Wed, Dec 19, 2012 - Page 1 News List

Dirty money costs developing world US$6tn, led by China, report says

Reuters, WASHINGTON

Crime, corruption and tax evasion have cost the developing world nearly US$6 trillion over the past decade, and illicit funds keep growing, led by China, a financial watchdog group said in a new report.

China accounted for almost half of the US$858.8 billion in dirty money that flowed into tax havens and Western banks in 2010, more than eight times the amounts for runner-ups Malaysia and Mexico. Total illicit outflows increased by 11 percent from the prior year, Global Financial Integrity, a Washington-based group that campaigns for financial accountability, said in its latest report released on Monday.

“Astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks,” GFI director Raymond Baker said.

“Developing countries are hemorrhaging more and more money at a time when rich and poor nations alike are struggling to spur economic growth. This report should be a wake-up call to world leaders that more must be done to address these harmful outflows,” he said.

All the countries in the top 10, which this year saw India, Nigeria and the Philippines join the ranks, face significant problems with corruption, and in most there are vast gaps between rich and poor citizens, as well as internal security problems.

G20 leaders increasingly are focusing on ways to crack down on money laundering, bank secrecy and tax loopholes to prevent funds stolen from public coffers or earned through criminal activity from depleting the budgets of developing countries. The sums are so huge that for every dollar in foreign direct aid, US$10 leaves developing countries.

China lost US$420.4 billion in 2010 and over the decade lost a total of US$2.74 trillion. Moreover, its losses are steadily rising. In an October report, GFI said another US$602 billion in illicit flows left China last year for a total of US$3.79 trillion between 2000 and last year.

“Our report continues to demonstrate that the Chinese economy is a ticking time bomb,” said Dev Kar, GFI’s lead economist who compiled the report. “The social, political and economic order in that country is not sustainable in the long run given such massive illicit outflows.”

Mexico lost US$51.17 billion in illicit flows in 2010 for a total of US$476 billion over the last decade, which does not even count the billions of dollars in bulk cash that probably left under organized crime and drug dealing. Malaysia, an export-dominated economy with a wealthy elite, lost US$64.38 billion in 2010 and US$285 billion cumulatively between 2001 and 2010, the report said.

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