China ranks first in illicit money outflows; India is fourth – GFI

The Global Financial Integrity – an origination monitoring illicit money transfer globally, estimate that developing and emerging economies lost US$7.8 trillion in illicit financial flows from 2004 through 2013. All these funds were transferred by the black money holders of developing countries to advanced country destinations.

According to the 2015 Report of the GFI, titled “Illicit Financial Flows from Developing Countries: 2004-2013,” China is the largest source of illicit money transfer. Total money transferred to the developed countries amounts to $1.1 trillion; which is nearly half of India’s GDP.

India is the fourth largest source for illicit money outflows. Between 2004-2013, illicit money flows were $51 billion from India. China, Russia and Mexico were the largest sources ahead of India.

According to GFI, illicit financial flows (IFFs) are illegal movements of money or capital from one country to another. GFI classifies this money movement as illicit flow when the funds are illegally earned, transferred, and/or utilized.

According to GFI, between 2004 and 2013, developing countries lost US$7.8 trillion to illicit outflows. The rate of growth of the transfer is around 6.5% and it is higher than the GDP growth of the developing world.

What is misinvoicing? 

Misinvoicing of trade transaction is the biggest form in which illegal money is transferred from the developing countries. Nearly 84% of the funds are transferred through this channel.

Trade misinvoicing is a method for moving money illicitly across borders by deliberately misreporting the value of a commercial transaction on an invoice submitted to customs. For example, an Indian importer reports a payment of $100 for an imported product, but actually pays only $80 (real price) and transfers $20 into his own account in a tax haven. Trade misinvoicing is a form of trade-based money laundering.

According to the GFI, the total illicit transfer from the developing countries in 2013 was $1.1 tn and this was higher than the FDI inflows into these countries. FDI into the developing world was US$858 billion during the year.


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