Estimating Illicit Financial Flows

Illicit financial flows constitute a global phenomenon of massive but uncertain scale, which erodes government revenues and drives corruption in countries rich and poor. This book offers a critical examination of existing data and methodologies, identifying the most promising avenues for future improvement.

Illicit financial flows constitute a global phenomenon of massive but uncertain scale, which erodes government revenues and drives corruption in countries rich and poor. This book offers a critical examination of existing data and methodologies, identifying the most promising avenues for future improvement.

This publication identifies the main areas of weakness and potential areas for action to combat money-laundering, tax evasion, foreign bribery, and to identify, freeze and return stolen assets.

Illicit Financial Flows (IFFs) have received increased attention in light of international corruption scandals, high-profile leaks about extensive tax abuse schemes, and the continued fight against terrorism financing and organized crime. Reducing IFFs is now a key target of the UN Sustainable Development Goals, renewing debates about both how to operationally define IFF and the methodologies that are used to estimate their extent. This book addresses these key issues, by investigating and schematizing the concept of illicit financial flows and critically evaluating the current models used to estimate them. It book proposes an original flow-network approach through which to produce longitudinal and country-specific estimates of IFFs and the gross value added related to transnational trafficking. It advocates for a reformulation of the current definition of IFFs to one that is more specific and operational, allowing scholars and policy-makers to better clarify the relationship between IFFs, the sources of capital and the channels that are used to move capital abroad. This brief will be an indispensable guide for students of criminology and organized crime, and for the researchers and practitioners working to understand and combat these crimes.

"Attempts to shed light on the total amounts likely to be laundered across the globe, as well as the potential attractiveness of various locations to those who launder money"--Pref.

A growing concern among those interested in economic development is the realization that hundreds of billions of dollars are illicitly flowing out of developing countries to tax havens and other financial centers in the developed world. This volume assesses the dynamics of these flows, much of which is from corruption and tax evasion.

The 2030 Agenda identifies the reduction of IFFs as a priority area, as reflected in target 16.4: "by 2030, significantly reduce illicit financial flows and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organised crime". This target is critical for financing efforts to achieve SDGs. IFFs were also identified as a global priority in the Addis Ababa Action Agenda (United Nations, 2015) on financing for development which calls for a redoubling of efforts to substantially reduce IFFs, with a view to eventually eliminating them. Regardless of its importance, data on indicator 16.4.1, "total value of inward and outward illicit financial flows", are not yet reported as part of the SDG indicator framework (United Nations, 2017b). Comparable and reliable statistics on IFFs are needed to shed light on the activities, sectors and channels most prone to illicit finance, pointing to where actions should be undertaken as a priority to curb these flows. This paper was prepared based on process and lessons learned within the United Nations Development Account project on "Defining, estimating and disseminating statistics on illicit financial flows in Africa", implemented by United Nations Economic Commission for Africa (UNECA) and United Nations Conference on Trade and Development (UNCTAD). Pilot testing by the following countries provided valuable feedback in future refinement of the methods: Angola, Benin, Burkina Faso, Gabon, Ghana, Mozambique, Namibia, Nigeria, Senegal, South Africa, and Zambia.

Why are carefully designed, sensible policies too often not adopted or implemented? When they are, why do they often fail to generate development outcomes such as security, growth, and equity? And why do some bad policies endure? World Development Report 2017: Governance and the Law addresses these fundamental questions, which are at the heart of development. Policy making and policy implementation do not occur in a vacuum. Rather, they take place in complex political and social settings, in which individuals and groups with unequal power interact within changing rules as they pursue conflicting interests. The process of these interactions is what this Report calls governance, and the space in which these interactions take place, the policy arena. The capacity of actors to commit and their willingness to cooperate and coordinate to achieve socially desirable goals are what matter for effectiveness. However, who bargains, who is excluded, and what barriers block entry to the policy arena determine the selection and implementation of policies and, consequently, their impact on development outcomes. Exclusion, capture, and clientelism are manifestations of power asymmetries that lead to failures to achieve security, growth, and equity. The distribution of power in society is partly determined by history. Yet, there is room for positive change. This Report reveals that governance can mitigate, even overcome, power asymmetries to bring about more effective policy interventions that achieve sustainable improvements in security, growth, and equity. This happens by shifting the incentives of those with power, reshaping their preferences in favor of good outcomes, and taking into account the interests of previously excluded participants. These changes can come about through bargains among elites and greater citizen engagement, as well as by international actors supporting rules that strengthen coalitions for reform.