draining development.pdf - Khazar University

Policy and Research Implications of Illicit Flows 495valuable. They have focused attention on an issue that had previouslybeen quite marginal. In this respect, they fit well into the modern patternby which policy issues acquire a public identity; it is numbers as much asstories that attract scrutiny (Andreas and Greenhill 2010).Thus, the numbers have been taken up by the advocacy communityand used extensively to press for various policy proposals. For example,they are used to support the case for paying more attention to AMLregimes in developing countries and for curbing tax havens and secrecyjurisdictions (DIIS 2009; Christensen 2009; FitzGerald 2010; Helleiner2009; Purje, Ylö nen, and Nokelainen 2010). As discussed in chapter 1,these estimates also have the troubling possibility of undercutting thecase for providing official development assistance simply because theyimply that there is a solution to the development problem that is bothmore constructive and less expensive for the wealthy nations that currentlyprovide official development assistance, namely, preventing illicitfinancial outflows. Thus, it matters a great deal if they are substantialoverestimates, a problem that is exacerbated by reference to missingitems that might make them conservative estimates.We address two related issues here: how well the measures match withthe concept of illicit as formulated for policy purposes and the unexpectedand troubling pattern of the distribution across countries in theestimates. The interested reader can find other concerns scattered in thechapters by Fuest and Riedel, by Eden, and by Nitsch (chapters 4, 7, and10, respectively).Concepts and MeasuresKar and Cartwright-Smith apply an unusually sweeping definition oftheir target measure, as follows:Illicit financial flows involve the transfer of money earned through activitiessuch as corruption, transactions involving contraband goods, criminalactivities, and efforts to shelter wealth from a country’s tax authorities.Such flows may also involve funds that were earned through legitimatemeans. It is in transferring legitimately earned funds in direct contraventionof applicable capital controls that the transfer becomes an illicit flow,regardless of the fact that the funds were earned in a legitimate activity.(Kar and Cartwright-Smith 2008, 1) 16