A look offshore : unpacking the routes of misinvoicing in international trade

We study whether misinvoicing in international trade is reflected in cross-border bank accounts as reported by offshore financial centres. We show that residents hold more offshore wealth when local misinvoicing practices thrive, especially for under-invoiced exports of natural resources. These results are driven by less-developed countries, autocracies, and resource-rich countries, which typically lack institutional capacity and/or political willingness to deter capital flight and misinvoicing practices. All our results are consistent with rent-seeking behaviour by local elites, and we provide corroborative evidence to support this claim.