19 December 2011
Corruption is not going away!
Global Financial Integrity reported last week that corruption is getting worse. Worldwide, the annual growth in illicit money flows is estimated at 14.9%. In the face international anti-corruption arrangements and national commitments, it may be reasonable to infer that there is an entrenched acceptance of corruption by some power groups in all societies.
GFI note that the recent decrease in trade and restricted credit conditions took the edge off the peak outflow from developing countries. For the 2008-9 year this was valued at USD 1.55 trillion. However the trend is increasing in all regions. Unsurprisingly in the period between 2000 and 2009, China, Mexico and Russia were the economies losing most to corruption. The flow of illicit capital out of Africa, which increased last year by 22.3%, is the world’s worst. Perhaps even more concerning in the light of the leadership role often adopted by governments in the developed world is that illicit transfers in those economies are growing at 4.4% per annum. In Asia, much of the fraud reflects mispricing. In most other places, bribery and payoffs to public officials were the sources of the illicit capital.
This GFI findng indicates that measures being taken everywhere are insufficient to counter corruption. The USD 8.44 trillion lost to illicit transfers over the decade since 2000 would not have been manageable without European and North American banks being extensively involved. Banking regulators in tthese jurisdictions should also have been aware of these transactions. The unavoidable conclusion is that a corrective movement will only occur if there is more effective promotion and enforcement of integrity standards in developed countries, as well as in the economies where illicit cash flows originate. New Zealand needs to share this commitment. Our banking system is no less susceptible than any other to the challenges of large scale money-laundering and off shore tax evasion.