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It noted Bangladesh’s vulnerability to trade-based money laundering, particularly through over-invoiced imports of capital machinery, which enjoys subsidised loans.

Illicit Financial Flows (IFFs) are most commonly understood as money or value that crosses borders and is illegal in its source, transfer, or use.

“These flows matter for development and governance because they can weaken domestic resource mobilisation, reduce tax revenue, and constrain the fiscal space required for public services and infrastructure investment,” the report said.

It added that larger economies with higher trade volumes show the biggest illicit outflows. China alone accounted for $6.96 trillion in cumulative trade gaps over the decade, followed by Thailand ($1.18 trillion) and India ($1.06 trillion).

Annually, illicit flows accounted for 24.90 percent of China’s trade with the world, 21.83 percent for India, 14.83 percent for Bhutan, and 15.49 percent for Nepal.

In December 2024, a white paper by the Bangladesh interim government found an average of $16 billion was siphoned off annually during the 15 years of Awami League rule.

Although GFI lacked access to Bangladesh’s data for 2014, 2019, 2020, 2021, and 2022, it used available figures to estimate the average.

It noted that some nations show high gaps with regional partners, while countries like Bangladesh and Sri Lanka reflect that such discrepancies are significantly tied to trade with advanced economies.

The report said commodity exports from Asia to advanced economies are often underpriced to evade resource rent taxes, while Asian financial hubs such as Singapore and Hong Kong act as intermediaries in misinvoicing schemes, providing transit hubs or booking centres for illicit trade profits.

In sum, trade misinvoicing with advanced economies is a “critical subset” of Asia’s illicit flows, the report said. It shows that while South-South trade misinvoicing is significant, the links to G7/OECD markets are “profound and cannot be ignored”.

“Any solution will require joint efforts: Asian countries improving their controls and advanced countries tightening oversight of trade transactions, closing legal loopholes, and sharing data,” it said.

Prof Selim Raihan of Dhaka University’s economics department cautioned that figures on illicit flows may vary because of different methodologies used in different studies.

“The problem is that Bangladesh officially reports trade data very late. This is a major reason why it is difficult to compare official Bangladesh data with what other countries report,” he told The Daily Star.

Raihan, also executive director of the South Asian Network on Economic Modelling, urged government institutions to engage with partner countries for cross-verification of financial data for curbing illicit flows.

He also stressed the need for a central bank or commerce ministry system to check whether import prices match global market rates.

He added that many exporters do not bring their earnings to the country, and monitoring agencies must hold them accountable for such illicit practices.

Remittances, too, are used for laundering.

“If the money that should come through official channels comes via Hundi [illegal channels operated by groups], it means large amounts of foreign currency stay outside the country,” Raihan said.

The GFI report warned that illicit flows deprive governments of essential revenues, undermine the rule of law, and hamper poverty reduction and infrastructure building.

“In effect, Asia’s wealth is being partially siphoned offshore instead of invested at home, at a time when the region still faces significant development needs,” it said.

As the 2030 Sustainable Development Goal deadline approaches, the report argued that curbing illicit flows is vital for Asia’s prosperity.

“Without political will to tackle corruption within customs and enforce transparency, the nation’s wealth will continue to benefit offshore interests rather than its own people,” it said.

GFI recommended strengthening customs enforcement, leveraging regional agreements for data sharing, enhancing transparency in free trade zones, and promoting international collaboration to curb illicit financial flows.