June 5th, 2015
This June 2015 report, the latest in a series by Global Financial Integrity (GFI), highlights the outsized impact that illicit financial flows have on the world's poorest economies. The study looks at illicit financial flows from some of the world's poorest nations and compares those values to some traditional indicators of development-including GDP, total trade, foreign direct investment, public expenditures on education and health services, and total tax revenue, among others-over the period 2008-2012.
From the Executive Summary:
The study ﬁnds that, for close to one-quarter of the 82 countries studied, the ratio of IFFs toGDP [see p. 6] is 10 percent or greater-for example, Honduras (21.7 percent), Zambia(18.1 percent), and Ethiopia (11.2 percent). It would not be overstating the point to note that, if any other economic factor had such a double-digit impact on GDP, it would be front-page news. Unfortunately, this is often not the case when illicit ﬂows are concerned.
Additionally, we ﬁnd that 40 percent of the countries examined had illicit ﬂows that were at least10 percent of the country's total trade value [see pp. 30-33]. These include the notable cases of Nicaragua (28.9 percent), Malawi (24.6 percent) and Nigeria (16.3 percent) [see p. 7]. This ﬁnding may be a reﬂection of the fact that, over the last 10 years, approximately 80 percent of all illicit outﬂows use trade misinvoicing (i.e. trade fraud) as the method to move funds offshore.
Most tellingly, we ﬁnd that 20 of the nations analyzed had illicit ﬂows amounting to more than the combined total of Ofﬁcial Development Assistance (i.e. foreign aid) and foreign direct investment [see p. 10]. These include Indonesia (184.5 percent), Chad (151.8 percent), and Cote d'Ivoire (109.9 percent). There can be no clearer indication that a nation is suffering the ill-effects of a severe countervailing economic force than when two of the largest sources of foreign funds are swamped by illicit outﬂows. Similarly, the ratio of IFFs to a country's tax base demonstrates the opportunity cost of this phenomenon.
Read the entire report: