Crime 'drains a trillion dollars a year from developing states'

Crime 'drains a trillion dollars a year from developing states'

Thailand has featured prominently in two top-10 rankings of countries with staggering illicit capital outflows.

One 2012 study involved 24 other countries that saw a record US$991.2 billion lost to crime, corruption and tax evasion. The other showed $6.6 trillion stolen from 25 countries in the developing world from 2003-12, according to Washington-based Global Financial Integrity (GFI).

In its annual global update released on Monday on its website, GFI said illicit outflows are growing at an inflation-adjusted 9.4 per cent per year - roughly double global GDP growth.

GFI president Raymond Baker said illicit financial flows are the most damaging economic problem plaguing developing and emerging economies.

"These outflows - already greater than the combined sum of all FDI [foreign direct investment] and ODA [official development assistance] flowing into these countries - are sapping roughly a trillion dollars per year from the world's poor and middle-income economies."

"It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on. That's why it is essential for the United Nations to include a specific target next year to halve all trade-related illicit flows by 2030 as part of the post-2015 Sustainable Development Agenda," he said.

The historic high of $991.2 billion in 2012 was a dramatic increase from 2003, when illicit outflows totalled a mere $297.4 billion.

In many parts of the world, illicit flows are growing much faster, particularly in the Middle East and North Africa (MENA) and in Sub-Saharan Africa, where the average annual inflation-adjusted rates are 24 per cent and 13 per cent.

Illicit financial flows averaged 3.9 per cent of the developing world's GDP. Sub-Saharan Africa suffered the most - 5.5 per cent - followed by developing Europe (4.4 per cent), Asia (3.7 per cent), MENA (3.7 per cent) and the Western Hemisphere (3.3 per cent).

Illicit outflows were roughly 1.3 times the $789.4 billion in foreign direct investment and 11 times the $89.7 billion in net official development aid that these economies received in 2012.

To curb the opacity in the global financial system, which facilitates these outflows, GFI suggests that governments should establish public registries of meaningful beneficial ownership information on all legal entities. It says financial regulators should require all banks should know the true beneficial owners of any account opened in their financial institution and authorities adopt and fully implement all of the Financial Action Task Force's anti-money laundering recommendations.

Regulators and law enforcement officials should also ensure that all anti-money laundering regulations already on the books are strongly enforced, while policymakers should require multi-national companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries and staff levels on a country-by-country basis.

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