Financial Transparency Coalition

In Thailand, corruption in customs enforcement is a fact of life.  The Bangkok Post notes that customs officials almost universally demand “tea money,” or bribes, and bonuses to customs officials based on a percentage of a confiscated shipment’s value cause the length of inspections to stretch out interminably.  These specific customs procedures and rules, along with the flawed incentive structures they create, have led to an increase in illicit financial flows (IFFs) from Thailand due to trade mispricing. Illicit financial outflows due to trade mispricing occur when individuals or companies use export under-invoicing and import over-invoicing to transfer funds...

Global Financial Integrity Economist Devon Cartwright-Smith analyzes the relationship between illicit financial outflows and illicit financial inflows in developing economies in this two-part series.

Yesterday I posed the question of whether it is wise to subtract evidence of illicit inflows from illicit outflows (which are known to hinder developing country economies), as if one would cancel the other out. If billions of dollars...

Global Financial Integrity Economist Devon Cartwright-Smith analyzes the relationship between illicit financial outflows and illicit financial inflows in developing economies in this two-part series.

When determining the amount of money that flows out of developing countries, a question naturally arises once the calculations are complete: “Why do some of these countries have huge negative outflows?” If outflows are measured as positive figures, negatives must indicate inflows. So are developing countries...

Illicit financial flows exit developing countries through two broad channels—as unrecorded capital flows from a country’s external accounts (captured by the World Bank Residual model) and trade mispricing (captured by the Direction of Trade statistics or DOTS model). GFI’s study Illicit Financial Flows from Developing Countries: 2002-2006 points out that some researchers have questioned the use of the trade mispricing model to capture illicit flows. They argue that data issues underlying the recording of partner country exports and imports introduce enough “noise” so that the trade mispricing model is unable to capture illicit flows. I was therefore...