Global Financial Integrity

 

Archive for September, 2014

Opportunity Knocks to Address Illicit Financial Flows

GFI Calls for a Sustainable Development Goal (SDG) to Halve Illicit Flows from Trade Misinvoicing by 2030

As I noted in yesterday’s post, the momentum toward global action on illicit flows by the international community (i.e. the United Nations, OECD, G20, etc) has grown substantially over the past three years.  Indeed, last October, the World Bank Group noted that “there is little doubt that [illicit] flows have a pernicious impact on development” and the UN group working on development financing said that “domestic resource mobilization is being severely undermined by illicit financial flows.”  And, in January, the African Union stated that “it is imperative to curtail illicit financial flows [to ensure] the efficient and effective use of resources.”

But, while there is an understanding of the problem and a willingness to act, there is no broad consensus on what should be done.  The opportunity that presents itself comes from a once-in-a-generation confluence:

  1. the international community agreeing on the need to reduce illicit financial flows (IFFs), and
  2. 2) the fact that the Post-2015 development agenda is open for debate.

The political will already exists to address the IFF challenge in concrete ways.  Now, the question is: what does a SMART (i.e. Specific, Measurable, Achievable, Relevant, Time-bound) SDG target on illicit flows look like?

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The “Big Mo” in the Drive to Address Illicit Financial Flows

GFI Participates in High Level OECD Side-Event on Curbing Illicit Flows during UN General Assembly Meetings

On September 24th, tucked away in a quiet conference room in the basement of the UN General Assembly building, an extraordinary conversation took place on the future of global development.  But, despite the gathering of representatives from the OECD, UN, World Bank, USAID and the Mexican, Australian, and Nigerian governments, the event received exactly zero media coverage.

Titled “Curbing Illicit Financial Flows for Domestic Resource Mobilization and Sustainable Development in the Post-2015 Era,” the focal point of the two-hour discussion was how the international community could, as the program description put it, “identify concrete international actions needed” to curtail illicit financial flows out of developing country economies.  While other events were given more airtime and other issues may require more immediate attention, some ideas presented at the panel could be transformational in terms of how countries address the scourge of illicit flows and how the development agenda is funded.

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China’s Illicit Outflows Were US$1.08 Trillion from 2002-2011

GFI’s Current Methodology Finds Illicit Outflows from China Totaled US$1.08 Trillion from 2002-2011, Not US$2.83 Trillion from 2005-2011

With the anti-corruption drive underway in China, our estimates of illicit financial flows have been in the news a lot lately.  This is for good reason; there is a ton of illicit money gushing out of China.

But, if you have been reading multiple stories on this topic, you might be a little confused about the precise scale of the problem facing China.

Prominent outlets such as the Financial Times, the South China Morning Post, and China Daily, among others, have all reported over the past week that:

“The US-based non-profit group Global Financial Integrity estimates illegal flows out of China amounted to $2.83tn between 2005 and 2011.”

While other major sources such as Businessweek and the Heritage Foundation have stated:

“Between 2002 and 2011, $1.08 trillion of illicit funds were spirited out of China, estimates Washington (D.C.)-based nonprofit Global Financial Integrity.”

These estimates are widely different.  Some of these outlets must be incorrect in their reporting, right?

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