An estimated six to 10 percent of Malaysia's total trade in 2014 comprised illicit financial outflows, according to the 2005-2014 report of the Global Financial Integrity (GFI) on illicit financial flows to and from developing countries.

This translates to between US$26.6 billion and US$44.3 billion, based on the country's total trade of US$443.2 billion in 2014.

GFI estimates illicit financial outflows by looking at legitimate trade being used to mask the transfer of funds abroad.

One commonly used method is through trade misinvoicing, which GFI estimates make up between US$22.2 billion and US$39.9 billion of Malaysia's total illicit outflow in 2014.

According to GFI, trade misinvoicing is a method for moving money illicitly across borders by deliberately misreporting the value of a commercial transaction on the invoice submitted to the Customs Department.

The report, released in the United States yesterday, puts Malaysia's total illicit outflow in the 10 years since 2005 at eight to 12 percent of the total trade, or US$287 billion to US$430.6 billion.

The total global illicit outflow for 2014 is estimated at US$620 billion to US$970 billion.

Recording data on illicit inflows

GFI, in its latest edition of the report, has also began recording data on illicit inflows into a country.

It estimates that seven to 13 percent, or US$31 billion to US$57.6 billion of Malaysia's total trade in 2014, comprised illicit inflow.

In the 10 years since 2005, the country's illicit inflow comprised eight to 13 percent of the total trade, or US$287 billion to US$466.4 billion.

GFI president Raymond Baker, in the report's foreword, said illicit inflows often involved tax evasion.

"Illicit inflows frequently occur when imports are under-invoiced for the purpose of evading Customs duties and VAT (value added taxes) taxes.

"The magnitude of estimated illicit inflows (globally) in the latest year (2014) ranges from US$1.4 trillion to US$2.5 trillion," Baker said.

He said illicit flows comprised 14 to 24 percent of the total merchandise trade of the world's developing countries.

"This is a staggering figure, underlining the enormous harm done to developing countries by illicit financial flows, however they are generated.

"The order of magnitude of these estimates, much more so than their exactitude, warrants serious attention in both the developing countries and in the wealthier world.

"Maximising domestic resources and achieving sustainable development goals is dependent upon substantially curtailing illicit financial flows," Baker said.

The complete report can be viewed here.