Study: Crime, corruption crushing poor nations

WASHINGTON—Almost $1 trillion in illicit capital left developing and emerging economies in 2012, and the problem is only growing worse, according to a new report by Global Financial Integrity (GFI).

GFI, a Washington-based research organization, found crime, corruption, and tax evasion drained some $991.2 billion from poor countries—an amount nearly equal to the $1.1 trillion one-year funding bill Congress just passed. Dirty money flows are growing at an inflation-adjusted rate of 9.4 percent annually, significantly outpacing developing countries' economic growth.

“Illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies,” said GFI President Raymond Baker, who called the growth rate most troubling. He said it is impossible for poor countries to achieve sustainable economic success “unless world leaders agree to address this issue head-on.”

This fall WORLD published a four-part series highlighting how corrupt politicians, oligarchs, and organized criminals are swindling the poor out of money and assets in places such as the Balkans and Africa—often aided by the United States and other complicit Western nations. The most popular tool is trade misinvoicing, which WORLD illustrated and GFI found to be responsible for 77.8 percent of all illicit outflows.

The study revealed some $6.6 trillion was stolen from the developing world between 2003 and 2012, a decade that saw a three-fold increase in illicit flows. Baker urged the United Nations to set a specific target date to cut trade-related thievery by half by the year 2030. The study also recommends creating public registries that would list beneficial owners of corporations.

China, Russia, Mexico, India, and Malaysia were the biggest exporters of illicit capital, according to GFI. Countries in sub-Saharan Africa were bilked the most, as a percentage of GDP.

“These outflows are growing fastest in and taking the largest toll—as a share of GDP—on some of the poorest regions of the world,” said Dev Kar, a study co-author. “These findings underscore the urgency with which policymakers should address illicit financial flows.”