“We shall not rest until illicit financial flows are reduced!" H.E. Quartey Thomas Kwesi, the Deputy Chairperson of the African Union Commission pledged in New York at a high level forum. The theme of the forum was “Promotion of International Cooperation to Combat Illicit Financial Flows and Strengthen Good Practices on Assets Recovery and Return to Foster Sustainable Development,” at which the African Union Development Agency-NEPAD and African Peer Review Mechanism urged world leaders to curb illicit financial flows at the 74th United Nations General Assembly.
The negative impact of illicit financial flows on the ability of countries to achieve their national developmental priorities has been the subject of international discussion in recent times. It is said that countries lose substantial resources through different sources of illicit financial flows such as corruption, crime and illicit commercial activities.
The report of the AU/ECA High Level Panel on Illicit Financial Flows from Africa, which was chaired by the former South African President, Thabo Mbeki, found that illicit commercial activities account for 65% of IFFs from Africa while criminal activities and corruption account for 30% and 5%, respectively. These are facilitated in part by the existence of tax havens and secrecy jurisdictions that facilitate the existence and operation of disguised corporations, anonymous trust accounts and fake charitable foundations.
The report of the Mbeki Panel indicates that illicit activities that are intended to hide wealth, evade/avoid tax and customs duties include: avoiding tax (base erosion and profit sharing); abusive transfer pricing; trade mispricing; mis-invoicing of services and intangibles; unequal contracts, and; tax inversion.
Given this backdrop, the high-level event in New York brought out the need for strengthened international cooperation to redress the situation. Princess Gloria Akobundu, National Coordinator and Chief Executive Officer of AUDA-NEPAD Nigeriaemphasised that, “The global contribution of strategies will assist to eradicate illicit financial flows, and to enhance attainment of the Sustainable Development Goals, ensuring the return of stolen assets.”
Speaking specifically on the African context, the President of Nigeria, H.E Muhammadu Buhari called for unity among African countries to demand unconditional repatriation of assets stolen from the continent, stating that his country has lost 157.5 billion dollars to illicit financial flows in nine years.
President Buhari commended the role played by the African Union Development Agency-NEPAD in supporting efforts to combat illicit financial flows. “The New Partnership for African Development (NEPAD) must be supported to play a critical role in securing the cooperation of African countries and their international counterparts,” he said.
By some estimates, illicit flows from Africa alone are as much as US$50 billion per annum, which is approximately double the Official Development Assistance the continent receives from development partners.
H.E President Sahle-Work Zewde of Ethiopia pointed out that innovative solutions are needed to tackle illicit financial flows in the spirit of partnership and shared responsibility. The President of Ethiopia added that above all, most countries are in need good governance.
The President of Zambia, H.E Edgar Lungu highlighted the need for harmonisation of legal and institutional frameworks across the continent in order to improve coordination among different jurisdictions, in order to effectively combat illicit financial flows and recover assets.
The socio-economic cost of corruption and illicit financial flows are massive and continues to stunt the development of all affected countries. Besides draining foreign exchange reserves, reducing domestic resource mobilisation, preventing the flow of foreign direct investment, exacerbating insecurity and worsening poverty and economic inequality, IFFs also undermine the rule of law, stifle trade and worsen macro-economic conditions in the affected countries.
Illicit financial flows also negatively impact lives as they reduce financial resources available for investment in health, education, housing, infrastructure and other critical sectors that would improve the well-being of peoples and societies. They also encourage illegal activities around the world since offshore havens provide storage and access to ill-gotten wealth at short notice. Such flows contribute to eroding trust in democratic institutions, and hampers free enterprise and fair competition.
“Let us not forget that illicit financial flows started with colonialism, which contributes to the current situation which sees about 75% of illicit financial flows coming from Africa’s extractive industries,” Dr Ibrahim Mayaki, AUDA-NEPAD’s Chief Executive Officer reminded delegates. “We need to invest more in human and institutional capacity to perform at optimum levels in order to stem illicit financial flows and foster sustainable development for the Africa we want,” the CEO said.
The high-level forum on the “Promotion of International Cooperation to Combat Illicit Financial Flows and Strengthen Good Practices on Assets Recovery and Return to Foster Sustainable Development,” was hosted by Nigeria and co-hosted by the governments of Norway, Ethiopia, Zambia and South Africa. It was organised by AUDA-NEPAD and the African Peer Review Mechanism, in collaboration with the Economic and Financial Crime Commission of Nigeria.