Lebanon: $2B in dirty money out the door yearly

Published January 14th, 2016 - 09:00 GMT

A report revealed that illicit financial practices by Lebanese firms are rife and estimated the illegal capital outflow at around $2 billion a year. According to Washington-based Global Financial Integrity, the illicit financial outflows from Lebanon are close to $2 billion a year, the 54th highest in the world.

The nonprofit research and advocacy organization estimated the cumulative illicit financial flows from Lebanon at $19.9 billion between 2004 and 2013, which is equivalent to an average of $2 billion per year during the covered period.

The report was part of a comprehensive study on illicit financial practices around the world.

Global Financial Integrity defines IFFs as funds that are illegally earned, transferred or utilized.

It includes all unrecorded private financial outflows that drive the accumulation of foreign assets by residents in infringement of applicable laws and regulatory frameworks.

The report said that part of the illicit financial outflows is caused by companies that underinvoice exports and overinvoice exports. It calculates IFFs as the sum of two components that are Gross Excluding Reversals and Hot Money Narrow. The HMN derives illicit financial flows from leakages in the balance of payments.

The organization’s estimates show that cumulative IFFs from Lebanon were the 54th highest among 145 countries globally with available data, the 20th highest among 47 upper middle-income countries and the ninth largest among 18 Arab countries. Globally, IFFs from Lebanon were higher than those from the Bahamas ($17.7 billion), El Salvador ($17.4 billion) and Tunisia ($16.8 billion); and were lower than those from Equatorial Guinea ($21.8 billion), Panama ($21 billion) and Sri Lanka ($20 billion).

Further, the annual average of IFFs from Lebanon during the 2004-13 period was lower than the global annual average of $5.4 billion.

Lebanon accounted for 4.1 percent of cumulative IFFs from Arab countries, for 0.5 percent of IFFs from UMICs and for 0.3 percent of global cumulative IFFs during the 10-year period. Cumulative IFFs from China were the highest worldwide at $1,392 billion between 2004 and 2013.

The survey said that illicit outflows from Lebanon on an HMN basis, or those that were channeled through balance-of-payments leakages, totaled $16.1 billion between 2004 and 2013, and averaged $1.6 billion per year during the covered period. It noted that Lebanon’s cumulative IFFs from balance-of-payments leakages were the 16th highest worldwide, the seventh highest among UMICs and the third highest among Arab countries with available data.

The annual average of HMN outflows from Lebanon during the 2004-13 period was higher than the global annual average outflows of $944 million, the UMICs’ annual average HMN outflows of $1.5 billion and the Arab yearly average of $874 million.

Lebanon accounted for 11.8 percent of total HMN outflows from Arab countries, for 2.4 percent of such outflows from UMICs and for 1.2 percent of global HMN outflows during the covered period.

The organization added that illicit outflows from Lebanon on a GER basis, or those transferred through the deliberate misinvoicing of external trade, totaled $3.8 billion between 2004 and 2013 and averaged $380 million per year during the covered period.

As such, cumulative GER outflows from Lebanon were the 84th highest worldwide, the 29th highest among UMICs and the 11th highest among Arab countries with available figures.

The annual average of GER outflows from Lebanon during the 2004-13 period was lower than the global annual average of $5.2 billion, the UMICs’ yearly average of $7.7 billion and the Arab annual average of $2.1 billion.

Further, Lebanon accounted for 1.4 percent of cumulative GER outflows from Arab countries, for 0.11 percent of such outflows from UMICs and for 0.06 percent of global GER outflows during the covered period.


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