Treasury acts to curb illicit financial outflows

SOUTH Africa ranks seventh among developing countries in terms of illicit financial outflows‚ a Washington-based research organisation has found. Illicit outflows from the country are of great concern to the Treasury‚ which has introduced a number of measures to curb it‚ particularly the outflows achieved through profit shifting by large multinationals. Accurate figures are difficult to come by‚ but Global Financial Integrity (GFI) estimates in its latest report – Illicit Financial Flows from Developing Countries: 2004-2013 – that the annual outflow from South Africa over 10 years averaged $20.92-billion (R304.5-billion). This was higher than Turkey and Nigeria but less than India and Brazil. China led the pack of developing countries‚ with an estimated average annual illicit outflow of $139-billion (R2.03-trillion) followed by Russia at $105-billion (R1.5-trillion).

The study found that $7.8-trillion (R88-trillion) had been sucked out of the developing world between 2004 and 2013 and that trade fraud was responsible for $6.5-trillion (R73.5-trillion) of this sum. The methodology used by GFI economists was to analyse discrepancies in balance of payments data and direction of trade statistics as reported to the International Monetary Fund to detect flows of capital that are illegally earned‚ transferred‚ and/or used. GFI recommended that steps be taken to curb opacity in the global financial system as this facilitated illicit outflows. Also‚ governments should establish public registries of verified beneficial ownership information on all legal entities‚ and all banks should know the true beneficial owner/s of any account opened. Governments should adopt and fully implement all of the Financial Action Task Force’s money-laundering recommendations. It also recommended that multinational companies be obliged to publicly disclose their revenues‚ profits‚ losses‚ sales‚ taxes paid‚ subsidiaries and staff levels on a country-by-country basis.