Developing countries lost nearly US$1 trillion to fraud, corruption and shady business transactions in 2011, vastly outpacing the foreign aid they received and the pace of dirty money leaving emerging nations is accelerating
December 20, 2013 Leave a comment
Updated: Friday December 13, 2013 MYT 7:53:26 AM
Developing nations lose US$1tril
WASHINGTON: Developing countries lost nearly US$1 trillion to fraud, corruption and shady business transactions in 2011, vastly outpacing the foreign aid they received and the pace of dirty money leaving emerging nations is accelerating, a new report found.Illicit finance leaving the 150 developing countries totalled US$946.7bil in 2011, up 13.7% from the prior year and the largest amount in a decade, according to Global Financial Integrity, the Washington-based group that exposes financial corruption. This means that for every US$1 in economic dev elopment assistance going into a developing country, US$10 are lost via these illicit outflows.
“As the world economy sputters along in the wake of the global financial crisis, the illicit underworld is thriving – siphoning more and more money from developing countries each year,” said GFI president Raymond Baker.
The issue has caught the attention of G-20 global leaders, who are struggling to repair their economies after the 2008–09 recession and face a widening gap between rich and poor citizens. They are cracking down on tax evasion and the corporate structures used to launder money and hide criminal wealth.
The Middle East and North Africa saw the most rapid increase in dirty money, which is the proceeds from illicit business, crime and corruption.
Illicit outflows rose 31.5% between 2002 and 2011, the decade leading up to the Arab Spring uprisings during which a rallying cry was fighting corruption in the regimes. It was followed by sub-Saharan Africa, up 20.2% in the decade ended 2011, the latest period for which data are available.
Asia lost the largest amount of money accounting for 40% of the US$5.9 trillion of illicit financial outflows from the developing world in the 10-year period, and the vast bulk of that came from China at US$1.08 trillion, GFI said.
The researchers also looked at balance of payments data to analyse how much money flows into a country through portfolio investment, foreign direct investment, aid and loans etcetera, and how that money is used.
Abnormally large discrepancies point to illicit capital flight, separate from the trade misinvoicing route. In this regard, Russia had the biggest problem, GFI said. It was the top exporter of illegal capital in 2011, losing US$191.14bil, followed by China at US$151.35bil and India at US$84.93bil. — Reuters
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