Illicit financial flows
top $32 billion in ten years
Leakage is facilitated by lack of transparency
Illicit financial flows between Lebanon and the outside world reached $32.6 billion over the ten-year period 2005-2014, accounting for 17 percent of the country’s total trade over the period, according to average estimates by U.S.-based research and advocacy organization Global Financial Integrity (GFI).
GFI’s report, ‘Illicit Financial Flows to and from Developing Countries: 2005-2014’, defines total trade as the sum of exports and imports. The country’s total trade amounted to $197.5 billion over the same period.
Illicit financial inflows and outflows are derived from leakages in BoP and from deliberate mis-invoicing.
Inflows of fraudulent trade mis-invoicing totaled $4 billion (two percent of total trade) and that of outflows $3 billion (1.5 percent of total trade).
Balance of Payment (BoP) leakage outflows totaled $15.8 billion (eight percent of total trade) during the ten-year period, and inflows amounted to $9.9 billion (five percent of total trade).
“Illicit financial flows from developing countries are facilitated by a lack of transparency in the global financial system that encourages tax havens and secrecy jurisdictions, anonymous trusts and shell companies, bribery, and corruption,” GFI said in the report.
BoP leakages represent unrecorded transactions due to compilation errors and capital flights, also known as hot money which presumably includes illicit transactions.
The high BoP leakages could be attributed mostly to smuggling activities, said Amine Awad, General Manager of BLOM Bank-Lebanon.
He ruled out the existence of money laundering activities. He said that if there were money laundering activities, they would represent a tiny and insignificant scale.
“For sure these activities, if they exist, are not done through the banking system thanks to the strict regulations that govern the banks,” Awad said.
GFI recommended that the government adopts and implements all of the Financial Action Task Force’s (FATF) anti-money laundering recommendations, and to strongly enforce the laws that are already in place. GFI also said that information on the ultimate, true, human owners of corporations and other legal entities, referred to as “beneficial owners,” should be disclosed upon formation.
GFI also said: “All countries should actively participate in the global movement toward the automatic exchange of financial information.”
Reported by Shikrallah Nakhoul
Date Posted: May 09, 2017