M’sia is world’s No 2 in illegal capital flight – But Why BNM?

Steven Gan 8:01AM Dec 18, 2012  (MKini)

Close to RM200 billion of dirty money was siphoned out of Malaysia in 2010, putting the country second only to Asian economic powerhouse China in global capital flight.

Washington-based financial watchdog Global Financial Integrity (GFI), in its latest report which tracks capital flight, says the level of illicit flows from Malaysia in 2010 was the highest in 10 years. azlan

GFI has introduced a new and more conservative methodology in its estimates of illicit financial outflows, which help to zero in exclusively on dirty money. As such, estimates from its previous reports have been revised.

Last year, GFI put the figure of illicit outflows for Malaysia in 2009 at US$46.86 billion (RM143.3). This has been altered to US$30.41 billion (RM93 billion).

The latest report finds a dramatic jump of capital flight in Malaysia – from US$30.41 billion (RM93 billion) in 2009 to US$64.38 billion (RM196.8) in 2010.

GFI has yet to obtain data for 2011 and 2012, but these will be included in future reports.

The global financial watchdog has warned that capital flight in Malaysia is “at a scale seen in few Asian countries”.

azlanThe GFI report, ‘Illicit Financial Flows From Developing Countries: 2001-2010′, is co-authored by GFI economists Sarah Freitas and Dev Kar, who is a former senior economist at the International Monetary Fund.

According to GFI, for the cumulative illicit financial outflows over 10 years – from 2001 to 2010 – Malaysia is ranked No 3 in the world, after China and Mexico.

The total 10-year estimate for Malaysia is US$285 billion (RM871.4 billion), while China is US$2,740 billion, and Mexico, US$476 billion.

Prime Minister Najib Abdul Razak has disputed GFI’s figures. Last year, he gave Parliament a much lower figure of RM135.3 billion for illicit capital outflows from 2000 to 2009.

Nevertheless, GFI data was backed by a different study earlier this year by another organisation – the London-based Tax Justice Network, which found Malaysia among the top countries when it comes to capital flight.

 Graft accounts for 20% of dirty money

GFI said that trade mispricing – the practice of shifting profits overseas by over- or under-invoicing intra-company transactions – accounts for an average of 80.1 percent of illicit financial flows from developing countries.

The rest of the dirty money involves corruption. azlan

“Illicit transfers of the proceeds of corruption, bribery, theft, and kickbacks, accounting on average for 19.9 percent of illicit outflows over the decade, are on the rise as a percentage of total illicit financial outflows,” said GFI.

“Crime, corruption, and tax evasion cost the developing world US$858.8 billion in 2010, just below the all-time high of US$871.3 billion set in 2008.”

GFI described its estimates of global dirty money as “extremely conservative” as they do not include trade mispricing in services, same-invoice trade mispricing, hawala transactions, and dealings conducted in bulk cash.

“This means that much of the proceeds of drug trafficking, human smuggling, and other criminal activities, which are often settled in cash, are not included in these estimates,” said Kar (right).

Asia is the biggest losers of capital, says the GFI report.

“We found that Asia, accounting for 61.2 percent of cumulative outflows, was still the main driver of such flows from developing countries.

“Indeed, five of the 10 countries with the largest illicit outflows – China, Malaysia, the Philippines, India, and Indonesia – are in Asia.”

GFI said increasing transparency in the global financial system is critical to stemming the outflow of illicit money from developing countries.

Following the release of the previous GFI report in January last year, Najib, who is also the finance minister, kicked the ball to Bank Negara’s court, saying that it would provide an explanation on the findings.

Soon after, Deputy Finance Minister Donald Lim announced that Bank Negara has launched a probe.

But to date, Bank Negara has yet to announce the result of its investigations or explain the massive illicit capital flight, despite offers of help from top GFI economists.

3 thoughts on “M’sia is world’s No 2 in illegal capital flight – But Why BNM?

  1. Finally Malaysia is so highly rated internationally, when all along Malaysia is so badly rated in every field polled ! Three cheers for that even though it is for the wrong reason and in the wrong area.
    At these rates soon Malaysia will have very little left in the country except old and retired Japanese and where and how the corrupted scumbags and parasites from Umno going to enrich themselves ? Fortunately for these morons they would even be around then to worry about the problem as they too would have billions in the foreign bank accounts.You don’t need to be an financial expert to know why and also the consequences the scenario will bring. Of course, as usual, Najib will come up with a different set of figures just like he always does with statics and figures. But he is the P.M. and he can do what he wants and all Malaysians, I would say almost all Malaysians, will have to accept what he comes up with although most of them deep down would take the figures he comes up with a pinch of salt. He is always full of air with anything to do with figures but appears dumb and has nothing to say when it comes to the C4 of the mongolian beauty.
    He might eventually swear again in the mosque and on the Koran that he was not the one to light the C4 that blew up the mongolian woman. How true that would be plus he did not swear he knows who could have done that, just the way the immigration records of that woman were deleted.
    China may be rated above Malaysia but at least China is not indebted the way Malaysia is, not that they are in the right to be rated so highly. Also as expected. Bank Negara will take their sweet time to announce the result of its investigations or explanation.
    To impede this sort of shambles from going any further just vote these morons out of Putrajaya in the coming elections regardless of what they say will happen if the opposition comes to power. You may not get a prefect watchdog but at least it will be a better one than the present regime, and Najib tells you why try to fix something when there is nothing wrong with it. But Najib everything now runs and administered by Umno is rotten to the core and if no change is to take place soon, very soon, Malaysia will be beyond salvation.
    Just remember half a loaf is better than the one you are presently having !

  2. Dear Doc Dzul..

    How can BNM release report on this illicit money flight out if BNM itself gives the approval for the fund transfer after being approved by the finance minister himself. Most of the transactions involved stashing away of kickbacks to foreign destinations. Some may have to be smuggled back in for these BN goons to use in the country and when caught, it became a fund for their party UMNO and it is alarming that most Malaysians buy this story and accepted that this kind of fund is legal if used for funding a political party!

    For Muslims to understand the gruesome impact of this kind of practices they must return back or rediscover their true source of reference the holy Quran. Alas, those that fight in the course of Allah are but a handful believers.

  3. The rogues are plundering the nation and will continue to do so until eternity if we don’t stop them in the 13th GE.

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