COMBATTING ILLICIT FINANCIAL
FLOWS IN AFRICA THROUGH
GLOBAL EFFORTS
IFFs as a development challenge for Africa
 In order to significantly improve its domestic resource
mobilization efforts, Africa has to urgently address Illicit
Financial Flows (IFFs).
 IFFs are a huge drain on Africa’s resources, including tax
revenues, and hinder the level of savings required to
address key development issues.
 These illicit flows derive from:
 proceeds of tax evasion and laundered commercial transactions;
 proceeds of criminal activities; and
 proceeds of theft of public resources, bribery and other forms of
corruption
 Currently, Africa is estimated to be losing in excess over
$50bn to $60bn in IFFs annually;
 These estimates may well be short of reality because;
 accurate data does not exist for all African countries,
 estimates often exclude secretive forms of IFFs which cannot
be properly estimated e.g. proceeds of bribery and
trafficking in drugs, people, and firearms.
 These outflows are of serious concern given inadequate
growth, poverty, resource needs and the changing global
landscape of official development assistance;
 Although Africa has been growing at an average of about
5% per annum, this rate is considered encouraging but
inadequate;
Impact of IFFs
 Weakening Governance - weakening public institutions and
ultimately reducing the capacity of the state to provide public
resources and welfare for the people.
 Development Consequences – high opportunity cost of lost
revenues given the scale of the outflows which have an impact
on growth and ultimately job creation.
 Discouraging Transformation and Transparency - by
discouraging value creation, IFFs impact negatively on African
aspirations for structural transformation.
 Undermining International Development Cooperation - global
efforts to promote partnerships for aid effectiveness and
development effectiveness are undercut by illicit financial flows.
Understanding IFFs
 Illicit financial flows can be defined as “money illegally earned,
transferred or used” to enable it come to good grips with its
assignment.
 It is generally agreed that there are three causes of IFFs in Africa.
I.
Commercial activities, which arise primarily from business-related
activities.
II.
Criminal activities which essentially keep the transactions out of the
purview of law enforcement agencies or revenue authorities.
III. Corruption: Although seen to be synonymous with public sector
corruption such as bribery and abuse of office. The key role played
by private sector actors like multinational firms is relevant.

For example through payment of bribes to public officials and by
exerting undue influence on public processes via personal
connections.
The Mosaic of Actors
 The issue of illicit financial flows is highly complex with many
technicalities relating to origins, destinations, scale, modalities, drivers
and actors.

Some of these actors are implicated as perpetrators while others are
actively engaged in combating IFFs.
I.
African governments - law enforcement and regulatory agencies
II.
The private sector - multinational corporations, international banks,
and international legal and accounting firms are of particular interest
because a lot them engage in illicit financial flows.
III.
Civil Society Organizations (CSOs)
IV. Criminal Networks
 Global Actors:
I.
Non-African governments - Apart from helping to set a
global norm against illicit financial flows, non-African
governments have a key role to play in assisting African
countries to acquire the capacities to fight the scourge.
II. International organizations - Different entities such as the
OECD, World Customs Organization, and Financial Action
Task Force are working on different aspects of illicit
financial flows and from different perspectives.
Drivers & Enablers of IFFs
 Illicit financial flows are driven by a number of ‘push’ and
‘pull’ factors.

Push Factors:
I. Poor governance
II. Weak regulatory structures
III. Tax incentives
 Pull Factors:
I.
Financial secrecy jurisdictions and/or tax havens
On-going Efforts to Curb IFFs
National and Regional Efforts:
 One such effort to curb the growth of illicit financial flows is the
‘whole of government approach’ promoted by the Oslo
Dialogue of the OECD which covers a wide range of issues and
related institutions pertaining to IFFs including tax, customs,
law enforcement, anti-corruption, financial regulation and
prosecuting authorities.
Challenges at the national and regional levels include the;
I.
II.
lack of adequate regulatory framework;
lack of adequate funding and reliance on unpredictable foreign
assistance;
III. lack of technical and human capacity to deal with crime
perpetuated by sophisticated individuals;
Global Efforts:
 One key principle that is emerging with regard to tackling IFFs
at the global level is the exchange of tax information between
countries.
 The automatic exchange of information (AEOI) for instance, is
increasingly favoured by developed countries including the
OECD.
 At the global level, some of the key items relate to transparency,
which encompasses issues like;
I.
availability of information relating to compliance with the arm’s
length principle;
II. country-by-country reporting;
III. asset recovery;
Emerging Issues
 Illicit Financial Flows from Africa are increasing.
 The issue of Illicit financial flows is ultimately a political one.
 Transparency is important for tackling illicit financial flows.
 Commercial routes of illicit financial flows need closer
monitoring.
 African countries depend on mainly on their extractive
industries.
Conclusion
 The necessity of curtailing illicit financial flows cannot be
overstressed.
 High and increasing illicit financial flows from Africa impact on
development and a global consensus in tackling the problem is
required.
 Tackling the issue of illicit financial flows requires concerted
efforts by countries of origin and destination countries alike.
 the legal and financial approach must be transparent
 the international asset recovery regime integrated, in an effort to
curb these outflows and unlock the much-needed resources.
Thank You