Malaysia bled RM174 billion dirty money in 2011, says global anti-graft watchdog

About RM174 billion was illegally siphoned out of Malaysia in 2011, making the country the fourth largest exporter of illicit capital that year after Russia, China and India, said anti-graft watchdog Global Financial Integrity (GFI).

The Washington-based research and advocacy organisation said crime, corruption, and tax evasion drained US$946.7 billion (RM3.05 trillion) from the developing world in 2011, up more than 13.7% from 2010 – when illicit financial outflows totalled US$832.4 billion.

“As the world economy sputters along in the wake of the global financial crisis, the illicit underworld is thriving… siphoning more and more money from developing countries each year,” said GFI president Raymond Baker when releasing the “Illicit Financial Flows from Developing Countries: 2002-2011” report.

The findings in the study peg cumulative illicit financial outflows from developing countries at US$5.9 trillion between 2002 and 2011.

“Anonymous shell companies, tax haven secrecy, and trade-based money laundering techniques drained nearly a trillion dollars from the world’s poorest in 2011, at a time when rich and poor nations alike are struggling to spur economic growth.

“While global momentum has been building over the past year to curtail this problem, more must be done. This study should serve as a wake-up call to world leaders: the time to act is now,” said Baker.

Disputing the GFI figures, Bank Negara Malaysia (BNM) said the estimates of illicit outflow was overstated as the estimates in the report of trade mispricing had not been taken into consideration.

According to reports by Malaysiakini, BNM stressed that the GFI estimates were essentially unrecorded financial flows, which were not necessarily synonymous with illicit financial outflows.

GFI chief economist Dev Kar said they had taken all data into consideration and made the necessary adjustments before calculating the estimated illicit outflows.

“The estimates provided by our methodology are still very conservative. They do not include trade ‘misinvoicing’ in services, same invoice trade ‘misinvoicing’, ‘hawala’ transactions or bulk cash transactions.

“This means that much of the proceeds from drug trafficking, human smuggling and other criminal activities, which are often settled in cash, are not included in these estimates.”

GFI, however, commended BNM for setting up a task force in 2010 to plug the flow of illicit funds out of the country.

Kar said: “Such actions by the government conveys the message to the public that it is serious in addressing governance issues and will take action against corruption.”

The “Illicit Financial Flows from Developing Countries: 2002-2011” report is GFI’s 2013 update on the amount of money flowing out of developing economies as a result of crime, corruption and tax evasion. It is also the first GFI report to include data for the year 2011. – December 12, 2013.


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