Shadow Financial Flows in International Trade of Arab Countries

Abstract

The article analyzes the scale, dynamics, and structure of incorrectly issued trade invoices, which are a key channel for illegal cash flows in the Arab region. International trade increasingly occurs within complex supply networks and value chains. In such circumstances, misreporting and incorrect invoicing can occur at any stage. Due to incorrect issuance of trade invoices in 2008–2015. in the Arab region, $482.7 billion were “missed,” which is equivalent to a fifth of total GDP in 2016. Every year, $60.3 billion “went into the shadows.” However, Saudi Arabia, the United Arab Emirates, Egypt, Tunisia, Algeria and Jordan accounted for 80% of illegal cash flows in the region associated with trade misinvoicing. Countries not primarily involved in the export of natural resources are more susceptible to misinvoicing practices (10.4%) than countries with resource-dependent economies (7.4%). Informal cross-border trade is a major challenge for customs authorities in some Arab countries. It represents the largest part of the trade flow on Sudan’s border with Ethiopia and Eritrea.

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