Washington: Crime, corruption and tax evasion have cost the developing world nearly $6 trillion over the past decade, and illicit funds keep growing, led by China, a financial watchdog group said in a new report.
China accounted for almost half of the $858.8 billion in dirty money that flowed into tax havens and Western banks in 2010, more than eight times the amounts for runner-ups Malaysia and Mexico. Total illicit outflows increased by 11 per cent from the prior year, Global Financial Integrity (GFI), a Washington-based group that campaigns for financial accountability, said in its latest report released on.
"Astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks," said Raymond Baker, director of GFI. "Developing countries are haemorrhaging more and more money at a time when rich and poor nations alike are struggling to spur economic growth. This report should be a wake-up call to world leaders that more must be done to address these harmful outflows," he said.
All the countries in the top 10, which this year saw India, Nigeria, the Philippines and Nigeria join the ranks, face significant problems with corruption, and in most there are vast gaps between rich and poor citizens as well as internal security problems.
Leaders of the Group of 20 major economies increasingly are focusing on ways to crack down on money laundering, bank secrecy and tax loopholes to prevent funds stolen from public coffers or earned through criminal activity from depleting the budgets of developing countries.
Methodology
The sums are so huge that for every dollar in foreign direct aid, $10 leaves developing countries. China lost $420.4 billion in 2010 and over the decade lost a total of $2.74 trillion. And its losses are steadily rising. In an October report, GFI said another $602 billion in illicit flows left China in 2011 for a total of $3.79 trillion between 2000-11.
However, the numbers in the latest report are not directly comparable with earlier data because GFI has updated its methodology, making the estimates somewhat more conservative. It measures illicit flows by calculating the difference between fund inflows from loans and net foreign direct investment, and the outflows from a country to pay for trade, cash transfers and other earnings.
Aware of the destabilising impact of corrupt money, Chinese leaders are embarking on a crackdown. Outgoing
China accounted for almost half of the $858.8 billion in dirty money that flowed into tax havens and Western banks in 2010, more than eight times the amounts for runner-ups Malaysia and Mexico. Total illicit outflows increased by 11 per cent from the prior year, Global Financial Integrity (GFI), a Washington-based group that campaigns for financial accountability, said in its latest report released on.
"Astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks," said Raymond Baker, director of GFI. "Developing countries are haemorrhaging more and more money at a time when rich and poor nations alike are struggling to spur economic growth. This report should be a wake-up call to world leaders that more must be done to address these harmful outflows," he said.
All the countries in the top 10, which this year saw India, Nigeria, the Philippines and Nigeria join the ranks, face significant problems with corruption, and in most there are vast gaps between rich and poor citizens as well as internal security problems.
Leaders of the Group of 20 major economies increasingly are focusing on ways to crack down on money laundering, bank secrecy and tax loopholes to prevent funds stolen from public coffers or earned through criminal activity from depleting the budgets of developing countries.
Methodology
The sums are so huge that for every dollar in foreign direct aid, $10 leaves developing countries. China lost $420.4 billion in 2010 and over the decade lost a total of $2.74 trillion. And its losses are steadily rising. In an October report, GFI said another $602 billion in illicit flows left China in 2011 for a total of $3.79 trillion between 2000-11.
However, the numbers in the latest report are not directly comparable with earlier data because GFI has updated its methodology, making the estimates somewhat more conservative. It measures illicit flows by calculating the difference between fund inflows from loans and net foreign direct investment, and the outflows from a country to pay for trade, cash transfers and other earnings.
Aware of the destabilising impact of corrupt money, Chinese leaders are embarking on a crackdown. Outgoing
President Hu Jintao recently warned corruption threatens to destroy the communist party and the state. In Russia, President Vladimir Putin last week also put the issue high on his agenda as citizen protests over corruption mount.
"Our report continues to demonstrate that the Chinese economy is a ticking time bomb," said Dev Kar, GFI's lead economist, who compiled the report. "The social, political and economic order in that country is not sustainable in the long run given such massive illicit outflows."
Mexico lost $51.17 billion in illicit flows in 2010 for a total of $476 billion over the last decade, which does not even count the billions of dollars in bulk cash that probably left under organised crime and drug dealing. Malaysia, an export-dominated economy with a wealthy elite, lost $64.38 billion in 2010 and $285 billion cumulatively between 2001 and 2010, the report said.
Globalisation of finance
Illicit financial flows have grown by 13.3 per cent a year since 2001, robbing countries of wealth and benefiting a handful of corrupt leaders. Kar said the worsening picture over the past decade coincides with the globalisation of finance and loosening of capital controls, changes that make it easier to transfer funds to Western banks and to tax havens.
GFI called on world leaders to accelerate efforts to curtail the flow of dirty money by clamping down on secret bank accounts and ownership of shell companies; reforming customs and trade protocols so that export/import payments cannot be used to hide illegal fund transfers; requiring multinational companies to report their profits by country to prevent tax avoidance; and strongly enforcing anti money-laundering laws.
"Our report continues to demonstrate that the Chinese economy is a ticking time bomb," said Dev Kar, GFI's lead economist, who compiled the report. "The social, political and economic order in that country is not sustainable in the long run given such massive illicit outflows."
Mexico lost $51.17 billion in illicit flows in 2010 for a total of $476 billion over the last decade, which does not even count the billions of dollars in bulk cash that probably left under organised crime and drug dealing. Malaysia, an export-dominated economy with a wealthy elite, lost $64.38 billion in 2010 and $285 billion cumulatively between 2001 and 2010, the report said.
Globalisation of finance
Illicit financial flows have grown by 13.3 per cent a year since 2001, robbing countries of wealth and benefiting a handful of corrupt leaders. Kar said the worsening picture over the past decade coincides with the globalisation of finance and loosening of capital controls, changes that make it easier to transfer funds to Western banks and to tax havens.
GFI called on world leaders to accelerate efforts to curtail the flow of dirty money by clamping down on secret bank accounts and ownership of shell companies; reforming customs and trade protocols so that export/import payments cannot be used to hide illegal fund transfers; requiring multinational companies to report their profits by country to prevent tax avoidance; and strongly enforcing anti money-laundering laws.
Source : http://www.timesofoman.com/News/Article-4100.aspx
