About Illicit Financial Flows

The term, illicit financial flows, pertains to the cross-border movement of money that is illegally earned, transferred, or utilized. Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities, and efforts to shelter wealth from a country's tax authorities.

Policy Implications

Implications for Economic Development Policy: The illicit outflows measured in this report are approximately 10 times the amount of official development assistance (ODA) going into developing countries. The ratio of illicit financial flows coming out of developing countries compared to ODA is 10-1, meaning that for every $1 in economic development assistance which goes into a developing country, $10 is lost via these illicit outflows.

Policy Recommendations

Increasing transparency in the global financial system is critical to reducing the outflow of illicit money from developing countries.

Recommendations for achieving greater transparency:

• curtail trade mispricing,
• require country-by-country reporting of sales, profits and taxes paid by multinational corporations,
• require confirmation of beneficial ownership in all banking and securities accounts,
• require automatic cross-border exchange of tax information on personal and business accounts, and
• harmonize predicate offenses under anti-money laundering laws across all Financial Action Task Force cooperating countries.

GFI Director Raymond Baker Explains Illicit Financial Flows and their Impact on Development