Illicit financial flows (IFFs) are most commonly understood as money or value that crosses borders and is illegal in its source, transfer, or use. These flows matter for development and governance because they can weaken domestic resource mobilization, reduce tax revenue, and constrain the fiscal space required for public services and infrastructure investment. The international policy community has increasingly treated the reduction of IFFs as a concrete development objective. For example, Sustainable Development Goal target 16.4 calls for the significant reduction of illicit financial and arms flows, strengthened recovery and return of stolen assets, and the combating of organized crime by 2030. Against this backdrop, trade is a critical lens for analyzing IFF risks because large shares of cross-border value move through routine commercial transactions, making abuse difficult to detect without systematic, data-driven methods.
A prominent channel for trade-related IFF risk is trade misinvoicing, which is defined as the fraudulent misreporting of key invoice information (including price and quantity, among other attributes) for the purpose of facilitating illicit cross-border financial flows. One widely used approach for identifying misinvoicing risk at scale is “mirror trade” or partner-country analysis, which compares what two trading partners each report about the same trade flow and flags persistent discrepancies (value gaps) as potential indicators of misinvoicing. This approach is particularly useful because it can be applied across many countries and products using large administrative datasets. At the same time, official trade data are not a perfect record of economic reality: differences in valuation conventions, timing, partner attribution, and other factors can create discrepancies even when there is no illicit intent. For that reason, value gaps are best treated as risk indicators that help policymakers prioritize investigations and reforms, rather than as precise measurements of criminal proceeds.
This risk lens is especially relevant for Developing Asia because the region sits at the center of modern trade and supply chains. Global trade volumes are vast: estimates suggest that the value of global trade in goods and services reached about US$32 trillion in 2022, following the post-pandemic rebound. Developing Asia, as used in this report, follows the World Economic Outlook country grouping for “Emerging and Developing Asia”, which includes several of the world’s most trade-integrated economies. The region’s scale is illustrated by the continued dominance of key exporters such as China, which remained the top merchandise exporter in 2022 with a world export share of about 14 percent. In an environment where high volumes of legitimate trade move across numerous jurisdictions, products, and counterparties, even relatively small mispricing rates can translate into very large absolute value gaps.
This report therefore examines trade-related IFF risks in Developing Asia through the lens of trade value gaps derived from partner-reported discrepancies in official trade data. The analysis draws on GFI’s longstanding value gap approach, which uses United Nations trade statistics to estimate the order of magnitude of trade misinvoicing risks across large samples of countries and years. In the Developing Asia results used for this report, estimated trade value gaps are substantial and appear to have increased over the 2013 to 2022 period, reaching approximately US$1.69 trillion in 2022. The same results underscore that these gaps are not marginal relative to the size of trade: average value gaps for many countries are on the order of one-fifth of total trade, and a concentrated set of high-volume trading economies contributes a large share of the region’s cumulative discrepancies. Consistent with international guidance, the findings should be interpreted as an empirically grounded indicator of exposure to misinvoicing and associated financial crime risks, not as a direct measure of proven illicit proceeds.