Corrupt Money s Negative Economic Impact Can Be Measured, Shows World Bank Study
WASHINGTON, December 1, 2011/African Press Organization (APO)/ — Income derived from corruption can be equivalent to a significant percentage of a country s GDP, shows a new study by the World Bank entitled Ill-Gotten Money and the Economy, Experiences from Malawi and Namibia.
In Malawi, income that is acquired through corruption amounts to about 5
percent of GDP, while tax evasion is estimated to equal 8 to 12 percent of GDP.
In Namibia, while corruption is considered to be significant, tax evasion is by
far the largest measurable source of ill-gotten money, equivalent to an
estimated 9 percent of GDP.
While these figures are estimates, this study shows that ill-gotten money and
its associated economic impact can be more systematically quantified, and that
the effect is negative. This will hopefully mobilize efforts to establish more
effective anti-money laundering policies, says Stuart Yikona, World Bank
Senior Financial Sector Specialist and one of the report s authors.
Conducted in collaboration with country experts, the study measures the
magnitude of corrupt money and shows how the recycling of ill-gotten money and
other related underlying criminal acts negatively affect economic development
and poverty reduction.
The high economic cost of criminal activities such as corruption, tax evasion
and its related dirty money flows reinforces the need for developing country
policy makers and practitioners to act effectively and early- to curb such
activities. Corruption and tax evasion affect national budgets, ultimately
undercutting the provision of public services in, for example, health, and
infrastructure.
The study also confirms that well-designed anti-money laundering measures such
as the use of financial intelligence can be useful tools in combating
corruption, tax evasion, and other financial crimes. Therefore, it is important
that developing countries adopt customized legal regimes and institutions to go
after dirty money when implementing international anti-money laundering
standards. These regimes should reflect the local political, economic and
social context. The study supports national efforts to formulate anti-money
laundering policies by providing a framework that can be used to analyze the
amounts and effects of ill-gotten money. The study guides countries to conduct
a cost-benefit analysis on the implementation of their anti-money laundering
policies, says Leonie Dunn, Director of the Namibia Financial Intelligence
Centre. Governments can evaluate whether or not sufficient measures have been
taken to estimate the risks illicit money flows pose to economic development
and to effectively address those risks. As a follow up to this study, Namibia
will conduct a national money laundering risk assessment in 2012 to explore how
anti-money laundering policies can be reformulated to focus on the real dangers
of ill-gotten money flows to the economy.
Tom Malikebu, Deputy Director of the Malawi Financial Intelligence Unit, adds
that this study provides an insight into the sources and magnitude of
ill-gotten funds. Such insight is a stepping stone in prioritizing resources
for combating crimes that have the most detrimental effect on Malawi s economy.
Ill-Gotten Money and the Economy is part of the Financial Market Integrity s
support for the efforts of policymakers and practitioners to eliminate safe
havens for the proceeds of corruption and other financial crimes.
The full report can be accessed at www.worldbank.org/amlcft
SOURCE
The World Bank
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