Illicit Financial Flows (IFF)

The term comes from development policy rather than criminal law. It groups three broad kinds of cross-border money: proceeds of crime such as trafficking and fraud, proceeds of corruption such as bribes and stolen public funds, and money that evades tax or customs duties, including through false trade invoices. What links them is that money leaves or moves through the legal system in a way that breaks the law somewhere along its path. Researchers and international bodies study the flows to understand how much money developing countries lose, because the sums are often said to rival aid received. Estimates are hard to make and vary widely. For compliance staff, the idea explains why AML, anti-corruption and tax transparency work overlap. Banks meet it in trade finance, offshore structures and politically exposed customers. Policy makers use the concept to size losses and to decide where to press for transparency on company ownership, trade data and tax information; the figures guide priorities more than they prove cases.

A country's customs data shows that exports of a raw material to one trading partner are far lower than that partner's import records. Analysts suspect that the exporters under-invoice sales and keep the difference abroad. Government agencies review the exporters, and local banks are asked to watch for unusual foreign payments.