Malaysia records among highest illicit financial outflows

Malaysia is among the countries which registered the highest illicit financial outflows from 2001 to 2010 period, according to the Global Financial Integrity (GFI).

The Washington DC-based GFI said in its report that from 2001 to 2010, a massive US$285.24 billion (RM860 billion) have flowed out illegally from Malaysia, according to the latest edition of business weekly "Focus Malaysia".

"Nearly 80 per cent of that or US$227 billion was due to trade mispricing by Malaysian companies which 20 per cent or US$57.6 billion was due to illegal money transfers by companies or individuals," the report said quoting GFI Communications Director Clark Gascoigne.

He said a total of US$122.67 billion was believed to have flowed illegally into the country in the same period, of which 98.5 per cent was due to trade mispricing and the other 1.5 per cent from "unrecorded" money transfer.

The GFI official said financial inflows are as harmful to a country as illicit outflows, and as criminal.

Illicit inflows could be taxed and they funnelled directly into Malaysia's underground economy, financing domestic crime, corruption and other illicit activities, he was quoted as saying in the report.

It was difficult to point out the reasons behind this massive outflow of illicit capital -- without carrying out an in-depth study of Malaysia, which is outside the scope of the report.

Illicit outflows from Malaysia tended to flow to offshore tax havens and bank accounts in developed countries within the geographic region that the illicit outflows originate from, the report said.

Illicit outflows from developed countries in Asia tended to end up in Asian tax havens like Singapore, Hong Kong, Macau, Mauritius and the Cook Islands, or they ended in bank accounts in developed Asian nations like Japan and South Korea, it added.

The GFI report ranked Malaysia in third place among the developing nations for the staggering amounts of money that have been illegally sent out of the country over the first decade of this century, behind China and Mexico, which are in first and second place, respectively.