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Sat 20 Dec 2014 01:51 AM

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Saudi Arabia among world's worst for 'dirty money' flows

More than $30bn in illicit capital flowed out of Saudi Arabia in a year, according to new report

Saudi Arabia among world's worst for 'dirty money' flows
(Photo for illustrative purposes only)

More than $30 billion in illicit capital flowed out of Saudi Arabia in 2012, facilitating crime and corruption, according to a new study released by Global Financial Integrity.

The Gulf kingdom was among the worst hit countries in the world, with nearly $310 billion of dirty money being drained between 2003 and 2012, the report said.

Saudi Arabia was the sixth worst hit country, behind China, Russia, Mexico, India and Malaysia.

Globally, a record $991.2 billion in illicit capital flowed out of developing and emerging economies in 2012, the US-based research and advisory organisation said.

The unrecorded funds left 151 developing and emerging economies, up nearly 5 percent from a year earlier, according to the report that exposes financial corruption.

GFI's sixth annual report found between 2003 and 2012, the estimated amount of illicit funds shifted from developing countries totalled $6.6 trillion and rose at an inflation-adjusted 9.4 percent a year - roughly double global GDP growth.

Sub-Saharan Africa suffered the biggest loss as a share of its economy, with the disappearance of dirty money averaging 5.5 percent of GDP. Nigeria and South Africa were among the top 12 nations with the largest volumes of illicit outflows.

GFI President Raymond Baker said the estimated losses were conservative but were still more than 10 times the total amount of foreign aid these countries received. He called the growth rate "alarming", having surged from about $297 billion in 2003.

"Illicit financial flows are the most damaging economic problem plaguing the world's developing and emerging economies," Baker said in a statement.

"It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on."

Asia was the region of the developing world with the greatest flow of dirty money over the decade, accounting for 40.3 percent of the world total, driven by China.

But the researchers found growth of illicit flows was faster in other parts of the world, particularly in the Middle East and North Africa and in sub-Saharan Africa, where the growth was seen at 24.2 percent and 13.2 percent respectively.

The GFI research found fraudulent mis-invoicing of trade transactions was the most popular method to move money illegally and accounted for nearly 78 percent of illicit flows in 2012.

Money is moved overseas through trade mispricing by fraudulent underbilling or over-invoicing for goods to avoid tax or to hide large transfers.

Baker called for the United Nations to next year include a target to halve all trade-related illicit flows by 2030 as it negotiates a new set of global goals, the Sustainable Development Goals, to replace the Millennium Development Goals.

The GFI research tracks illegal money flowing out of 151 developing countries using trade and balance of payments reports filed with the International Monetary Fund. Its data provides an estimate as illicit flows cannot be precisely measured.

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