draining development.pdf - Khazar University

Policy and Research Implications of Illicit Flows 501The existing estimates provide a useful basis for selecting case studycountries. The dominance of China in the Global Financial Integrity calculationssuggests that it should be a prime target for research. As LorraineEden notes, Chinese government agencies have been cooperativein prior studies of trade mispricing. While this does not mean they willcooperate in all aspects of illicit flows research, it does suggest the possibilityof obtaining the kind of information, for example, on the extentof informal moneylending, that can help identify the methods otherthan trade mispricing that are important in the transfer of illicit fundsoverseas. The recent release of a study by the Bank of China, “Investigationon the Asset Transfer Routes Used by Corrupt Officials and the CorrespondingSurveillance Methods,” is further indication of the Chinesegovernment’s interest in the phenomenon of IFFs. 20At the microlevel, it may be possible to learn from case studies of specificchannels that have been hypothesized as important channels in particularcountries. Ethnographic techniques involving participant observationor, at least, close and lengthy immersion may help increase ourunderstanding of how, for instance, hawalas in East Africa serve to facilitatesuch flows, who are the customers, which are the destinations, perhapseven, what are the sources of the money being transferred.As the number of successful asset recovery actions increases, a databasecould be developed on the portfolio decisions of kleptocrats. Thismay be fertile ground for forensic accountants, particularly if the caserecords allow the creation of a historical record of the movements of theassociated assets. The recent studies by the World Bank of the portfoliosof Abacha, Marcos, and Montesinos are indicative of the potential of thiskind of research (Dumas 2007).Policy shifts may also provide important research opportunities. Theloosening of exchange controls, for example, should reduce the incentivesfor at least certain kinds of illicit outflows. Building models that allow forthe separate identification of these effects, first, on the outflows themselvesand, then, on the real economy, would be a worthwhile challenge.IFFs have complex origins and varied consequences and present difficultpolicy options. Research will require a mix of opportunism andimagination.