Financial Transparency Coalition

Many experts have called Kenya, Uganda, and Tanzania the “next frontier” of gas and oil production. In fact, these reserves have the potential to turn these nations’ economies from “mixed” to “success” stories. One large impediment to this possibility, however, is trade misinvoicing, which occurs on a massive scale. It I so serious that this problem threatens their governments’ ability to capitalize on the potential gains associated with the discovery of oil and gas. The discovery of oil in Kenya and Uganda, and gas in Tanzania has thrust each of these nations into the world’s energy spotlight. In 2006 Uganda...

The Philippines has made significant progress on its quest to confront corruption and tax evasion under the guidance of President Aquino. However, a new report by Global Financial Integrity shows one important—and growing—component of the problem is trade mispricing, specifically import under-invoicing, and its role in facilitating tax evasion in the Philippines. In June 2010, Benigno Simeon Cojuangco Aquino III assumed his position as the 15th President of the Philippines. As a Senator, before his election to the Presidency, Aquino pursued an anti-corruption agenda. For example, Aquino contributed to the Preservation of Public Infrastructures bill—which raised standards in public infrastructure...

This week Global Financial Integrity released their periodic estimate of worldwide illicit financial flows authored by Dev Kar and Sarah Freitas. The report finds the developing world exported an estimated US$859 billion in illicit financial flows in 2010. In case you like moving words, here’s a presentation I put together on what that number means. The GFI model of illicit financial flows includes two components: (1) an estimate of money that exits developing countries via trade channels (called trade mispricing) and (2) an estimate of money that leaves developing countries through other, private capital flows. Traditionally GFI has estimated the...

According to Global Financial Integrity, in 2009, importers and exporters sent $569 billion out of developing countries through trade mispricing. Trade mispricing, in case you’re not already aware, is a process by which individuals can transfer money abroad without detection. By over-invoicing imports and under-invoicing exports, individuals can evade taxes and avert capital controls through routine trade. Here’s how it works: Suppose a Mexican furniture manufacturer, who wants to send money abroad illegally, imports $100 worth of timber from the United States. Instead of paying $100, the furniture company reports and pays $200. The company’s U.S. trading partner...