Billions scammed in illicit financial flows

A record $991.2 billion in illicit capital flowed out of developing and emerging economies in 2012 facilitating crime, corruption, and tax evasion, according to the latest study released Tuesday by Global Financial Integrity, a Washington, D.C.-based research and advisory organization. The study is the first analysis to include estimates of illicit financial flows for 2012.

The report, the organization’s 2014 annual global update on illicit financial flows, pegs cumulative illicit outflows from developing economies at US$6.6 trillion between 2003 and 2012, the latest year for which data is available.  Titled “Illicit Financial Flows from Developing Countries: 2003-2012,” the report finds that illicit outflows are growing at an inflation-adjusted 9.4 percent per year, roughly double global gross domestic product growth over the same period.

Costa Rica was in 14th place behind such countries as China, Russia and México, as the biggest exporters of illicit financial flows. The country exported $9.4 billion in 2012 and $94 billion over the period under study.

Costa Rica was 10th in the world for the export of illegal capital, according to the study. That amount was $21.55 billion, according to the study.

“As this report demonstrates, illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies,” said Raymond Baker, a longtime authority on financial crime. “These outflows . . . are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies.” He is president of Global Financial Integrity.

“Most troubling, however, is the fact that these outflows are growing at an alarming rate of 9.4 percent per year, twice as fast as global GDP,” continued  Baker.  “It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on.”

Illicit financial flows include such techniques as misinvoicing. This is when an individual or firm uses a third party to skim money from a legitimate import by creating an inflated invoice.

The organization said that policy makers should require multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries, and staff levels on a country-by-country basis.  All countries should actively participate in the worldwide movement towards the automatic exchange of tax information, it said.

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