M’sia among top 30 for illicit financial outflows

PETALING JAYA: Malaysia’s illicit financial outflow, amounting to a whopping US$33.74bil (RM138.61bil), has placed the country among the highest in the world, Global Financial Integrity (GFI) found.

The Washington think tank’s analysis of illicit financial flows due to trade misinvoicing in 148 developing countries found that both the United Nations (UN) and the Inter­na­tional Monetary Fund (IMF) placed Malaysia among the top 30 countries with high illicit outflows.

IMF’s Direction of Trade Statistics dataset found Malaysia’s total trade with advanced countries valued at US$212.09mil (RM871.30mil), with illicit outflows of US$33.74mil (RM138.61mil) and illicit inflows of US$20.65mil (RM84.83mil).

UN’s Comtrade dataset shows that Malaysia’s total trade with advanced countries is valued at US$172mil (RM706.6mil), with illicit outflows of US$22.89mil (RM94.04mil) and illicit inflows of US$16.12mil (RM66.22mil).

Comparatively, the UN found that other countries with high dollar amounts of illicit outflows include Brazil (US$12bil/RM49.30bil), Vietnam (US$9.1bil/RM39.85bil), Hungary (US$7.6bil/RM31.22bil), South Africa (US$5.9bil/RM24.24bil) and Bangladesh (US$2.7bil/RM11.09bil).

“This study underscores the point that trade-related illicit financial flows appear to be both significant and persistent features of developing country trade with advanced economies,” GFI said.

“Our estimates indicate that potential trade misinvoicing is the primary means for illicitly shifting funds between developing and advanced countries.”

GFI said trade misinvoicing includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT taxes, launder the proceeds of criminal activity or to hide offshore the proceeds of legitimate trade transactions.

“Trade misinvoicing is a form of trade-based money laundering made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven) – a method known as re-invoicing,” it said.

The GFI’s “Illicit Financial Flows to and from 148 Developing Countries: 2006-2015” report recommends governments and international organisations to strengthen policy and increase cooperation to combat this issue.