Capital Flight

The term capital flight generally refers to the movement of large amounts of capital out of a country. This phenomenon sometimes occurs as a result or in anticipation of an economic shock such as rapid currency devaluation or sovereign default. Investors may become fearful of perceived country-specific risks to their assets (such as political instability, sovereign debt burden, or nationalization of private industry), and consequently they move their securities or cash out of that country in search of higher returns on their investments elsewhere. When it is intended that the money disappear from financial records in the country of origin, or when the entity making the cross-border transfer of funds does not properly record the transaction on its books, capital flight is usually illegal. This ...