Oslo — “All illicit financial flows are immoral, with deeply negative effects on people and planet.”
As humanitarians scramble for cash, high-profile calls for “innovative finance” are proliferating — often with the intention of tapping the private sector to further aid policy objectives. A new report, however, takes an arguably more effective approach, highlighting the “breathtaking scale” of money lost to illicit finance flows.
According to Sunit Bagree, consultant researcher at anti-poverty NGO Results UK, tax revenues were lost from $309.8 billion worth of illicit finance flows caused by trade misinvoicing alone, in 20 of the 26 countries worst affected by child malnutrition in 2024. Data was unavailable for six countries, including Sudan and the Democratic Republic of the Congo, which were also likely to have seen significant illicit finance flows. India, which saw $229.8 billion worth of the trade misinvoicing, potentially missed out on a staggering $41 billion in lost public revenues.
Illicit finance flows are features of many humanitarian crises. Trade misinvoicing, which is deliberately misvaluing imports and exports, is just one method from a very broad spectrum, which includes other types of commercial activity, profits from criminality like human trafficking and drugs, and corruption.
Nigeria — one of Africa’s biggest economies but also gripped by severe and chronic humanitarian crises — had $19 billion of trade misinvoicing in 2024, costing the public purse $1.4 billion.
Sudan has long lost public revenues to illicit finance, weakening institutions. Competition over “lucrative returns”, often from the extractives sector, has been cited as a key driver of the conflict between the Sudanese Armed Forces and the Rapid Support Forces (RSF) that has engulfed the country since 2023. The war has most likely worsened the problem, with the RSF financially exploiting aid groups operating in its territory.
Illicit finance from a wide range of sources has also long fuelled conflict in Myanmar, where it is now of “central importance to sustaining ethnic armed groups and [their opponents] the Myanmar military”, according to a report by the Global Initiative Against Transnational Organized Crime (the body coordinates regional observatories of illicit economies). “Without targeted policies to disrupt illicit markets and provide alternative economic solutions, Myanmar risks repeating the cycles of instability that have defined its history,” it said.
The UN defines dirty money as “financial flows that are illicit in origin, transfer or use, that reflect an exchange of value and that cross country borders”.
“It’s difficult to say things definitively because of the nature” of illicit finance, where things are “hidden and thrive on concealment”, Bagree said. But “all illicit financial flows are immoral, and some are really grisly, with deeply negative effects on people and planet.”
Bagree’s framing, linking illicit finance to child malnutrition, also goes to the heart of deeper discussions being held by the humanitarian community at a time of deep reflection: in particular, about whether their work needs to be more actively political.
Illicit finance is not the only money that could be put to better use but requires political will to access it, according to Bagree: Calls for debt relief to finance development goals have been growing for years, along with additional taxes targeting wealth and environmental damage.
The New Humanitarian spoke at length with Bagree about these issues to find out more. This interview has been edited for length and clarity.
The New Humanitarian: Why does illicit finance matter to humanitarians?
Sunit Bagree: I anchored the report in nutrition, but the arguments that I make around illicit finance are relevant to all sorts of social sectors.
If we were to see genuine partnerships and true solidarity — moving beyond the PR — among Global North and South countries working with each other to seriously counter illicit financial flows, you would see massive boosts to tax revenues for all of those countries, not just poorer countries.
If this was to happen, you’d see far more financial resources available for investment in public services, in both richer countries and poorer countries. That absolutely includes nutrition and health, but it also includes other sectors, from education to agriculture to water, sanitation and hygiene and economic development… the benefits would be very wide-ranging. If you look at the shortfalls around financing the sustainable development goals (SDGs), you know this funding is desperately needed (the SDGs are short by around $4.2 trillion annually).
There’s also a benefit in helping to prevent crises: not just by contributing to the SDGs, but because illicit financial flows also fuel crime and empower despots, [they] can drive violence on different scales.
The New Humanitarian: The report is heavily focused on the UK, both because of the government’s upcoming summit on illicit finance in June, and the City of London’s reputation as a haven for dirty money. But should other governments be concerned?
Bagree: Absolutely. Illicit financial flows are relevant to all countries.
My focus has been [on] how trade-related illicit financial flows affect the Global South, and highlighting how greater funds for Global South governments could potentially be used to improve child nutrition and wider child development.
But illicit financial flows are also deeply damaging to Global North countries, where they also damage tax revenue collection.
There’s also wider benefits. Because illicit finance makes financial systems less secure and more prone to instability and undermines markets, businesses that play by the rules are undercut by businesses that do not. Ultimately, illicit finance undermines democracy, because they increase inequality and allow certain actors to become far more economically powerful and manipulate politics.
So, cracking down on illicit financial flows is an absolute win-win.
The New Humanitarian: Did you have any other observations while doing this work on illicit finance?
Bagree: The Organisation for Economic Co-operation and Development (OECD) is the most influential international body on tax issues. And the Financial Action Task Force (an intergovernmental body founded by the G7) is the primary global organisation dealing with money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction.
What crystallised in my mind during the process of researching and writing this report is how the failings of these two institutions mirror each other.
Both of them are unrepresentative of poorer countries. They have Global South countries as members, but in terms of the real decision-making and the actual nature of rules, they heavily favour the rich countries. That’s mirrored in their lack of responsiveness to poorer countries’ needs.
Those factors are interrelated: If you’re not properly represented, it’s unlikely that your needs are going to be adequately and fairly met.
This is true for both organisations: They kind of reflect each other’s deficiencies. That’s why it’s so important that we address these failings of global governance.
The New Humanitarian: Do you have any recommendations for policymakers?
Bagree: We need a UN Framework Convention on International Tax Cooperation. That can lead to a system with an associated treaty body that is truly equitable, inclusive, fair and rooted in international human rights law and standards: Everything that the OECD is not.
We need to see a reversal of the nine states who voted against this treaty.
Also, we need a UN coordination and oversight mechanism on illicit financial flows. Despite its failings, the UN is still the only truly multilateral body in the world engaged on these sorts of issues.
Having a UN tax treaty and coordination mechanism on illicit financial flows would help to address the fragmentation, ineffectiveness, and inequality that we currently see.
