Law & order
China, Russia,
India, and Mexico launder as much money as the next 141 developing
countries—combined
Here's looking at you, and the $400 billion in illicit money your countries combined produce. (Source: EPA/Sergei Ilnitsky)
Everybody's heard about the economic
growth of China, India, Mexico and Russia (well, at least, until
recently). But it turns out that success has come with a big
asterisk: These countries now are the biggest source of illegal money in the
world, exporting $1 trillion a year in laundered funds, drugs, and
under-the-table payments.
This is the dark side of the developing
world, according
to a new report by international corruption
watchdog Global Financial Integrity (GFI). And it's growing -- by 10 percent a
year.
China leads the pack,
contributing just under $250 billion in illicit financial flows in 2012,
the latest date for which data is available. Russia was nearly $125 billion.
India, the third most corrupt developing country by this measure, contributed
just shy of $100 billion to the world's growing pool of illicit money.
All told, the top 10 countries account
for a "staggering 67 percent of the global total by volume," the
researchers note.
The takeaway is that these
countries, whatever success they have had, are still struggling to contain
corruption and illegal finance that can easily undermine growth and prevent the
countries from building on their successes.
In all, some 145 developing
countries around the world funneled anywhere an average of between $1
million and $125 billion between 2003 and 2012...
... Illicit financial flows are particularly
problematic in developing countries, where financial systems are often
more vulnerable to corruption. The trillions of dollars represents money
that would otherwise flow through economies and help spur growth. Instead it
ends up in the hands of criminals and corrupt officials and businessmen.
"Illicit inflows often deprive
developing countries of significant customs duties, they facilitate crime,
and they flow into the underground economy," the report notes.
Curbing the amount of illegal money
flowing in and out of developing countries is a tall task. The most common way
in which illicit cash moves unnoticed is through the under or over reporting of
trade, a practice that is both illegal and extremely difficult to track.
Like most other forms of money
laundering, trade misinvoicing, as the practice is known, is perpetuated
by a general opacity in the global financial system. Companies in developing
countries are often able to operate without sharing important information about
their finances, transactions, or even ownership.
One of the keys to reversing the current
trend is shedding a light on this sort of information by calling on developing
governments worldwide to hold companies accountable, and thereby creating transparency
where there has been little. And why not start with Chinas, Russias, and
Indias of the world, where most of the illegal money is coming from.
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