Crime and corruption are draining a record $1 trillion a year from poor and middle-income nations with the disappearance of dirty money hitting some of the world’s poorest regions hardest, according to US-based watchdog, Global Financial Integrity (GFI) that exposes financial corruption.
GFI’s sixth annual report found that between 2003 and 2012 the estimated amount of illicit funds shifted from developing countries totalled $6.6 trillion and rose at an inflation-adjusted 9.4 percent a year — roughly double global GDP growth.
China, Russia, Mexico, India, Malaysia saw the largest outflow of dirty money — the proceeds from shady business, crime and corruption — over the decade and also in 2012.
Sub-Saharan Africa suffered the biggest loss as a share of its economy, with the disappearance of dirty money averaging 5.5 percent of GDP. Nigeria and South Africa were among the top 12 nations with the largest volumes of illicit outflows.
Asia was the region of the developing world with the greatest flow of dirty money over the decade, accounting for 40.3 percent of the world total, driven by China.
But the researchers found growth of illicit flows was faster in other parts of the world, particularly in the Middle East and North Africa and in sub-Saharan Africa, where the growth was seen at 24.2 percent and 13.2 percent, respectively.
The GFI research found fraudulent mis-invoicing of trade transactions was the most popular method to move money illegally and accounted for nearly 78 percent of illicit flows in 2012.
The GFI research tracks illegal money flowing out of 151 developing countries using trade and balance of payments reports filed with the International Monetary Fund. Its data provides an estimate as illicit flows cannot be precisely measured.