WASHINGTON: The international community loses hundreds of billions of dollars every year due to trade-based money laundering, says a US report which identifies China, Russia, Mexico and India as the top four sources of illicit financial outflows.

The practice also costs Pakistan more than $10bn a year.

The US State Department’s Interna­tional Narcotics Control Strategy Report, released a couple of days ago, refers to TBML (trade-based money laundering), the process by which criminals use a legitimate trade to disguise their criminal proceeds from their unscrupulous sources.

This practice allows traders and the currency mafia to launder hundreds of billions of dollars every year. It is one of the most sophisticated methods of cleaning dirty money and TBML red flags are among the hardest to detect.

In Pakistan, estimates of illicit financial flowsput over $10bn as escaping taxation and being siphoned off outside the country. This is with nearly one-third of the population living below the poverty line.

The report identifies India as the fourth largest source of illicit financial outflows in the world. It notes that India’s main money laundering vulnerability comes from a widespread lack of access to formal financial institutions, particularly in the rural sector, that has resulted in the growth of informal financing networks.

The report also refers to a study by a United States think-tank, the Global Financial Integrity (GFI), which estimates that India loses up to $51bn every year due to illicit financial outflows.

China tops the GFI list with $139bn average outflow of illicit finances per annum, followed by Russia ($104bn) and Mexico ($52.8bn).

The section on