Misreporting of invoice values is occurring “at massive scale” across Asian supply chains, researchers have said, with as much as a quarter of China’s trade showing signs of potentially fraudulent misinvoicing. 

The findings were outlined in a paper published last week by Global Financial Integrity (GFI), a US-based think tank that analyses illicit financial flows, which studied the information reported by companies on each side of international transactions. 

It found that in 2022, the difference between what companies reported totalled a record US$1.7tn across developing Asia, up from US$1.5tn the year before and around double the figure a decade earlier. 

It said the findings suggest a “huge hidden leakage” of funds, which could indicate a combination of trade-based money laundering, import tax evasion and capital flight. 

“The scale indicates that illicit financial leakages through trade are a first-order economic challenge for Asia,” GFI said. “The opportunity cost is enormous: funds on the order of trillions that could have been used for development have instead been smuggled out, laundered or lost to governments.” 

Over the past decade, China’s invoice value gap was estimated to stand at US$7tn, by far the largest contributor to misinvoicing in the region. 

“This staggering number reflects China’s status as the world’s largest trading nation and indicates that misinvoicing is occurring at massive scale across its supply chains,” the paper said. 

The think tank found the disparity is similar in China’s trade with both developing and advanced economies. It said efforts by underground banking networks to evade currency controls through fake export or import invoices is a primary driver.