Global Financial Integrity (GFI), a Washington -based research and advisory organization announced yesterday that $ 1 trillion in illicit money took flight from developing countries to developed countries. Stashing away illegal money is an offence. Receiving such illegal money is also an abominable offence, which the developed countries are guilty of. These developed countries impose severe penalties for money laundering in their own countries, but have paid little attention to money received illegally.
India ranks the fourth in losing money illegally. During the ten year period from 2003 to 2012, China lost $1.25 trillion, Russia $973.86 billion, Mexico $514.26 billion, India $439.59 billion and Malaysia $394.87 billion.
‘Black money’ as is called in India, was a hot topic during the last general elections. Prime Minister Narendra Modi has taken a personal interest in bringing back the ‘black money’ that is stashed away in other counties. People tend to stash away the illicit money they cannot account for. If there is some form of exchange control, people will park their funds overseas so that they can spend the money freely. Inflation and unstable exchange rates will also contribute to capital flight.
While taking legal action against the sending money abroad, India should stabilize currency rates and relax on exchange controls. These measures will build public confidence in Indian Rupees.
‘Black money’ is small compared to the amount of money lost by the government in other forms of corruption. A Supreme Court appointed Special Investigation Team (SIT) has traced $716 million in the accounts of Indians figuring in a list of account holders of HSBC’s Geneva branch. There may be dozens of other countries and other bank branches where Indian nationals would have put their money.
SIT has also disclosed tracing unaccounted wealth worth $2,393 million within India, which are now being investigated by the Enforcement Directorate and the Income Tax Department.
GFI president Raymond Baker said: “As this report demonstrates, illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies.”
“These outflows-already greater than the combined sum of all FDI and ODA flowing into these countries – are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies,” he added.
He noted that these outflows are growing at an alarming rate of 9.4 per cent per year, which is twice as fast as global GDP.