Illicit money flows grow in China, Iraq-report

Mon Dec 17, 2012 7:09pm EST

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(Reuters) - Some 150 developing countries, led by China, have been the source of flows of tainted money totaling $5.9 trillion over 10 years through 2010, Global Financial Integrity, a research and advocacy group in Washington, D.C., said on Monday.

Flows of illicit money from tax evasion, crime and corruption in the developing world have roared back to pre-financial crisis levels, topping nearly $859 billion in 2010, near the all-time high of $871 billion in 2008, it said.

In 2009, following the global financial crisis, the figure dropped to $776 billion.

China tops the list of developing countries sending illicit money abroad, either to offshore havens or to financial institutions in developed countries, GFI said in a study.

GFI said the flows underscored a need for governments to increase exchanges of tax information; boost money laundering laws; reform laws allowing criminals to hide behind anonymous entities; and require corporations to disclose sales, profits and taxes paid in foreign countries.

In 2010, illicit money out of China totaled $420 billion, the report said, and exceeded $2.7 trillion for the decade ending in 2010 - nearly half that period's total for all developing countries.

Malaysia came in second place, with more than $64 billion in illegal capital exported in 2010 and $285 billion for the decade.

Mexico ranked third for 2010, with over $51 billion in illicit flows, and close to 10 times that amount, or $476 billion, for the decade. Overall, Mexico ranked second over the decade in illegal outflows.

Tainted money flowing out of Iraq rose sharply in 2010, to just over $22 billion, from $18 billion in 2009, nearly $20 billion in 2008 and nearly $4 billion in 2007. GFI said it did not have reliable data for prior years.

Overall, the bulk, or nearly 61 percent, of illegal money flows over the decade came out of Asia, followed by just over 15 percent from the Western Hemisphere and just over 10 percent from the Middle East and North Africa.

But in recent years the highest growth in tainted flows has come from the Middle East and Africa.

Dev Kar, GFI's lead economist and co-author of the report, said the 2010 figures likely underestimated actual totals for illicit flows, as they did not include cash-driven activities. Such activities, wrote Kar, formerly a senior economist at the International Monetary Fund, include smuggling, human trafficking and so-called trade mispricing for services.

(Reporting by Lynnley Browning; Editing by Howard Goller and Steve Orlofsky)

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