Wednesday, March 01, 2017

The Money Launderers

Global Financial Integrity (GFI) estimates that in 2013, US$1.1 trillion left developing countries in illicit financial outflows. Its methodology is considered to be quite conservative, as it does not pick up movements of bulk cash, mispricing of services, or most money laundering.

Most illicit financial outflows from developing countries ultimately end up in banks in countries like the US and the UK, as well as in tax havens like Switzerland, the Cayman Islands or Singapore. 
GFI estimates that about 45 per cent of illicit flows end up in offshore financial centres and 55 per cent in developed countries.

University of California, Berkeley Professor Gabriel Zucman has estimated that 6 to 8 per cent of global wealth is offshore, mostly not reported to tax authorities.


According to GFI, Malaysia lost US$418.542 billion during 2004-2013, losing US$48.25 billion in 2013 alone.

The illicit capital outflows stem from tax evasion, crime, corruption and other illicit activities. Malaysia is fifth among the top five countries for illicit capital flight, after China, Russia, Mexico and India, but tops the list, by far, on a per capita basis.
GFI’s December 2015 report found that developing and emerging economies had lost US$7.8 trillion in illicit financial flows over the preceding ten-year period, with illicit outflows increasing by an average of 6.5 per cent yearly. Over the decade, an average of 83.4 per cent of illicit financial outflows were due to fraudulent trade mis-invoicing, involving intentional misreporting by transnational companies of the value, quantity or composition of goods on customs declaration forms and invoices, usually for tax evasion.
Many tax avoidance schemes are not illegal. But just because it is not illegal does not mean it is not a form of abuse, fraud or corruption. To tackle the corruption at the heart of the global financial system, tax havens need to be shut down, not reformed, the experts say.

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