{"id":1857,"date":"2026-05-20T13:35:18","date_gmt":"2026-05-20T12:35:18","guid":{"rendered":"https:\/\/blogs.sussex.ac.uk\/centre-for-the-study-of-corruption\/?p=1857"},"modified":"2026-05-20T13:35:20","modified_gmt":"2026-05-20T12:35:20","slug":"the-uks-facilitation-of-illicit-finance-drives-child-undernutrition-globally","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/centre-for-the-study-of-corruption\/2026\/05\/20\/the-uks-facilitation-of-illicit-finance-drives-child-undernutrition-globally\/","title":{"rendered":"The UK\u2019s facilitation of illicit finance drives child undernutrition globally"},"content":{"rendered":"\n
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Source: Pexels\/Burak The Weekender<\/a><\/figcaption><\/figure>\n\n\n\n

In this guest blog, Sunit Bagree, Research Associate in the School of Global Studies and Senior Policy Advocacy Consultant at Results UK, explores the harm to populations in the Global South in areas like child undernutrition that can result when trade-related illicit financial flows extract wealth from an economy; he gives his take on the UK government’s response to the challenges of illicit financial flows  – and calls on the UK to transform its stance.<\/em> <\/p>\n\n\n\n

My recent report<\/a> for Results UK estimates that 20 of the countries worst affected by child undernutrition experienced at least $309.8 billion in trade-related illicit financial flows (IFFs) in 2024. Trade-related IFFs are widely regarded<\/a> to be a major subset of IFFs as a whole, which the United Nations (UN) defines<\/a> as \u2018financial flows that are illicit in origin, transfer or use, that reflect an exchange of value and that cross country borders\u2019.  <\/p>\n\n\n\n

Further, using the latest available data, my research conservatively estimates that government revenue losses from trade-related IFFs amounted to 86.3% of India\u2019s and 65.1% of Nigeria\u2019s domestically funded public health spending in 2023, respectively. It is therefore clear that significant funds could be raised by Global South governments, including those most challenged by child undernutrition, if IFFs were comprehensively tackled. <\/p>\n\n\n\n

However, the British Government is failing to take the necessary steps domestically to end the UK\u2019s status as a safe haven for illicit finance. Moreover, it is doing too little to directly assist Global South countries to combat IFFs, and at times even impedes them in relevant global forums.  <\/p>\n\n\n\n

The damage caused by trade misinvoicing <\/strong> <\/p>\n\n\n\n

Trade misinvoicing is an illicit tax and commercial practice that generates trade-related IFFs. It may be defined<\/a> as \u2018a method for moving money illicitly across borders which involves the deliberate falsification of the value, volume, and\/or type of commodity in an international commercial transaction of goods or services by at least one party to the transaction\u2019. Trade misinvoicing has four main uses: evading customs duties and taxes, laundering the proceeds of criminal activity, circumventing quotas and capital controls, and claiming tax incentives. <\/p>\n\n\n\n

The ill-gotten gains derived from trade misinvoicing tend to be diverted to tax havens. Like all IFFs, trade-related IFFs severely undermine<\/a> domestic tax revenues in all countries. This in turn reduces the financial resources available for public investment, including for child health. As Global South countries tend to collect relatively low levels of personal income tax, they are usually more reliant<\/a> on corporate taxation as a share of all tax revenue compared with Global North countries. <\/p>\n\n\n\n

How the UK should address its domestic problems <\/strong> <\/p>\n\n\n\n

It is high time that the British Government forced the UK\u2019s Overseas Territories and Crown Dependencies to establish public registers of beneficial ownership. Such registers disclose the real human beings who own and control corporate vehicles. In restating the Government\u2019s stance that all of these jurisdictions should publish such registers, a letter<\/a> from Ministers to Liam Byrne MP in February this year demonstrates the knots that the Government has tied itself in. Despite recognising that most of these jurisdictions are dragging their heels, Ministers go on to downplay their blatant lack of progress.  <\/p>\n\n\n\n

The British Government also needs to crack down on the professional enablers (including lawyers, accountants, estate agents and others) that enable IFFs. The Financial Conduct Authority, which since last year has been the single anti-money laundering supervisor for professional services, needs to be adequately resourced if it is to combat the over \u00a3100 billion<\/a> that is laundered through or within the UK annually (which itself represents just one component of IFFs). <\/p>\n\n\n\n

Another necessary domestic reform relates to information sharing on foreign account holders. Although financial institutions in the UK collect data on all account holders, HM Revenue & Customs (HMRC) does not receive this data for countries that do not implement the Organisation for Economic Co-operation and Development\u2019s (OECD) onerous standards<\/a> for automatic exchange of financial account information between governments. These countries are almost exclusively in the Global South. Thus, if HMRC published this data (with suitable privacy protections), all Global South authorities could check<\/a> whether their taxpayers\u2019 reporting aligns with UK records. <\/p>\n\n\n\n

What the UK needs to change in its international policies<\/strong> <\/p>\n\n\n\n

The British Government\u2019s recent cut to official development assistance (ODA) is harming<\/a> social programmes for marginalised people, including children. In addition, the cut may endanger<\/a> work to counter IFFs \u2013 the previous ODA cut did<\/a>. Yet Global South countries need greater support to create and strengthen laws and regulations targeting trade misinvoicing (in ways that protect whistleblowers and civil society) and to enhance the capacity and coordination of customs, tax, financial intelligence and law enforcement authorities. It does not help that the UK\u2019s anti-corruption strategy<\/a> omits any mention of trade-related IFFs. <\/p>\n\n\n\n

The UK also needs to massively improve its performance on asset recovery. While the British Government backs the Stolen Asset Recovery (StAR) Initiative<\/a>, the UK had returned assets to overseas jurisdictions in only 26 out of 78 cases<\/a> on the StAR Initiative database by the end of 2023. The UK should seek to be a leader on asset recovery, including by working with Global South countries to break down barriers to cross-border cooperation. <\/p>\n\n\n\n

Last but not least, the British Government must change its approach to the global governance of IFFs. There are two priorities here. First, the UK needs to reverse its position<\/a>, and support a UN Framework Convention on International Tax Cooperation. This treaty could see an inclusive and rights-based entity replace the unequal and ineffective OECD as the leading global body for tax.  <\/p>\n\n\n\n

Second, the UK must back a new UN coordination and oversight mechanism for IFFs. The Financial Action Task Force, an intergovernmental organisation that focuses on money laundering and terrorist financing, is unrepresentative<\/a> of the Global South and thus unresponsive to its challenges. Meanwhile the work of the Egmont Group, an international body of financial intelligence units, has been weaponised<\/a> by some governments to unjustly target their political opponents and civil society actors. Only the UN has the legitimacy to ensure that global action against IFFs is strategic and accountable. <\/p>\n\n\n\n

Tackling IFFs is a \u2018win-win\u2019<\/strong> <\/p>\n\n\n\n

The UK is responsible for more tax losses<\/a> than any other nation at the same time as the world is largely way off-track<\/a> when it comes to achieving global nutrition targets. Ironically, properly tackling IFFs would generate enormous sums<\/a> for the British Government as well, which could be invested in public services at home. And combatting illicit finance has many additional benefits<\/a> for all nations, e.g. preventing market distortions, enhancing financial stability, upholding the rule of law, building public trust, and weakening criminals and despots.  <\/p>\n\n\n\n

The British Government is hosting the Illicit Finance Summit<\/a> on 23-24 June. Unfortunately, current plans for the Summit agenda possess significant weaknesses. For example, major issues such as beneficial ownership only feature in a weak form; others such as global governance do not feature at all. Furthermore, there is a focus on providing loans for asset recovery, despite the fact that many countries in the Global South<\/a> are in, or at risk of, a debt crisis.  <\/p>\n\n\n\n

It is not too late for the British Government to address these concerns \u2013 and ensure that Summit genuinely confronts financial secrecy and theft.  <\/p>\n\n\n\n

This blog post is co-published with the University of Sussex\u2019s School of Global Studies<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In this guest blog, Sunit Bagree, Research Associate in the School of Global Studies and Senior Policy Advocacy Consultant at Results UK, explores the harm to populations in the Global South in areas like child undernutrition that can result when trade-related…<\/span><\/p>\n

Read more ›<\/a><\/div>\n

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