GFI President Raymond Baker said: “The most troubling… is the fact that these outflows are growing at an alarming rate of 9.4% a year —twice as fast as global GDP,” adding “it is simply impossible to achieve sustainable global development, unless world leaders agree to address this issue head-on”.
The study estimates illicit financial outflows from two sources: As a result of deliberate trade misinvoicing, and due to leakages in the balance of payments (known as illicit hot money narrow outflows). According to the study, while trade invoicing accounted for 77.8% of illicit flows from all developing countries over the period, this number was 85.3% for Asia.
The report says it is likely the repatriation and surrender requirements create strong incentives for exporters to under-invoice exports as a way to circumvent these requirements.
GFI’s Joseph Spanjers said: “Illicit financial flows have major consequences for developing economies,” adding these funds “could have been invested in local businesses, health care, education, or infrastructure. Without concrete action to address illicit outflows, the drain on the developing world is only going to grow larger”.