Effects of trade misinvoicing on money laundering in developing economies
| DOI | https://doi.org/10.1108/JMLC-11-2021-0124 |
| Published date | 14 December 2021 |
| Date | 14 December 2021 |
| Pages | 60-68 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Bello Umar |
Effects of trade misinvoicing
on money laundering in
developing economies
Bello Umar
Department of Business Administration, Nile University of Nigeria, Abuja, Nigeria
Abstract
Purpose –This study aims to define the concepts and determine the extent to which trade misinvoicing
influencesmoney laundering activities in developing countries.
Design/methodology/approach –A qualitative researchmethodology was adopted using a descriptive
synthesis of secondary datadue to the heterogeneous nature of data sources (empirical evidence and content
analysis).
Findings –Analysisrevealed that in recent times trade misinvoicingaccounts for over 20% of international
trade value between developing and developed countries, and trade misinvoicing has been identified as a
trade-basedmoney laundering mechanism.
Research limitations/implications –Unavailability of homogenous data relating to trade misinvoicing
among developing countries, different methods for measuring trade misinvoicing and inadequate high-quality
research papers that led to the use of reports from reputable organisations.
Originality/value –Tothebestoftheauthor’s knowledge, this study is among the few research works to
assess the effects of trade misinvoicing and how it influences money laundering activities in developing countries.
Keywords Illicit financial flows, Trade misinvoicing, Money laundering, Developing nations,
Export misinvoicing, Import misinvoicing
Paper type Research paper
1. Introduction
“Money laundering is a global concern, as it becomes a crucial link in tracing criminal funds,
especially from organised crime”(Hendriyetty and Grewal, 2017). Developing countries are
losing more than US$1tn to illicit financial flows (IFFs) according to calculated estimates
(Ortega et al., 2017). IFFs involves illicit and illegal commercial transactions or capital flight
resulting from criminal and commercial enterprises gene rated and shifted to benefitfromthe
earnings (Gathii, 2019). These finances are taken away and are not returned to the country of
origin, therefore diminishing the resources available for developmental purposes (Miyandazi
and Ronceray, 2018). IFFs are from both legal and illegal activities such as corruption,
organised criminal groups, tax evasion and trade misinvoicing (Bohoslavsky, 2018).
The African continent loses US$60bn annually to IFFs, and Nigeria alone accounts for
68% of these flows (Eme et al.,2015). Nigeria’sPresident Muhammadu Buhari observed that
the country lost $157.5bn to IFFs at the United Nations General Assembly in 2019 at New
York (The Nation, 2019). Global FinancialIntegrity (GFI) reported in their latest publication
a continuous reoccurrence of IFFs to and from 148 developing nations due to commercial
internationaltrade with developed nations (GFI, 2019).
United Nation (UN) in its resolution 70/1 stated the Sustainable Development Goals
(SDGs) in which goal 16 is to enhance peaceful and inclusive communities for sustainable
development; to provide justice for all and build institutions that are inclusive, accountable
JMLC
26,1
60
Journalof Money Laundering
Control
Vol.26 No. 1, 2023
pp. 60-68
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2021-0124
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
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