IDEAS home Printed from https://ideas.repec.org/a/spr/minecn/v37y2024i2d10.1007_s13563-023-00374-2.html
   My bibliography  Save this article

Illicit financial flows and extractive commodities: false claims in an UNCTAD report

Author

Listed:
  • Olle Östensson

    (Caromb Consulting)

Abstract

A report by UNCTAD on illicit financial flows claims that misinvoicing of extractive commodity exports accounts for very large illicit financial flows from African countries. The report has received considerable attention, and it is possible that governments may take actions based on the assumption that the claims in the report are true. The present paper analyses these claims, focusing on South African gold exports, which account for the vast majority of the alleged illicit financial flows. Data in the source used for the UNCTAD report (UN Comtrade) are analysed in greater detail than is presented in the UNCTAD report. It is shown that the claims in the UNCTAD report are not supported by the data. It is impossible to prove any misinvoicing and anomalies in the statistics cannot be shown to be due to illicit financial flows. The authors of the report were clearly aware that misinvoicing could not be proved and that there were alternatives, more likely explanations of the statistical anomalies identified. They chose, however, to still present their claims of misinvoicing. UNCTAD produced a report with similar claims in 2016, and those claims were disproved at the time. There is very little evidence of misinvoicing in extractive commodities trade, and mirror trade analysis is in any case of very limited value when it comes to detecting or proving it. The UNCTAD report also uses mirror trade analysis in a highly questionable way that differs from the way it is applied by respected researchers. Different methods are necessary to identify or assess the magnitude of any illicit financial flows associated with the extractive industry. More granular data, supported by an understanding of international trade statistics, the international trading system and trading practices for the commodities concerned are needed in order to arrive at estimates with some degree of accuracy. UNCTAD was given an opportunity to comment on the article and did so. UNCTAD did not dispute the substance of the present article. Unfortunately, UNCTAD has refused to allow Mineral Economics to publish the comments. Nothing in the comments justified any changes in the text of the article.

Suggested Citation

  • Olle Östensson, 2024. "Illicit financial flows and extractive commodities: false claims in an UNCTAD report," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 37(2), pages 393-407, June.
    • Handle: RePEc:spr:minecn:v:37:y:2024:i:2:d:10.1007_s13563-023-00374-2
    DOI: 10.1007/s13563-023-00374-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13563-023-00374-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13563-023-00374-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. World Bank, 2008. "Democratic Republic of Congo : Growth with Governance in the Mining Sector," World Bank Publications - Reports 8072, The World Bank Group.
    2. Grynberg, Roman & Nyambe, Jacob & Singogo, Fwasa, 2019. "Illicit Financial Flows, Theft and Gold Smuggling in Africa," Tanzanian Economic Review, Department of Economics, University of Dar es Salaam, vol. 9(1), pages 35-59, June.
    3. Yeats, Alexander J, 1978. "On the Accuracy of Partner Country Trade Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 40(4), pages 341-361, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Julia Rotter & Peppi-Emilia Airike & Cecilia Mark-Herbert, 2014. "Exploring Political Corporate Social Responsibility in Global Supply Chains," Journal of Business Ethics, Springer, vol. 125(4), pages 581-599, December.
    2. Antonio Tena Junguito, 1992. "Las estadísticas históricas del comercio internacional: fiabilidad y comparabilidad," Estudios de Historia Económica, Banco de España, number 24, November.
    3. Joel CARIOLLE & Cyril CHALENDARD & Anne-Marie GEOURJON & Bertrand LAPORTE, 2017. "Going beyond analysis of internal data to support customs modernization: A case study in Gabon," Working Papers 201723, CERDI.
    4. Berger, Helge & Nitsch, Volker, 2008. "Gotcha! A Profile of Smuggling in International Trade," Conference papers 331735, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Joel CARIOLLE & Cyril CHALENDARD & Anne-Marie GEOURJON & Bertrand LAPORTE, 2016. "Décloisonner l’analyse des données pour appuyer la modernisation des douanes : une illustration à partir du Gabon," Working Papers 201618, CERDI.
    6. Perks, Rachel, 2012. "How can public–private partnerships contribute to security and human rights policy and practice in the extractive industries? A case study of The Democratic Republic of Congo (DRC)," Resources Policy, Elsevier, vol. 37(2), pages 251-260.
    7. Nobuaki Yamashita, 2010. "International Fragmentation of Production," Books, Edward Elgar Publishing, number 13615.
    8. Hamanaka, Shintaro, 2011. "Utilizing the Multiple Mirror Technique to Assess the Quality of Cambodian Trade Statistics," Working Papers on Regional Economic Integration 88, Asian Development Bank.
    9. Guillaume Daudin, 2003. "La logistique de la mondialisation," Revue de l'OFCE, Presses de Sciences-Po, vol. 87(4), pages 409-435.
    10. R. M. Conlon, 1982. "Transport Cost and Tariff Protection of Australian Manufacturing," The Economic Record, The Economic Society of Australia, vol. 58(1), pages 73-81, March.
    11. Hilson, Gavin, 2019. "Why is there a large-scale mining ‘bias’ in sub-Saharan Africa?," Land Use Policy, Elsevier, vol. 81(C), pages 852-861.
    12. Geenen, Sara, 2014. "Dispossession, displacement and resistance: Artisanal miners in a gold concession in South-Kivu, Democratic Republic of Congo," Resources Policy, Elsevier, vol. 40(C), pages 90-99.
    13. Nitsch, Volker, 2011. "Trade Mispricing and Illicit Flows," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 77397, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    14. Hanlin, Rebecca & Hanlin, Christopher, 2012. "The view from below: ‘lock-in’ and local procurement in the African gold mining sector," Resources Policy, Elsevier, vol. 37(4), pages 468-474.
    15. Katherine Barbieri & Omar M.G. Keshk & Brian M. Pollins, 2009. "Trading Data," Conflict Management and Peace Science, Peace Science Society (International), vol. 26(5), pages 471-491, November.
    16. Channing Arndt & Rui Benfica & Nelson Maximiano & Antonio M. D. Nucifora & James T. Thurlow, 2008. "Higher fuel and food prices: impacts and responses for Mozambique," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 497-511, November.
    17. Kilosho, Janvier & Stoop, Nik & Verpoorten, Marijke, 2015. "The social minefield of gold digging in South-Kivu, DRC. The case of Kamituga," IOB Analyses & Policy Briefs 10, Universiteit Antwerpen, Institute of Development Policy (IOB).
    18. Céline Carrère & Christopher Grigoriou, 2014. "Can Mirror Data Help To Capture Informal International Trade?," UNCTAD Blue Series Papers 65, United Nations Conference on Trade and Development.
    19. Stoop, Nik & Verpoorten, Marijke & van der Windt, Peter, 2019. "Artisanal or industrial conflict minerals? Evidence from Eastern Congo," World Development, Elsevier, vol. 122(C), pages 660-674.
    20. Ra�l S�nchez de la Sierra, 2015. "On the Origins of States: Stationary Bandits and Taxation in Eastern Congo," HiCN Working Papers 194, Households in Conflict Network.

    More about this item

    Keywords

    Misinvoicing; Extractive commodities; Commodity trade; Tax evasion;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:minecn:v:37:y:2024:i:2:d:10.1007_s13563-023-00374-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.