Pakistan 109th, India placed 4th in illicit financial flows

China tops list with $1.39 trillion illegal capital ushered over 10 years

KARACHI:

Developing and emerging economies lost as much as $7.8 trillion in illicit financial flows during the period between 2004 and 2013, according to the report of a US-based think-tank, with $1.917 billion being whisked away from Pakistan.

It put Pakistan at 109th place among 149 countries in the list of “biggest exporters of illicit capital over the decade”. The country lost around 2.3% of GDP due to illegal financial flows, according to the report.



China Mainland ($1.392 trillion), Russian Federation ($1.05 trillion), Mexico ($528.44 billion), India ($510.29 billion) and Malaysia ($418.54 billion) occupied the top five places after contributing the most in illicit financial flows during the period.



The December 2015 report from Global Financial Integrity (GFI), a Washington based research and advisory organisation, shows that illicit outflows increased at an average rate of 6.5% per year-nearly twice as fast as global GDP

These findings also estimate that $1.1trillion was whisked away from developing countries in 2013 alone, reflecting a steady upward trend as illegal flows grew from $465 billion in 2004.



To conduct the study, analysts looked at balance of payments data and direction of trade statistics (DOTS), as reported to the IMF, in order to detect flows of capital that are illegally earned, transferred or utilised.

Examples of illegitimate money outflows include corrupt government officials transferring money abroad, importers using trade mis-invoicing to evade customs duties, drug cartel trying to launder dirty money and terrorists wiring money abroad to finance operations.

According to the GFI’s findings, illicit outflows peaked in Pakistan in 2010 with a balance of $729 million. This was followed by 2012 and 2013 with illegal flows amounting to $405 million and $529 million, respectively.



GFI provided a list of recommendations to better equip authorities to battle illicit flows. The list included the establishment of public registries of verified beneficial ownership information on all legal entities, significantly boosting customs enforcement by equipping and training officers to better detect intentional misinvoicing of trade transactions and treatment by customs agencies of trade transactions involving a tax haven with the highest level of scrutiny.

Published in The Express Tribune, December 10^th,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.