Global Financial Integrity

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Illicit Financial Flows from Developing Countries: 2002-2011

This December 2013 report from Global Financial Integrity, “Illicit Financial Flows from the Developing World: 2002-2011,” finds that the developing world lost US$5.9 trillion in illicit financial flows from 2002-2011, with illicit outflows alarmingly increasing at an average rate of more than 10 percent per year.

The report is the fourth update of Global Financial Integrity’s groundbreaking report, Illicit Financial Flows from Developing Countries 2002-2006. For the first time, this year’s report incorporates re-exporting data from Hong Kong and uses disaggregated—as opposed to aggregated—bilateral trade data for those countries which report it.



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Primary Findings

The developing world lost US$946.7 billion in illicit outflows in 2011, an increase of 13.7% over 2010. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity.


The report finds that from 2002 to 2011, developing countries lost US$5.9 trillion to illicit outflows. The outflows increased at an average inflation-adjusted rate of 10.2% per year over the decade—significantly outpacing GDP growth.

As a percentage of GDP, Sub-Saharan Africa suffered the biggest loss of illicit capital. Illicit outflows from the region averaged 5.7% of GDP annually. Globally, illicit financial outflows averaged 4% of GDP.


China leads the world over the 10-year period with US$1.08 trillion in illicit outflows. However, 2011 marked the first time that Russia’s illicit outflows exceeded China’s, with a loss of US$191.14 billion against China’s US$151.35 billion. The previous methodology had significantly understated Russia’s illicit outflows, while it overstated China’s illicit outflows.

New Methodology

Last year, Global Financial Integrity debuted several important revisions to its HMN (Hot Money Narrow) methodology for calculating illicit financial flows. This report continues to revise GFI’s methodology by making significant changes to how it calculates GER (Gross Excluding Reversals) to estimate trade misinvoicing.

For the first time, this year’s report incorporates re-exporting data from Hong Kong and uses disaggregated—as opposed to aggregated—bilateral trade data for those countries which report it. The authors of this report believe that GFI’s previous methodology—which was accepted by most economists studying trade misinvoicing—resulted in an estimate that potentially overstated illicit outflows from many Asian countries and understated illicit outflows from other countries. Post-revision, the authors believe they have produced the most accurate estimate of global illicit financial outflows produced by GFI to date.

Country Rankings

The Top 25 countries with the highest measured cumulative illicit financial outflows between 2002 and 2011 were:

Rank
Country
Illicit Outflows
Rank
Country
Illicit Outflows
1.China:US$1.08tn14.Philippines:US$88.87bn
2.Russia:US$880.96bn15.Costa Rica:US$80.65bn
3.Mexico:US$461.86bn16.Belarus:US$75.09bn
4.Malaysia:US$370.38bn17.Qatar:US$62.82bn2
5.India:US$343.93bn18.Poland:US$49.39bn
6.Saudi Arabia:US$266.43bn19.Serbia:US$49.37bn
7.Brazil:US$192.69bn20.Chile:US$45.20bn
8.Indonesia:US$181.83bn21.Paraguay:US$40.12bn
9.Iraq:US$78.79bn122.Venezuela:US$38.97bn
10.Nigeria:US$142.27bn23.Brunei:US$38.37bn2
11.Thailand: US$140.88bn24.Panama:US$38.09bn
12.United Arab Emirates:US$114.64bn225.Turkey:US$37.28bn
13.South Africa:US$100.73bn

Description: PDF Download Full Country Rankings (66 KB)
Description: PDF Download Full Country Outflow Data (152 KB)

Footnotes
  1. Data for Iraq was not available in 2002-2006, thus the average illicit outflows of US$15.76 billion reflect only the years 2007-2011.  Likewise, the cumulative outflows of US$78.79 billion for Iraq are cumulative outflows for 2007 through 2011 only.
  2. Illicit financial outflow estimates from the oil exporting nations of Brunei, Qatar, and the United Arab Emirates should be viewed with caution as they could be inflated due to opaque transactions with their nation’s sovereign wealth funds.  GFI has flagged these countries in particular as their Net Errors and Omissions are greater than 50% of their Financial Account.