Illicit Financial Flows

STRICTLY EMBARGOED UNTIL TUESDAY NIGHT, 28 MAY 2013
AT 18:59 EDT / 23:59 BST / 23:59 WEST / 23:59 CET
As the 2007 Balance of Payments Statistics Yearbook notes: 12
Under the conventions of the system, a compiling economy records credit entries (i) for real
resources denoting exports and (ii) for financial items reflecting reductions in an economy’s
foreign assets or increases in an economy’s foreign liabilities. Conversely, a compiling
economy records debit entries (i) for real resources denoting imports and (ii) for financial
items reflecting increases in foreign assets or decreases in foreign liabilities. In other words,
for assets—whether real or financial—a positive figure (credit) represents a decrease in
holdings, and a negative figure (debit) represents an increase. In contrast, for liabilities, a
positive figure shows an increase, and a negative figure shows a decrease. Transfers are
shown as credits when the entries to which they provide the offsets are debits and as debits
when those entries are credits.
Transactions are also of different types and the balance of payments must make room for recording
them in a manner that is consistent across countries. That is a major raison d’être of the BPM6 and
its predecessors—to ensure a framework of recoding different types of international transactions on a
consistent basis across countries so that BOP statistics are meaningful for policymakers and researchers.
Transactions can be either exchanges or transfers, monetary or non-monetary. As the BPM6 notes:
An exchange involves a provision of something of economic value in return for a counterpart
item of economic value. Purchases of goods and services, acquisition of assets,
compensation of employees, dividends, etc., are all exchanges. An exchange is sometimes
called a transaction with “something for something” or a transaction with a quid pro quo. A
transfer involves a provision (or receipt) of an economic value by one party without receiving
(or providing) a counterpart item of economic value. Taxes, debt forgiveness, grants, personal
remittances are examples of transfers. A transfer is also called a transaction with “something
for nothing” or a transaction without a quid pro quo.
The estimation of NRecT involves all four kinds of external transactions (i.e., exchanges and
transfers - either monetary or non-monetary) which are recorded in the various accounts of
the balance of payments. The inclusion of transfers involving non-financial assets results in the
terminology “Net Recorded Transfers” and not “Net Capital Transfers”. It is important to keep in
mind that the reference to transfers here also includes exchanges.
The balance of payments also accounts for certain non-financial, non-produced assets such as
debt write-offs or write-downs. While these flows are not included in the financial account, they
nevertheless involve a transfer of resources from the creditor to the debtor country. As noted earlier,
every transaction can be either monetary or non-monetary in character. In the case of monetary
transactions, one party makes a payment or receives a payment or incurs a liability or acquires an
12
Reference, 2007 Balance of Payments Statistics Yearbook, Annex V, page xxi, International Monetary Fund.
Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009
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