Source of dirty money: Phl ranks 6th

MANILA, Philippines - Between 2001 and 2010, a staggering $138 billion in dirty money left the Philippines, according to an international anti-corruption monitoring group.

This made the Philippines place sixth in a ranking of countries that are the biggest sources of financial outflow attributed to corruption, tax evasion, smuggling and other illegal activities, according to the anti-corruption group Global Financial Integrity.

Worldwide, the group estimates that $5.86 trillion in illicit funds left developing nations from 2001 to 2010.

Among those previously in the top 10 worst, Qatar, Kuwait, Venezuela and Poland were replaced by India, Indonesia, Nigeria and the Philippines.

In 2010 alone, it is estimated that developing countries saw $859 billion in illicit financial outflow – about 11 percent higher than the $776 billion in the previous year, according to Global Financial Integrity.

The top 10 countries with the highest measured cumulative illicit financial outflows, from 2001 to 2010, are China ($2.74 trillion), Mexico ($476 billion), Malaysia ($285 billion), Saudi Arabia ($210billion), Russia ($152 billion), the Philippines ($138 billion), Nigeria ($129 billion), India ($123 billion), Indonesia ($109 billion) and the United Arab Emirates ($107 billion).

The next 10 are Iraq, South Africa, Thailand, Costa Rica, Qatar, Serbia, Poland, Panama, Venezuela and Brunei.

Trade mispricing, which includes smuggling, was found to account for an average of 80 percent of cumulative illicit flows from developing countries. This was followed by bribery, kickbacks, and the proceeds of corruption.

Trade mispricing was also found to be the major channel for the transfer of illicit capital from China and Mexico.

The “commercially tax avoiding component” accounted for the largest chunk or about 60-65 percent of illicit cross-border financial flows, followed by dirty money from criminal activities, which accounted for 30 to 35 percent of the global total, according to Global Financial Integrity director Raymond Baker.

He said the corruption component, stemming from bribery and theft among government officials, accounted for three to five percent.

The criminal component does not include proceeds from drug trafficking, human smuggling, and other criminal activities that are often settled in cash.

Moving veritable mountains of money requires a vast and global shadow financial system.

Baker said the essential elements of the system are secrecy, jurisdictions, disguised corporations, anonymous trust accounts, and fake charitable foundations.

“The mispricing of trade is part of this system; various money laundering techniques are part of this system. Quite frankly, another part is holes left in the laws of Western countries that facilitate the movement of money through this shadow financial system and ultimately into our own Western economies,” the director said.

One of the world’s biggest financial “black holes” is the United States, where individual states handle the legal process of incorporation, often with little oversight. The corruption monitoring group says this allows the creation of anonymous companies that serve as shells and conduits for illicit money.

Corruption monitoring groups say that bank secrecy laws in some Western nations such as Switzerland as well as several islands in the Caribbean attract cash from corruption and facilitate its movement.

In recent years, Switzerland has bowed to pressure from other nations and international law enforcement agencies and loosened its secrecy laws.

The Global Financial Integrity report also included inputs from the World Bank on corruption and illicit funds.