Our Perspective


Tackling illegal money flows in Asia could bring schools, hospitals and bridges to the poorest

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Corruption Complaint BoxGlobally, illicit financial flows drained roughly US$950b from the developing world in 2011 according to Global Financial Integrity. Photo: “Corruption Box,” available under a Creative Commons 2.0 license, © Michael Goodine

Illicit financial flows (cross-border flows of money that is illegally earned, transferred or utilised) are depriving the poorest economies in the region from vital funds for development. And the consequences of these flows on the sustainability of some of the region’s strongest economies are still largely underestimated.

Globally, illicit financial flows drained roughly US$950b from the developing world in 2011 according to Global Financial Integrity. The Asia-Pacific region accounts for 39.6 per cent of total illicit outflows from developing countries, the largest share among regions in terms of volume.
 
It strikes me that many of the countries that struggle to finance their development needs such as schools, bridges and hospitals – might easily have access to much larger development budgets if they could prevent illicit financial resources from flowing out of the country.

This is all the more critical, since these flows are often bigger in Dollar terms than the official development assistance that most of these aid-dependent countries receive.

Even in countries with fast-growing economies the outflow of financial resources threatens the sustainability of their economic and social growth. And my experience working as an anti-corruption advisor in the region provides daily reminders that the inflows of financial resources can be similarly damaging. Inflows as a result of activities such as corruption, organized crime and drug smuggling, undermine governance, rule of law and security.
 
Considering the financial significance of illicit financial flows I am surprised how little attention they have received so far in the Asia Pacific region. This contrasts with other regions, for example in Africa, where governments are putting the issue high on the political agenda.

Also this issue is drawing a lot of attention at the international level with the United Nations High-Level Panel of Eminent Persons on the Post-2015 Development Agenda. The Open Working Group on Sustainable Development Goals is discussing the proposal to include a specific sub-goal on illicit financial flows as part of goal 16:

“by 2030 significantly reduce illicit financial and arms flows, strengthen recovery and return of stolen assets, and combat all forms of organized crime”.
 
I participated in a Workshop on Preventing Illicit Financial Flows hosted by the Anti-corruption Unit of the Government of Cambodia on 5th September, 2014, with support from UNDP, UNODC and the ADB-OECD Secretariat.

For the first time the issue of illicit financial flows was discussed in Asia-Pacific at the regional level. The event brought together perspectives of senior officials from 27 countries in Asia Pacific – including representatives from anti-corruption authorities, financial intelligence units, centers of government, ministries of finance, civil society, development partners as well as regional and international experts.
 
During the Workshop a groundbreaking report, Coming to Grips with Illicit financial flows in Asia-Pacific generated interesting debates on the estimates of illicit financial flows and potential solutions to prevent them in four countries in the region - Bangladesh, Indonesia, Malaysia and Nepal.

Workshop participants suggested measures to prevent illicit financial flows in the region in the following ways:
 
·         Undertaking in-country consultations to raise awareness about the importance of illicit financial flows with different stakeholders (including private sector, media and civil society), understand better their drivers and develop counter-measures accordingly.

·         Conducting more thorough studies of illicit financial flows in individual countries in the region.

·         Fostering the political consensus in the region around the need to curtail illicit financial flows by organizing a high-level regional meeting whose conclusions could feed into the UN’s Post-2015 discussions.

·         Engaging relevant regional and/or sub-regional bodies (e.g. ASEAN, SAARC, PIF, APEC, etc.) to ensure policy coherence and improved cooperation at the regional level.
UNDP remains committed to supporting countries in this critical area for development together with UNODC and other development partners.

This is in the continuity of the global effort launched by UNDP Administrator Helen Clark during the Fourth United Nations Conference on the Least Developed Countries in 2011 with the discussion paper on Illicit Financial Flows from the Least Developed Countries: 1990-2008.
 
 

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