* Please reference the digital version of the full report for complete source information on each appendix.
About Illicit Financial Flows
The term, illicit financial flows, pertains to the cross-border movement of money that is illegally earned, transferred, or utilized. Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities, and efforts to shelter wealth from a country's tax authorities.
In December 2008, GFI released the groundbreaking study, "Illicit Financial Flows from Developing Countries: 2002-2006," based on examination of macroeconomic data from the World Bank and the International Monetary Fund (IMF). In this analysis, GFI found the following:
Illicit financial flows out of developing countries, on average, for the five year period examined ranged from $850 billion to $1.06 trillion per year. This estimate is conservative as it does not include several major forms of value drainages out of poorer countries not represented by money, namely:
Trade mispricing that is handled by collusion between importers and exporters within the same invoice, not picked up in mispricing models based on IMF Direction of Trade Statistics, a technique utilized extensively by multinational corporations;
The proceeds of criminal and commercial smuggling such as drugs, minerals, and contraband goods, and
Mispriced asset swaps, where ownership of commodities, shares, and properties are traded without a cash flow;
Illicit outflows from African countries are approximately $25 billion per year.
Illicit outflows outpace aid, undermine development efforts: The ratio of illicit financial flows coming out of developing countries compared to official development assistance (ODA), is 10-1. Meaning that for every $1 in economic development assistance which goes into a developing country, $10 is lost via these illicit outflows.
GFI Director Raymond Baker Explains Illicit Financial Flows and their Impact on Development