A/HRC/22/42
also prepared several evidence-based case studies, showing that the banking sector
facilitated illicit financial flows by doing business with suspicious customers. 10
Estimates of illicit financial flows11
A.
12.
The scarcity of data combined with lack of transparency on the part of banks and
other financial intermediaries involved in illicit financial transactions renders it difficult to
calculate illicit financial flows with a degree of certainty. However, a number of studies
have provided useful estimates. A recent study by Global Financial Integrity (GFI)
concludes that, depending on the method employed, in 2010, developing countries lost
between US$783 billion and US$1,138 billion in illicit financial outflows. 12 Despite
increased efforts by the international community to curb the flow of illicit funds, the study
indicates that such flows have grown in real terms by 8.6 per cent per annual on average
over the period 2001–2010, signifying that existing measures to address the problem have
thus far not been very effective. 13 It is notable that this rate of growth of illicit flows
exceeded the average rate of economic growth (6.3 per cent per annum) of developing
countries for the same period.14
13.
Transfer mispricing and trade mis-invoicing are considered the prime factors for
illicit financial flows, followed by illicit flows related to international drug trafficking and
other criminal activities. While flows of the proceeds of corruption out of developing
countries account for only about 5 per cent of all illicit financial flows, they have been
estimated at US$20–40 billion annually.15 This is still a very significant amount,
10
11
12
13
14
15
See Global Witness, Undue Diligence: How Banks do business with corrupt regimes (London, 2009);
and Global Witness, “International Thief, Thief”: How British banks are complicit in Nigerian
Corruption (London, 2010).
There are several economic models employed to estimate illicit financial flows. The World Bank
residual model, for example, considers the difference between the source and use of official funds,
including additions to the country‟s reserves. A difference thus suggests that money has been
misappropriated by someone with access to the Government‟s coffers. Global Financial Integrity
(GFI), a think tank that has worked for several years on the issue, estimates illicit financial flows
through a combined measure by analysing balance of payments data to capture funds that flow
through the banking system and trade statistics to estimate the flow of illicit funds through
manipulated invoices in import/export operations. The strength of this method is to provide a more
complete picture of the total amount leaving a country illicitly. GFI has further refined its
methodology by now also providing estimates of illicit flows using the Hot Money Narrow model,
which produces more conservative estimates. For a brief overview of the models, see Alessandra
Fontana, “„What does not get measured, does not get done‟, The methods and limitations of
measuring illicit financial flows”, U4 Brief No. 2 (Bergen, 2010). See also United Nations Office on
Drugs and Crime (UNODC), Estimating illicit financial flows resulting from drug trafficking and
other transnational organized crimes, Research report (Vienna, 2011), pp. 15–18.
Dev Kar and Sarah Freitas, Illicit Financial Flows from Developing Countries: 2001–2010
(Washington, D.C., Global Financial Integrity, 2012), p. c.
Ibid., p. 9.
Ibid., p. 9.
See comprehensive study on the negative impact of the non-repatriation of funds of illicit origin to the
countries of origin on the enjoyment of human rights, in particular economic, social and cultural
rights, report of the United Nations High Commissioner for Human Rights, A/HRC/19/42 and Corr.1,
para. 5. This figure, based on data from Raymond Baker, Capitalism’s Achilles Heel: Dirty Money
and How to Renew the Free-Market System (Hoboken, John Wiley and Sons, Inc., 2005), has been
frequently used as an estimate by the Wold Bank and UNODC.
7