Washington, Feb 14 (IANS/RIA Novosti): More than $750 billion in illicit funds have streamed in and out of Russia since 1994, fuelling an "underground" economy that accounts for nearly half of the country's gross domestic product, says a report by a US group.

"Russia has a severe problem with illegal flows of money," Raymond Baker, director of the Global Financial Integrity (GFI), which produced the report, said in a statement.

"Hundreds of billions of dollars have been lost that could have been used to invest in Russian healthcare, education, and infrastructure."

The Washington-based advocacy group tracks illegal financial flows throughout the world.

The report titled "Russia: Illicit Financial Flows and the Role of the Underground Economy", measured $764.3 billion in total illegal funds moving in and out of Russia between 1994 and 2011, with inflows estimated at $552.9 billion and outflows at $211.5 billion.

The study estimated total capital flight -- which includes both illegal and legal outflows -- at $782.5 billion during the same time period, a figure that the report's chief author, economist Dev Kar, described as "extremely conservative".

The estimate does not account for financial shenanigans like invoice mispricing and "dealings conducted in bulk cash", Kar said.

"This means that much of the proceeds of drug trafficking, human smuggling, and other criminal activities, which are often settled in cash, are not included in these estimates," he said.

GFI said the findings raise "serious questions about the economic and political stability" of Russia as it chairs the G-20 group of leading global economies.

"So long as the Russian authorities fail to shrink the underground economy, Russia will continue to haemorrhage scare capital, both illicit and licit, to the detriment of economic and political stability and undermining the nation-state," Kar and co-author Sarah Freitas said in the 68-page report.

The authors singled out Cyprus as a favourite destination for illicit Russian money, citing International Monetary Fund (IMF) figures.

The island nation shipped $128.8 billion in foreign direct investment (FDI) to Russia between 2009 and 2011, more than five times the size of Cyprus' GDP.

"The recorded FDI positions merely reflect the round-tripping of prior illicit deposits from Russia into Cyprus," they wrote.

Kar called Cyprus "a laundry machine for dirty Russian money".

The authors proposed several actions the Russian government could take to stem the tide of illicit money, including boosting customs enforcement, tightening scrutiny of transactions with "tax haven jurisdictions like Cyprus and Switzerland", and requiring Russian banks to know the actual owner of accounts opened in their institutions.

"Often banks do not know who owns or controls the accounts in their institution-they might have the name of an anonymous shell company, but they don't know the person controlling that shell company," the authors wrote.