Only 5% of RIAs Feel “Advanced” at Marketing or Business Development

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La mayoría de los RIAs destinan un 2% de sus ingresos a marketing
Photo: Tomwsulcer . Only 5% of RIAs Feel "Advanced" at Marketing or Business Development

Fidelity Institutional Wealth Services, a custodian for registered investment advisor (RIA) firms, has released findings from The 2014 Fidelity RIA Benchmarking Study,which revealed many firms recognize the need to improve when it comes to marketing and business development: only 5 percent feel their firms are advanced in these areas, and seven in 10 do not have a plan in place to guide them toward better business results, a number that has gone unchanged since 2011.

The study looks at what may be holding RIAs back from advancing their marketing and business development efforts and explores the best practices of “High-Performing Firms” to help RIAs learn from their peers.

According to the study, High-Performing Firms excel in the areas of growth, productivityand profitability. And while many factors can contribute to their success, these firms stand out in several important areas of marketing and business development: firm story, targeting clients, referrals and aligning talent—strategies that may be contributing to their ability to close business in two or fewer meetings and drive more incremental growth than other firms.

“Three-fourths of firms see improving their marketing and business development as a top strategic initiative, but they are struggling to make progress,” said David Canter, executive vice president and head of practice management and consulting, Fidelity Institutional Wealth Services. “As firm leaders sit down to think through their 2015 strategic plans, they should consider looking to their peers for insights on what is working and ideas on where to focus to make the most impact.”

Among the key findings of the study, High-Performing Firms are focused on telling a consistent firm story, while half of RIA firms are still struggling to establish one. Only 56 percent of all firms agree that they have a clearly defined and differentiated firm story, and only 43 percent agree their stories are tailored to the specific needs of target clients. High-Performing Firms are 1.7X times more likely to tell a consistent firm story, with all client and prospect- facing associates describing their firm and its key differentiators in the same way. As a result, High-Performing Firms are also more likely to agree that the majority of their clients know the fundamentals of their firm story, which can help clients become advocates for the firm.

While firms are making progress when it comes to targeting the right clients, High- Performing Firms are almost twice as likely to effectively communicate their target client profiles to help generate the right referrals. Firms with a target client profile reported that 90 percent of new clients added in 2013 fit this description, compared to only 75 percent of clients on board prior to 2013. High-Performing Firms are almost twice as likely to agree that they effectively describe their target client profiles to both clients and centers of influence (COI). This may help clients and COI identify the most appropriate referrals, which may lead to a higher percentage of clients fitting target client profiles over time.

Few firms have an “advanced” referral process; High-Performing Firms are four times as likely to leverage COI referrals to the fullest. Referrals from existing clients and centers of influence are important channels of growth for RIAs, accounting for 75 percent of all new clients. However, less than one-third of firms rate their referral processes as advanced, or even fairly strong. Only 14 percent agreed that they have analyzed their client base to focus on the clients most likely to make referrals. High- Performing Firms are 4X more likely to say their COI referral processes are advanced. This includes activities such as always thanking sources for referrals and working to understand their centers of influences’ target client profiles so they can send reciprocal referrals. In addition, they are more likely to review centers of influence data, such as referral status, at least monthly and keep data up to date.

High-Performing Firms have the talent and resources in place, while one-third of RIA firms are pursuing business development officers. High-Performing Firms are approximately twice as likely to be pursuing strategic initiatives to develop talent- management plans or change firm compensation plans—signs that they may be managing talent more proactively. They are also less likely to see lack of internal sales and marketing capabilities as an issue and, possibly as a result, are less likely to be hiring business development officers (81 percent not pursuing vs. 66 percent of other firms).

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Gramercy Property Trust Closes a €350mn Venture for Single-Tenant Net Leased Assets in Europe

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Gramercy Property Trust has announced, along with several of its investment partners, the closing of a €350 million venture targeting single-tenant net leased assets and sale-leaseback opportunities across Europe, and the simultaneous acquisition of ThreadGreen Europe Limited, an existing property investment and asset management platform.

Gramercy Europe is a joint venture among the Company and investment entities managed by EJF Capital LLC, Fir Tree Partners and Senator Investment Group LP, along with certain other investors. Gramercy Europe will invest predominantly in single-tenant industrial, office and specialty retail assets in Germany, the Netherlands, the Nordic region, the United Kingdom and other targeted European countries. The total equity capital available to Gramercy Europe is €350 million, comprised of an initial commitment of €250 million of equity from Gramercy and the Founding Investors as well as an additional capital accordion of €100 million. Gramercy has a total commitment of €50 million to the venture. Simultaneously with the closing of the venture, Lindsay Sparacino of EJF, Jarret Cohen of Fir Tree and Michael Simanovsky of Senator will join the board of directors of Gramercy Europe, together with certain representatives appointed by Gramercy, including Gordon F. DuGan.

Simultaneous with the closing of Gramercy Europe, the Company is purchasing all of the assets of ThreadGreen Europe Limited who will provide the day-to-day management of the investment vehicle. With the ThreadGreen purchase, Gramercy has a fully-integrated presence in Europe, including investment personnel, asset management capability as well as all support functions in those areas. Principals of the Company and ThreadGreen worked together for a number of years at W. P. Carey & Co., where Alistair Calvert, Managing Director of ThreadGreen, along with Michael Heal, Director of ThreadGreen, ran the London office of W. P. Carey from December 2004 to June 2006. ThreadGreen currently manages approximately €210 million in single-tenant industrial and office assets located in Germany, Finland and Switzerland. Gramercy’s management along with the ThreadGreen principals have overseen investments in excess of $3 billion of single-tenant properties in Europe over a greater than 10-year period.

Gordon F. DuGan, Chief Executive Officer of Gramercy Property Trust, stated, “We are very excited about the opportunity to buy single-tenant assets with long, inflation-indexed leases throughout Europe at high current yields. We believe this new investment vehicle gives Gramercy shareholders access to European net leased assets in scale and in partnership with deep-pocketed and sophisticated partners. Gramercy will have a fully-integrated team on the ground that we have worked with in the past and a strategy that I have many years of experience with. We hope to replicate the success we have had with Gramercy Property Trust with our effort on Gramercy Europe.”

Morgan Stanley & Co. LLC served as the Company’s financial advisor in connection with the transaction.

Germany Leads European Mutual Fund Inflows

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The European funds industry enjoyed net inflows of only €0.4bn into long-term mutual funds for October 2014, according to Lipper Thomson Reuters.

Single fund market flows for long-term funds showed a mixed but positive picture for October; 22 of the 33 markets covered in Lipper’s report showed net inflows. The single market with the highest net inflows for October was Germany (+€2.4bn), followed by Italy (+ €1.9bn) and Belgium (+€0.8bn). Meanwhile, the international fund hubs Luxembourg and Ireland (-€5.8bn), France (-€1.5bn), and Denmark (-€0.5bn) stood on the other side.

Mixed-asset products—with estimated net inflows of €7.7bn—were the best selling asset class overall for October.

BlackRock, with net sales of €4bn, was the best selling group of long-term funds for October, ahead of Vanguard (+€2.2bn) and Pioneer (+€1.6bn).

Provisional figures for Luxembourg- and Ireland-domiciled funds suggest equity funds, with estimated net inflows of around €17.6bn, will be the best selling products for November.

Russia Moves To Stabilize Its Currency

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¿Default en Rusia?
Photo: Dennis Jarvis. Russia Moves To Stabilize Its Currency

A sharp drop in the oil price has caused concerns over the potential damage to the Russian economy and has led the Russian central bank to raise official interest rates sharply to stabilize its currency. This Market Update sets out what is happening in the Russian markets, with comments from Fidelity Worldwide Investments.

Following international sanctions in protest at Russia’s expansionist policies in the Ukraine and most recently a sharp drop in the oil price, investors have become increasingly concerned about the potential damage this will have to the Russian economy as a major producer and exporter of oil. “We estimate that a 10% drop in oil prices can shave up to 1.3 percentage points off Russian GDP growth”, said the team of experts from Fidelity WI in an market analysis.

The Russian rouble has borne the brunt of these concerns (chart 2), depreciating dramatically against the US Dollar. Russian asset prices have also been falling across the board, with the stock market down over 8% in December, Russian 10 year government bond yields rising 5 percentage points to over 15% and 5 year Russian sovereign CDS rising from 318bp to over 620bp. The Central Bank of Russia (CBR) raised overnight interest rates by 1% less than a week ago but a further 10% slide in the currency yesterday prompted it to hike rates by another 6.5% to 17%.

“The CBR’s aim is to slow the depreciation of its currency rather than to achieve a reversal of direction per se.  It is very concerned by the disorderly and dysfunctional way in which the currency has been trading. Rather than spend its foreign exchange reserves, which proved a costly and ineffective strategy in 2008, the CBR has decided to use the blunt tool of interest rate rises. Over the longer term, this should be effective in slowing an uncontrolled depreciation of the rouble by making it costly to sell the currency; however, in the short run the oil price is likely to be the most important determinant of the direction of the rouble”, explains Fidelity WI.

Could the Russian state be forced into defaulting on its debt, as it did in 1998?, ask the experts from the firm. “Overall, this seems unlikely. While there are some worrying parallels with 1998 when the oil price was also falling and Russia was also involved in an international conflict (an expensive campaign in Chechnya), the Russian government balance sheet today is much stronger than in 1998. General government debt is around 10% of GDP, whereas in 1998 it was 100%. The other main difference today is the CBR’s willingness to let the exchange rate float freely. As a result, unlike in 1998 a falling Rouble today can act as a shock absorber by balancing the dollar oil price falls and keeping fiscal balances stable”, they conclude.

Man Group Announces Acquisition of Silvermine Capital Management

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Man Group Announces Acquisition of Silvermine Capital Management
. Man Group anuncia la adquisición de Silvermine Capital Management

Man Group plc announced this week that it has entered into a conditional agreement to acquire Silvermine Capital Management LLC, a Connecticut-based leveraged loan manager with $3.8 billion of funds under management across nine active collateralised loan obligation (“CLO”) structures as of 30 November 2014. The acquisition is expected to complete in the first quarter of 2015, subject to certain approvals being obtained.

Silvermine is wholly-owned by the firm’s founders and senior staff members and is based in Stamford, Connecticut. The team of 17 focuses exclusively on managing US levered credit portfolios and, since inception in 2005, has executed 16 separate transactions totalling $6.7 billion.

Upon completion of the Acquisition, Silvermine will be integrated into Man GLG and will operate under the Man GLG Silvermine name which will complement Man GLG’s existing credit business. Silvermine’s team will remain in place under the leadership of two of the firm’s founders, G. Steven Kalin and Richard F. Kurth, who will continue to work alongside the other co-founders Aaron Meyer and Jonathan Marks.

The Acquisition follows Man Group’s recent acquisitions in the US of Pine Grove Asset Management LLC, Numeric Holdings LLC and the Merrill Lynch Alternative Investments LLC fund of hedge fund portfolio.

The regulatory capital requirement associated with the Acquisition is expected to be approximately $45 million. As of 30 November 2014, Silvermine’s run rate management fee revenues and PBT were $17 million and $8 million respectively, based on $3.8 billion in funds under management.

Mark Jones, co-CEO of Man GLG, stated, “The acquisition of Silvermine will transform our existing credit business and position us to benefit from strong demand for US CLOs and other credit strategies. Silvermine is a highly respected, specialised business with an excellent track record of outperformance. As part of Man Group, Silvermine will benefit from our world class infrastructure, distribution and access to capital and we are confident that this acquisition will bring meaningful advantages to our investors by further diversifying our offering.”

Steven Kalin and Richard Kurth, Managing Directors of Silvermine, commented, “We’re excited about the opportunities that joining Man Group will bring to us and to our investors. We have always been focused on identifying opportunities in the credit space that, given their risk/return proposition, deliver attractive performance for our clients. We are pleased to be joining forces with an organisation that not only embraces our firm’s entrepreneurial spirit, but plans to help foster that spirit and collaborate with us to further grow the business”.

DAB Bank Acquisition: a Major Step in the Development of BNP Paribas in Germany

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BNP Paribas has closed the acquisition of 81.4% stake in DAB Bank AG from Unicredit AG, together with the voluntary offer to minority shareholders. Following this step, BNP Paribas now controls 91.7% of DAB Bank’s capital and announces its intention to perform a squeeze-out on the remaining shares. Through this acquisition BNP Paribas strongly boosts its retail presence in Germany.

With DAB Bank and Consorsbank, BNP Paribas ranks fifth digital bank in Germany serving 1.4 million clients and first online broker with 8.7 million executed trades for the first nine months of the year. This acquisition also provides foundation for retail business in Austria, where the Group intends to develop direktanlage.at into a full-blown digital retail bank. Overall, at the end of September 2014, the total deposits of Consorsbank and DAB Bank reached 17Bn EUR and total assets under management 47Bn EUR.

“This operation once more confirms our strategic ambition to build a long term franchise in Germany, in line with our development plan in the Retail, the Corporate and the Institutional segments. DAB now joining our set-up in Germany represents a key contribution to grow our clients’ and deposits’ base serving the German economy. The combined client base puts us in a position to come close to the top 3 online banks in the country.” says Camille Fohl, Head of BNP Paribas Germany and Chairman of the Management Board in Germany.

Kai Friedrich, CEO of Consorsbank and coordinator of the BNP Paribas Retail activities in Germany, confirms: “the clients of DAB Bank and Consorsbank will both benefit from this operation. We intend to offer to all our retail clients a fully-fledged banking offer and services, while maintaining state of the art platforms for active traders. At the same time, we will speed up the development of the B2B activity for the professional segment”.

“We welcome the employees and clients of DAB Bank to the BNP Paribas Group. This acquisition is a crucial strategic move, both for our development in Germany and to further grow our digital bank in Europe. BNP Paribas, with already 1.3 million digital clients through Hello bank!, will become one of the leader in Europe in this field, adapting to changing needs and behavior of our clients” concludes François Villeroy de Galhau, COO of BNP Paribas and Head of Domestic Markets.

Founded in 1994, same year as Consorsbank, DAB Bank has been experiencing rapid growth in its direct banking business, in particular recently since 2012. The Munich-based company is expanding its business with private clients, as well as through its B2B offer to the professional segments such as Independent Financial Advisers. DAB Bank in Germany and direktanlage.at its subsidiary in Austria, serve 575,000 and 68,000 clients, respectively. Their total deposits reached 5bn EUR and securities accounts stood at 31bn EUR end of September 2014.

In Germany, BNP Paribas already covers a broad range of client segments from retail to corporate and institutional with 13 businesses lines and more than 4,000 employees. Germany is a key market for BNP Paribas’ expansion in Europe, committing additional means and workforce with strong growth targets in terms of revenues.

Anne Tinyo to Lead Life Management Services for Wells Fargo Private Bank

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Wells Fargo Private Bank announced Anne Tinyo has been named head of its Life Management Services group. This program integrates life and wealth management solutions to help clients plan for their future. Its services assist with the challenges of life transitions and maintaining their personal and financial independence. In her role, Tinyo will be responsible for national leadership of the program, which

Prior to joining Wells Fargo, Tinyo served as senior vice president of operations for 11 years at Los Angeles-based LivHOME Inc., a provider of at-home caregiving and geriatric care management services.

“Anne Tinyo brings tremendous experience working with older adults and helping them maintain independence, financial stability and quality of life,” said Jeff Savage, head of Specialized Wealth Services at Wells Fargo Private Bank. “Her passion working with clients, along with her practical experience in this field, makes her a perfect match to run this important business for Wells Fargo.”

Wells Fargo Life Management Services is one of nine lines of business that comprise Specialized Wealth Services, a part of Wells Fargo Private Bank’s Investment and Fiduciary Services. Life Management Services serves clients in 32 states and more than 100 markets nationwide.

“Within the next 20 to 30 years, more than 75 million baby boomers will surpass the age of 60, and people aged 90 and above are the fastest growing segment of our population today, according to the U.S. Census Bureau. Despite these statistics, there is still a lot of evidence that people fail to consider how they will manage their health and finances, and maintain their lifestyles as they age. I look forward to having a meaningful impact on our clients,” said Tinyo.

A native of Windsor in Ontario, Canada, and a graduate of the University of Western Ontario with a bachelor’s degree in social sciences, Tinyo will be located in Los Angeles.

Erik Davidson Named Chief Investment Officer for Wells Fargo Private Bank

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Wells Fargo Private Bank nombra a Erik Davidson director general de Inversiones
Erik Davidson Named Chief Investment Officer for Wells Fargo Private Bank . Erik Davidson Named Chief Investment Officer for Wells Fargo Private Bank

Wells Fargo Private Bank has announced Erik Davidson has been named chief investment officer, to serve as the business’s lead investment professional. He replaces Dean Junkans, who retires at the end of this year.

In this role, Davidson will oversee The Private Bank’s global equity, fixed income portfolio management and research, alternative investments, guided portfolios, investment products, investment tools and investment analytics. He will also jointly oversee the firm’s regional chief investment officers and investment and fiduciary senior directors, in partnership with regional leadership.

Davidson has been with The Private Bank for 10 years in a number of investment leadership positions at both the regional and national level, including deputy chief investment officer, managing director of investments, senior director of investments and regional investment manager.

“Erik has a tremendous combination of investment acumen, client focus and institutional knowledge, which positions him very well for this important role,” said Jay Welker, head of Wells Fargo Private Bank. “His passion for the investment industry and commitment to our unique business model will add tremendous value for our clients.”

Prior to joining Wells Fargo, Davidson was president and co-chief executive officer of a separately managed account (SMA) outsourcing company. He was also a managing director at Franklin Templeton Investments, and he held several fixed income positions at Credit Suisse First Boston, including spending many years in Asia. He received a master’s degree in business administration from the University of California Los Angeles Anderson School of Management and a bachelor’s degree from St. Olaf College in Northfield, Minn. He holds the Chartered Financial Analyst® designation.

Wells Fargo Private Bank, the fourth largest wealth management provider in the United States (Barron’s 2014), offers a full range of financial services and products to help individuals and families build, manage, preserve and transfer their wealth. The Private Bank serves clients across North America and internationally and has more than $190 billion in assets under management (9/30/14).

Capitulation Out of Energy and Materials to the Benefit of the Dollar

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Trump en la Casa Blanca: impacto en las materias primas
Foto: Doug8888, Flickr, Creative Commons.. Trump en la Casa Blanca: impacto en las materias primas

Global investors are keeping faith with equities while raising cash as markets enter the volatile year-end period, according to the BofA Merrill Lynch Fund Manager Survey for December. Asset allocators have hiked their cash holdings to an average 5 percent. Moreover, a net 28 percent are now overweight relative to their benchmarks. This is the survey’s highest reading on this measure since June 2012.

Despite this defensive move, respondents show renewed confidence in the global economy. A net 60 percent now expect it to strengthen over the next year – up almost 30 percentage points in two months. Against this constructive background, they are also more confident that corporate earnings will rise.

At the same time, inflation expectations have fallen to their lowest level since August 2012. Commodities are a significant factor in this. A net 36 percent of fund managers view oil as undervalued following its recent price fall. This reading is up over 20 percentage points since October and represents its lowest level since 2009.

In addition, expectations of European economic performance have improved. This reflects the likelihood of the European Central Bank beginning a program of quantitative easing next quarter – as 63 percent of respondents now expect, compared to November’s 41 percent. This translates into higher appetite for eurozone equities, notably banks, revealed in the survey.

“We are seeing capitulation out of energy and materials to the benefit of the dollar, cash, eurozone stocks and global tech and discretionary stocks,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “The prospect of ECB QE has brought growing consensus on European equities, but the weakening business cycle and falling commodity prices are working against true earnings recovery,” said Manish Kabra, European equity and quantitative strategist.

Benign inflation ups growth expectations

A growing number of investors now anticipate a favorable scenario of above-trend growth and below-trend inflation over the next 12 months. While this is still a minority view (with the majority anticipating that both growth and inflation remain below-trend), its reading has jumped five percentage points month-on-month.

A net 20 percent now expect higher global consumer prices in the next 12 months. This is down from last month’s net 35 percent.

In this environment, respondents view global fiscal policy as too restrictive. This month’s net 26 percent is the survey’s highest reading on this measure since July 2012.

Commodity collapse

Commodities have fallen sharply out of favor. A net 26 percent of fund managers are now underweight the asset class. This is up from November’s net 18 percent and marks the survey’s lowest reading on this measure in a year. This shift is also evident in strong moves in investors’ positioning. Both the energy and materials sectors saw 19 percentage-point month-on-month increases in net underweights.

Commodities’ fall has intensified bullishness on the U.S. dollar. While funds continue to view long exposure to the U.S. currency as the most crowded trade in financial markets currently, they still regard the dollar as significantly undervalued.

 Europe finds favor

Appetite for eurozone equities has risen to a net 26 percent overweight, up from November’s net 8 percent. Intentions to own the market have also risen, with Europe now the region fund managers are most likely to overweight over the next year. A net 19 percent regard eurozone equities as undervalued. This reading is up from November’s net 12 percent.

Regional fund managers have raised their exposure to European banks in particular. A net 13 percent are now overweighting the sector, compared to last month’s net 3 percent underweight.

In contrast, investors have less conviction towards U.S. and Japanese stocks. With the U.S. market appearing overvalued to a strong majority of the panel, a net 10 percent now intend to underweight it in the coming 12 months.

Crime, Corruption, Tax Evasion Drained a Record US$991.2bn in Illicit Financial Flows from Developing Economies in 2012

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A record US$991.2 billion in illicit capital flowed out of developing and emerging economies in 2012—facilitating crime, corruption, and tax evasion—according to the latest study released Tuesday by Global Financial Integrity (GFI), a Washington, DC-based research and advisory organization. The study is the first GFI analysis to include estimates of illicit financial flows for 2012.

The report—GFI’s 2014 annual global update on illicit financial flows—pegs cumulative illicit outflows from developing economies at US$6.6 trillion between 2003 and 2012, the latest year for which data is available.  Titled “Illicit Financial Flows from Developing Countries: 2003-2012,” [PDF] the report finds that illicit outflows are growing at an inflation-adjusted 9.4 percent per year—roughly double global GDP growth over the same period.

“As this report demonstrates, illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies,” said GFI President Raymond Baker, a longtime authority on financial crime. “These outflows—already greater than the combined sum of all FDI and ODA flowing into these countries—are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies.”

“Most troubling, however, is the fact that these outflows are growing at an alarming rate of 9.4 percent per year—twice as fast as global GDP,” continued Mr. Baker.  “It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on. That’s why it is essential for the United Nations to include a specific target next year to halve all trade-related illicit flows by 2030 as part of post-2015 Sustainable Development Agenda.”

Findings

Authored by GFI Chief Economist Dev Kar and GFI Junior Economist Joseph Spanjers, the study reveals that illicit financial flows hit an historic high of US$991.2 billion in 2012—marking a dramatic increase from 2003, when illicit outflows totaled a mere US$297.4 billion. Over the span of the decade, the report finds that illicit financial flows are growing at an inflation-adjusted average rate of 9.4 percent per year. Still, in many parts of the world, the authors note that illicit flows are growing much faster—particularly in the Middle East and North Africa (MENA) and in Sub-Saharan Africa, where illicit flows are growing at an average annual inflation-adjusted rate of 24.2 and 13.2 percent, respectively.

Totaling US$6.6 trillion over the entire decade, illicit financial flows averaged a staggering 3.9 percent of the developing world’s GDP. As a share of its economy, Sub-Saharan Africa suffered the largest illicit financial outflows—averaging 5.5 percent of its GDP—followed by developing Europe (4.4 percent), Asia (3.7 percent), MENA (3.7 percent), and the Western Hemisphere (3.3 percent).

“It’s extremely troubling to note just how fast illicit flows are growing,” stated Dr. Kar, the principal author of the study.  “Over the past decade, illicit outflows from developing countries increased by 9.4 percent each year in real terms, significantly outpacing economic growth.  Moreover, these outflows are growing fastest in and taking the largest toll—as a share of GDP—on some of the poorest regions of the world.  These findings underscore the urgency with which policymakers should address illicit financial flows”.

Trade Misinvoicing Dominant Channel

The fraudulent misinvoicing of trade transactions was revealed to be the largest component of illicit financial flows from developing countries, accounting for 77.8 percent of all illicit flows—highlighting that any effort to significantly curtail illicit financial flows must address trade misinvoicing.

The US$991.2 billion that flowed illicitly out of developing countries in 2012 was greater than the combined total of foreign direct investment (FDI) and net official development assistance (ODA), which these economies received that year. Illicit outflows were roughly 1.3 times the US$789.4 billion in total FDI, and they were 11.1 times the US$89.7 billion in ODA that these economies received in 2012.

“Illicit financial flows have major consequences for developing economies,” explained Mr. Spanjers, the report’s co-author.  “Emerging and developing countries hemorrhaged a trillion dollars from their economies in 2012 that could have been invested in local businesses, healthcare, education, or infrastructure.  This is a trillion dollars that could have contributed to inclusive economic growth, legitimate private-sector job creation, and sound public budgets. Without concrete action addressing illicit outflows, the drain on the developing world is only going to grow larger.”

Country Rankings

Dr. Kar and Mr. Spanjers’ research tracks the amount of illegal capital flowing out of 151 different developing and emerging countries over the 10-year period from 2003 through 2012, and it ranks the countries by the volume of illicit outflows. According to the report, the 25 biggest exporters of illicit financial flows over the decade are:

  1. China……… US$125.24bn average (US$1.25tr cumulative)
  2. Russia…………….. US$97.39bn avg. (US$973.86bn cum.)
  3. Mexico…………….. US$51.43bn avg. (US$514.26bn cum.)
  4. India……………….. US$43.96bn avg. (US$439.59bn cum.)
  5. Malaysia…………. US$39.49bn avg. (US$394.87bn cum.)
  6. Saudi Arabia……. US$30.86bn avg. (US$308.62bn cum.)
  7. Brazil……………… US$21.71bn avg. (US$217.10bn cum.)
  8. Indonesia……….. US$18.78bn avg. (US$187.84bn cum.)
  9. Thailand…………. US$17.17bn avg. (US$171.68bn cum.)
  10. Nigeria…………… US$15.75bn avg. (US$157.46bn cum.)
  11. A.E………………… US$13.53bn avg. (US$135.30bn cum.)
  12. South Africa……… US$12.21bn avg. (US$122.14bn cum.)
  13. Iraq…………………. US$11.14bn avg. (US$89.10bn cum.)
  14. Costa Rica………… US$9.40bn avg. (US$94.03bn cum.)
  15. Philippines……….. US$9.35bn avg. (US$93.49bn cum.)
  16. Belarus……………. US$8.45bn avg. (US$84.53bn cum.)
  17. Poland……………… US$5.31bn avg. (US$53.12bn cum.)
  18. Panama…………… US$4.85bn avg. (US$48.48bn cum.)
  19. Serbia……………… US$4.57bn avg. (US$45.66bn cum.)
  20. Chile……………….. US$4.56bn avg. (US$45.64bn cum.)
  21. Brunei…………….. US$4.30bn avg. (US$34.40bn cum.)
  22. Syria………………. US$3.77bn avg. (US$37.68bn cum.)
  23. Egypt……………… US$3.77bn avg. (US$37.68bn cum.)
  24. Paraguay………… US$3.70bn avg. (US$36.97bn cum.)
  25. Venezuela……….. US$3.68bn avg. (US$36.77bn cum.)

For a complete ranking of average annual illicit financial outflows by country, please refer to Appendix Table 2 of the report on page 28. The rankings can also be downloaded here.

GFI also found that the top exporters of illegal capital in 2012 were:

  1. China………………………… US$249.57bn
  2. Russia……………………….. US$122.86bn
  3. India…………………………… US$94.76bn
  4. Mexico……………………….. US$59.66bn
  5. Malaysia ………………….. US$48.93bn
  6. Saudi Arabia……………….. US$46.53bn
  7. Thailand…………………….. US$35.56bn
  8. Brazil…………………………. US$33.93bn
  9. South Africa………………… US$29.13bn
  10. Costa Rica…………………… US$21.55bn
  11. Indonesia……………………. US$20.82bn
  12. A.E…………………………… US$19.40bn
  13. Iraq…………………………… US$14.65bn
  14. Belarus…………………….. US$13.90bn
  15. Philippines…………………. US$9.16bn
  16. Syria…………………………… US$8.64bn
  17. Nigeria……………………….. US$7.92bn
  18. Trinidad & Tobago…………. US$7.41bn
  19. Vietnam……………………… US$6.93bn
  20. Lithuania………………….. US$6.45bn
  21. Libya…………………………. US$5.40bn
  22. Panama……………………. US$5.34bn
  23. Aruba………………………. US$5.29bn
  24. Egypt………………………. US$5.09bn
  25. Chile……………………….. US$5.08bn

An alphabetical listing of illicit financial outflows is available by year for each country in Appendix Table 3 on pg. 30 of the report, or it can be downloaded here.

Policy Recommendations

The report recommends that world leaders focus on curbing the opacity in the global financial system, which facilitates these outflows. Specifically, GFI maintains that:

  • Governments should establish public registries of meaningful beneficial ownership information on all legal entities;
  • Financial regulators should require that all banks in their country know the true beneficial owner(s) of any account opened in their financial institution;
  • Government authorities should adopt and fully implement all of the Financial Action Task Force’s (FATF) anti-money laundering recommendations;
  • Regulators and law enforcement authorities should ensure that all of the anti-money laundering regulations, which are already on the books, are strongly enforced;
  • Policymakers should require multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries, and staff levels on a country-by-country basis;
  • All countries should actively participate in the worldwide movement towards the automatic exchange of tax information as endorsed by the OECD and the G20;
  • Trade transactions involving tax haven jurisdictions should be treated with the highest level of scrutiny by customs, tax, and law enforcement officials;
  • Governments should significantly boost their customs enforcement, by equipping and training officers to better detect intentional misinvoicing of trade transactions; and
  • The United Nations should adopt a clear and concise Sustainable Development Goal (SDG) to halve trade-related illicit financial flows by 2030and similar language should be included in the outcome document of the Financing for Development Conference in July 2015.