Commodity trading and illicit capital flows

CGDev: Commodities such as copper, gold, and oil are sold to traders in Switzerland at prices below the world market. The traders then re-sell these commodities at a steep mark-up. In most cases the goods never pass through Switzerland, nor are they processed in any way that would justify the mark-up. The traders and whomever they are in business with are thus able to reap massive profits, skimming off capital that would otherwise have gone to the original exporter. In our paper we use four methods that involve various means of comparing initial Swiss purchase price, the re-export price, and prevailing global prices. Our most conservative estimate is that developing countries lose at least $8 billion a year in illicit flows to Switzerland – more than twice the Swiss aid budget.