Nigeria Is 7th Biggest Money Laundering Nation - Report

Barely one week after Transparency International corruption perception index placed Nigeria 135th out of 176 corrupt countries, the country has again placed seventh out of the 20 biggest exporters of illicit financial flows over a decade, with cumulative figure of $129 billion and an average of $12.9 billion, according to a new study by Global Financial Integrity (GFI), a Washington-based research and advocacy organisation.
The report also revealed the 20 top exporters of illegal capital in 2010, with Nigeria occupying the same position with $19.66 billion. The report, covering 2001 to 2010 and co-authored by GFI Lead Economist Dev Kar and GFI Economist Sarah Freitas, is due to be submitted next week.
The report, the first by GFI to incorporate a new, more conservative estimate of illicit financial flows facilitating comparisons with previous estimates from GFI updates, identifies crime, corruption and tax evasion at near historic highs with nearly $6 trillion stolen from poor countries within the decade and $859 billion in 2010.
China is leading the pack with $274 billion average ($2.74 trillion cumulative); followed by Mexico with $47.6 billion avg. ($476 billion cum.); Malaysia, $28.5 billion avg. ($285 billion cum.); Saudi Arabia, $21.0 billion avg. ($210 billion cum.); Russia, $15.2 billion avg. ($152 billion cum.); and Philippines, $13.8 billion avg. ($138 billion cum.).
Raymond Baker, GFI director, said the development was capable of further impoverishing the developing countries, while observing that it was a call for leaders to halt the trend.
“Astronomical sums of dirty money continue to flow out of the developing world and into offshore tax havens and developed country banks. Regardless of the methodology, it’s clear: developing economies are haemorrhaging 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,” Baker said.
Giving insight into the report, Kar said, “The estimates provided by either methodology are still likely to be extremely conservative as they do not include trade mispricing in services, same-invoice trade mispricing, hawala transactions, and dealings conducted in bulk cash. This means that much of the proceeds of drug trafficking, human smuggling, and other criminal activities, which are often settled in cash, are not included in these estimates.”
The report noted that crime, corruption, and tax evasion cost the developing world $858.8 billion in 2010, just below the all-time high of $871.3 billion set in 2008 – the year preceding the global financial crisis.
“As developing countries begin to loosen capital controls, the possibility exists that the methodology utilised in previous GFI reports – known as the World Bank Residual Plus Trade Mispricing method – could increasingly pick up some licit capital flows. The methodology introduced in this report – the Hot Money Narrow Plus Trade Mispricing method – ensures that all flow estimates are strictly illicit moving forward, but may omit some illicit financial flows detected in the previous methodology,” said the report.
The $858.8 billion of illicit outflows lost in 2010, according to the report, is a significant uptick from 2009, which saw developing countries lose $776.0 billion under the new methodology. “This has very big consequences for developing economies. Poor countries lost nearly a trillion dollars that could have been used to invest in healthcare, education, and infrastructure. It’s nearly a trillion dollars that could have been used to pull people out of poverty and save lives,” said Freitas.
The authors of the report advocated “that world leaders increase the transparency in the international financial system as a means to curtail the illicit flow of money.”
They also called for addressing the problems posed by “anonymous shell companies, foundations, and trusts by requiring confirmation of beneficial ownership in all banking and securities accounts and demanding that information on the true, human owner of all corporations, trusts and foundations be disclosed upon formation and be available to law enforcement; reforming customs and trade protocols to detect and curtail trade mispricing and requiring the country-by-country reporting of sales, profits and taxes paid by multinational corporations.”
Other solutions suggested include “requiring the automatic, cross-border exchange of tax information on personal and business accounts and harmonising predicate offences under anti-money laundering laws across all Financial Action Task Force cooperating countries, while ensuring that the existing anti-money laundering regulations are strongly enforced.”