "It is a major contributor to poverty, inequality, and insecurity in emerging market and developing economies. The social cost attendant to trade misinvoicing undermines sustainable growth in living standards and exacerbates inequities and social divisions, issues which are critical in Nigeria today." Examination of the underlying commodity groups which comprise Nigeria's global trade show that a large amount of lost revenue ($200 million) was related to import under-invoicing of just five product types. Those products and the related estimated revenue losses include: vehicles ($100 million), iron and steel products ($40 million), electrical machinery ($20 million), ceramics ($20 million), and aluminum products ($20 million). Lost revenue due to mispriced exports ($1.3 billion) may be related to the mineral fuels trade given this category of goods makes up over 90 percent of all exports. Trade misinvoicing occurs in four ways: under-invoicing of imports or exports, and over-invoicing of imports or exports. In the case of import under-invoicing fewer VAT taxes and customs duties are collected due to the lower valuation of goods. When import over-invoicing occurs (i.e. when companies pay more than would normally be expected for a product), corporate revenues are lower and therefore less income tax is paid. In export under-invoicing the exporting company collects less revenue than would be anticipated and therefore reports lower income. Thus, it pays less income tax. Corporate royalties are also lower. Total misinvoicing gaps related to imports can be broken down by under-invoicing ($2.4 billion) and over-invoicing ($1.9 billion). It should be noted that these figures represent the estimated value of the gap between what was reported by Nigeria and its trading partners. The loss in government revenue is a subset of these amounts and is based on VAT tax rates (5 percent), customs duties (15.2 percent), corporate income taxes (22.4 percent), and royalties (.2 percent) which are then applied to the value gap. Export misinvoicing gaps were a massive $5.9 billion for export under-invoicing and $5.6 billion for export over-invoicing. Lost corporate income taxes and royalties are then applied to export under-invoicing amounts to calculate lost government revenue. Details: Washington, DC: GFI, 2018. 32p. Source: Internet Resource: Accessed November 3, 2018 at: https://www.gfintegrity.org/wp-content/uploads/2018/10/Nigeria-Report-2018.pdf Year: 2018 Country: Nigeria URL: https://www.gfintegrity.org/wp-content/uploads/2018/10/Nigeria-Report-2018.pdf Shelf Number: 153244 Keywords: Corporate CrimeCorrupt PracticesFinancial CrimesIllicit Financial FlowsMoney LaunderingTax Evasion |
Author: Global Financial Integrity Title: Illicit Financial Flows to and from 148 Developing Countries: 2006-2015 Summary: This is the latest in a series of reports, issued on a roughly annual basis by Global Financial Integrity (GFI), which provides country-level estimates of the illicit flows of money into and out of 148 developing and emerging market nations as a result of their trade in goods with advanced economies, as classified by the International Monetary Fund. Such flows - hereafter referred to as illicit financial flows (IFFs)-are estimated over the years from 2006 to 2015, the most recent ten year period for which comprehensive data are available. In addition to updating the estimated IFFs GFI has presented in the past, this report widens the scope of its research and uses a more detailed database published by the United Nations (UN) along with updated measures from the International Monetary Fund (IMF) data it has used previously. This report presents estimates of IFFs based on both data sets. GFI defines IFFs as "money that is illegally earned, used or moved and which crosses an international border." Currently, the World Bank, IMF, UN, and the OECD use a similar definition. This study underscores the point that trade-related IFFs appear to be both significant and persistent features of developing country trade with advanced economies. As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world. Details: Washington, DC: GFI, 2019. 56p. Source: Internet Resource: Accessed February 18, 2019 at: https://www.gfintegrity.org/wp-content/uploads/2019/01/GFI-2019-IFF-Update-Report-1.29.18.pdf Year: 2019 Country: International URL: https://www.gfintegrity.org/wp-content/uploads/2019/01/GFI-2019-IFF-Update-Report-1.29.18.pdf Shelf Number: 154642 Keywords: Corporate CorruptionCorporate CrimeFinancial CrimeIllicit Financial FlowsMoney LaunderingTax EvasionTerrorist financingTrade Misinvoicing |