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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
 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
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
 It is generally agreed that there are three causes of IFFs in Africa.
Commercial activities, which arise primarily from business-related
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
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.
African governments - law enforcement and regulatory agencies
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.
Civil Society Organizations (CSOs)
IV. Criminal Networks
 Global Actors:
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:
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;
lack of adequate regulatory framework;
lack of adequate funding and reliance on unpredictable foreign
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
 The automatic exchange of information (AEOI) for instance, is
increasingly favoured by developed countries including the
 At the global level, some of the key items relate to transparency,
which encompasses issues like;
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
 African countries depend on mainly on their extractive
 The necessity of curtailing illicit financial flows cannot be
 High and increasing illicit financial flows from Africa impact on
development and a global consensus in tackling the problem is
 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

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