Global Financial Integrity

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Illicit Financial Flows from Developing Countries: 2002-2006

This ground-breaking 2008 report from Global Financial Integrity, Illicit Financial Flows from Developing Countries: 2002-2006, is the first study to show that the developing world is losing an increasing amount of money through illicit capital flight each year.

Illicit financial flows siphon revenue out of poor countries, robbing them of much-needed assets and forestalling economic development. 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.

  • 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.

To effectively curtail these outflows we need to first identify and measure them – this report is just the beginning of GFI’s work to map and measure the movement of these illicit flows.  The magnitude of the flows indicates there is much the international community must do to tackle this systemic and destructive problem.

GFI recommends citing from the most recently released research. The most recent annual report is Illicit Financial Flows to and from 148 Developing Countries: 2006-2015.