'Dirty money' greatly hindering help to developing nations
For every $1 in economic development assistance towards nations, $10 are lost
With poverty, war and lack of growth, developing nations must also deal with rampant corruption. Money sent to these developing countries become lost due to shady business transactions, negating most if not all the funds sent in aid. Global Financial Integrity, the Washington-based group that exposes financial corruption estimates that for every $1 in economic development assistance sent to a developing country, $10 are lost via these illicit outflows.
In 2011, developing countries lost nearly $1 trillion to fraud, corruption and shady business transactions - far more than the foreign aid they received. It's only getting worse: Dirty money leaving emerging nations is accelerating.
The amount of bad money departing 150 developing countries totaled $946.7 billion in 2011. These figures are up 13.7 percent from 2010. It was the largest such amount in a decade.
G20 global leaders already trying to repair their economies after the 2008-2009 recession, face a widening gap between rich and poor citizens. Members are cracking down on tax evasion and the corporate structures used to launder money and hide criminal wealth.
Geographically, the Middle East and North Africa saw the fastest increase in dirty money directly coming from illicit business, crime and corruption. Such illicit outflows rose 31.5 percent in the years between 2002 to 2011, which led to the Arab Spring uprisings. A rallying cry at that time was fighting the corruption within government circles. Sub-Saharan Africa followed closely behind, where illicit outflows rose 20.2 percent in the decade ended 2011, the latest period for which data are available.
Asia lost the largest amount of money, accounting for 40 percent of the $5.9 trillion of illicit financial outflows from the developing world in the 10-year period. The majority of those funds came from China at $1.08 trillion, GFI said.
"The evidence continues to mount - illicit financial flows have a devastating impact on economic development and stability in Africa," Dev Kar, GFI's chief economist says.
Illicit flows cannot be precisely measured, since by their nature they are hidden. GFI's updated methodology this year included the re-exporting through Hong Kong and different types of trade data in order to come up with an estimate.
Trade mis-invoicing, whereby exports and imports are booked at different values to avoid taxes or to hide large transfers of money, is the most popular method, accounting for over 79 percent of the illicit flows.
© 2014 - Distributed by THE NEWS CONSORTIUM
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