Thailand ranked eighth in illicit financial outflows, study finds

Titled “Illicit Financial Flows from Developing Countries: 2004-2013”, the study claims that illicit financial flows first surpassed US$1 trillion in 2011, and grew to $1.1 trillion (Bt39 trillion) in 2013 – marking a dramatic increase from 2004, when illicit outflows totalled just $465.3 billion.

The study ranks the countries by the volume of illicit outflows. According to the report, the 10 biggest exporters of illicit flows over the decade are the following. 

1. China: $139.23 billion average ($1.39 trillion cumulative).

2. Russia: $104.98 billion average ($1.05 trillion cumulative). 

3. Mexico: $52.84 billion average ($528.44 billion cumulative). 

4. India: $51.03 billion average ($510.29 billion cumulative). 

5. Malaysia: $41.85 billion average ($418.54 billion cumulative). 

6. Brazil: $22.67 billion average ($226.67 billion cumulative). 

7. South Africa: $20.92 billion average ($209.22 billion cumulative).

8. Thailand: $19.18 billion average ($191.77 billion cumulative). 

9. Indonesia: $18.07 billion average ($180.71 billion cumulative). 

10. Nigeria: $17.80 billion average ($178.04 billion cumulative).

Authored by GFI chief economist Dev Kar and GFI junior economist Joseph Spanjers, the report pegs cumulative illicit outflows from developing economies at $7.8 trillion between 2004 and 2013, the last year for which data are available.

“This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world’s developing and emerging economies,” said GFI president Raymond Baker, a long-time authority on financial crime. 

“This year at the UN the mantra of ‘trillions not billions’ was continuously used to indicate the amount of funds needed to reach the Sustainable Development Goals. Significantly curtailing illicit flows is central to that effort.”

 

Additional findings

Illicit financial flows averaged a staggering 4.0 per cent of the developing world’s gross domestic product.

Sub-Saharan Africa suffered the largest illicit financial outflows – averaging 6.1 per cent of GDP – followed by developing Europe (5.9 per cent), Asia (3.8 per cent), the Western Hemisphere (3.6 per cent), and the Middle East, North Africa, Afghanistan and Pakistan (MENA+AP, 2.3 per cent).

 In seven of the 10 years studied, global illicit financial flows (IFFs) outpaced the total value of all foreign aid and foreign direct investment flowing into poor nations.

 The IFF growth rate from 2004-2013 was 8.6 per cent in Asia and 7 per cent in developing Europe as well as in the MENA and Asia-Pacific regions.

 

Major implications 

Goal 16.4 of the Sustainable Development Goals (SDGs) calls on countries to reduce IFFs significantly by 2030. However, the international community has not yet agreed on goal indicators, the technical measurements to provide baselines and track progress made on underlying targets and, subsequently, the overall SDGs. 

These indicators will not be finalised until March. The report calls on the International Monetary Fund to conduct this annual assessment.

 

Policy recommendations

The report recommends that world leaders focus on curbing opacity in the global financial system, which facilitates these outflows. Specifically, GFI maintains that:

 Governments should establish public registries of verified beneficial ownership information on all legal entities, and all banks should know the true beneficial owner(s) of any account opened in their financial institution.

 Government authorities should adopt and fully implement all of the Financial Action Task Force’s anti-money-laundering recommendations; laws already in place should be strongly enforced.

 Policymakers should require multinational companies publicly to 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 as endorsed by the Organisation for Economic Cooperation and Development and the Group of 20.

 Customs agencies should treat trade transactions involving a tax haven with the highest level of scrutiny.

 Governments should significantly boost their customs enforcement by equipping and training officers to detect intentional mis-invoicing of trade transactions better, particularly through access to real-time world market pricing information at a detailed commodity level.

 Governments should sign on to the Addis Tax Initiative to support efforts to curb IFFs as a key component of the development agenda.