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Illicit remittances as a component of illicit financial flows: a new estimation method and application in Kyrgyzstan

Vol. 1 No. 1 (2026): Anti-Corruption Studies and Research

Published 2026-06-30

Authors
  • Anastasia Maga,
  • Chingiz Bekenov
Anastasia Maga
Stockholm Environment Institute
DOI link:
https://doi.org/10.71559/ACSAR.1.1.2026.33

Abstract

Illicit financial flows (IFFs) undermine development by diverting resources away from productive investment and public revenue systems. While most IFF estimation methods focus on trade misinvoicing and corporate tax evasion, the role of individuals, particularly through remittances, remains underexplored. This paper introduces the first applied estimation model for assessing the illicit component of personal remittance flows in Central Asia, using the Kyrgyz Republic as a case study. In migration-dependent economies, large remittance volumes may partially originate from informal or undeclared labor, which is often untaxed and transferred through informal channels. The proposed method compares migrant income and consumption data with reported remittance volumes, adjusting for the use of informal money transfer systems (IMTS).

Applied to Kyrgyzstan, where over 95% of remittances originate from the Russian Federation, the model covers the period of 2014 - 2023. Results show that approximately USD 11.8 billion of total remittance inflows during this period may have been illicit in origin. These flows represent a persistent, large-scale IFF pattern, with inward flows for the source economy and outward flows for the host. The findings challenge the conventional view of remittances as purely beneficial, showing that what strengthens the source economy can undermine the sustainable development of the host economy, mainly when driven by informal labor and unregulated transfers, highlighting the need for coordinated policy measures to mitigate these risks. This method expands the existing IFF estimation toolkit by introducing a replicable framework that captures flows from individuals, not just firms or trade. It holds significant relevance for countries seeking to improve resource mobilization, tax transparency, and compliance with SDG target 16.4.1.

Keywords

  • Illicit financial flows (IFFs); remittances; labour migration; money transfers; informal money transfers; hawala.

How to Cite

Maga, A., & Bekenov, C. (2026). Illicit remittances as a component of illicit financial flows: a new estimation method and application in Kyrgyzstan. Anti-Corruption Studies and Research, 1(1), 140-152. https://doi.org/10.71559/ACSAR.1.1.2026.33

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Copyright (c) 2026 Anastasia Maga, Chingiz Bekenov

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