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The World’s “Hot” Money [Chart]

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The World’s “Hot” Money [Chart]

Over $7.8 trillion of illicit money has flowed out of developing countries in last decade

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Every year, roughly $1 trillion flows illegally out of developing and emerging economies due to crime, corruption, and tax evasion. This amount is more than these countries receive in foreign direct investment and foreign aid combined.

This week, a new report was released that highlights the latest data available on this “hot” money. Assembled by Global Financial Integrity, a research and advisory organization based in Washington, DC, the report details illicit financial flows of money from developing countries using the latest information available, which is up until the end of 2013.

The cumulative amount of this “hot money” coming out of developing countries totaled just over $7.8 trillion between 2004 and 2013. On an annual basis, it breached the $1 trillion mark each of the last three years of data available, which is good for a growth rate of 6.5% rate annually.

In Asia, illicit financial outflows are growing even quicker at an 8.6% clip. It’s also on the continent that five of the ten largest source economies for these flows can be found, including the largest offender, which is Mainland China.

How does this “hot” money leave these countries? Global Financial Integrity has calculated that 83% of illicit financial flows are due to what it calls “trade misinvoicing”.

It’s defined as the following:

The misinvoicing of trade is accomplished by misstating the value or volume of an export or import on a customs invoice. Trade misinvoicing is a form of trade-based money laundering made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven), a method known as re-invoicing. Fraudulent manipulation of the price, quantity, or quality of a good or service on an invoice allows criminals, corrupt government officials, and commercial tax evaders to shift vast amounts of money across international borders quickly, easily, and nearly always undetected.

Trade misinvoicing accounted for an average of $654.7 billion per year of lost trade in developing markets over the data set covered by the report.

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Mapped: The Migration of the World’s Millionaires in 2023

Where do the world’s wealthiest people want to live? This map tracks the migration of the world’s High Net Worth Individuals (HNWIs).

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Mapping the Migration of the World’s Millionaires 2023

Just like everyone else, High Net Worth Individuals (HNWIs) traveled less than usual during the pandemic, and as a result their migration numbers trended downwards. But millionaires and billionaires are on the move again and it is anticipated that 122,000 HNWIs will move to a new country by the end of the year.

Henley & Partners’ Private Wealth Migration Report has tracked the countries HNWIs have moved from and to over the last 10 years; this map showcases the 2023 forecasts.

In this context, HNWIs are defined as individuals with a net worth of at least $1 million USD.

The Countries Welcoming New Millionaires

The top 10 countries which are likely to become home to the highest number of millionaires and billionaires in 2023 are scattered across the globe, with Australia reclaiming its top spot this year from the UAE.

Here’s a closer look at the data:

RankCountryProjected HNWI Inflow 2023
1🇦🇺 Australia5,200
2🇦🇪 UAE4,500
3🇸🇬 Singapore3,200
4🇺🇸 U.S.2,100
5🇨🇭 Switzerland1,800
6🇨🇦 Canada1,600
7🇬🇷 Greece1,200
8🇫🇷 France1,000
9🇵🇹 Portugal800
10🇳🇿 New Zealand700

Only two Asian countries make the top 10, with the rest spread across Europe, North America, and Oceania.

Despite historic economic challenges, Greece is projected to gain 1,200 High Net Worth Individuals this year. One reason could be the country’s golden visa program, wherein wealthy individuals can easily obtain residence and eventually EU passports for the right price—currently a minimum real estate investment cost of 250,000 euros is all that’s required.

Many of the leading millionaire destinations are attractive for wealthy individuals because of higher levels of economic freedom, allowing for laxer tax burdens or ease of investment. Singapore, which expects to gain 3,200 millionaires, is the most economically free market in the world.

The Countries Losing the Most Millionaires

China is anticipated to lose 13,500 High Net Worth Individuals this year, more than double as many as the second place country, India (6,500).

Here’s a closer look at the bottom 10:

RankCountryProjected HNWI Outflow 2023
1🇨🇳 China-13,500
2🇮🇳 India-6,500
3🇬🇧 UK-3,200
4🇷🇺 Russia-3,000
5🇧🇷 Brazil-1,200
6🇭🇰 Hong Kong SAR -1,000
7🇰🇷 South Korea-800
8🇲🇽 Mexico-700
9🇿🇦 South Africa-500
10🇯🇵 Japan-300

In a number of these countries, strict regulatory bodies and corrupt governments can hinder the ease with which HNWIs can manage their own money.

In Russia, many wealthy individuals are facing personal tariffs and trade restrictions from Western countries due to the war in Ukraine. China’s crackdowns on Hong Kong have made it a less attractive place for business. And finally, the UK’s exit from the EU has caused many businesses and individuals to lose the easy movement of labor, finances, and investment that made operations across European borders seamless.

Some of these countries may still be adding homegrown millionaires and billionaires, but losing thousands of HNWIs to net migration does have a considerable economic impact.

Overall, millionaires are increasingly on the move. In the 10 years of reporting—despite a dip during the pandemic—the number of HNWIs moving away from their countries of origin has been growing every year.

Here’s a look at the numbers:

YearProjected HNWI Migration
201351,000
201457,000
201564,000
201682,000
201795,000
2018108,000
2019110,000
202012,000
202125,000
202284,000
2023 (forecast)122,000

In a geopolitically fragile but more connected world, it’s no surprise to see millionaires voting with their feet. As a result, governments are increasingly in competition to win the hearts and minds of the world’s economic elite to their side.

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