By Robert Mwanyumba, Africa Regional Coordinator, Transparency International
Illicit financial flows (IFFs) pose a significant challenge in Africa, with devastating consequences for the continent’s development. According to a 2020 report by UN Trade and Development, Africa loses an estimated $89 billion annually to IFFs, equivalent to 3.7 percent of the GDP. These illicit outflows, stemming from tax evasion, corruption, and trade mis-invoicing, not only drain financial resources but also hinder investments in critical sectors like education, healthcare, and infrastructure.
The impact of IFFs goes beyond mere numbers; it represents a theft of opportunities and resources, perpetuating inequality, poverty, and weakening the social contract between governments and citizens. Every dollar siphoned offshore translates to a child deprived of education, a community lacking healthcare services, or a nation burdened by debt.
Recent research conducted by Transparency International reveals that $3.7 billion in corruption-linked African assets are hidden in wealthy nations, underscoring the scale of the problem. This systemic siphoning of resources exacerbates inequality within and across borders, making Africa more vulnerable to external shocks and hindering its ability to address global challenges such as climate change.
While IFFs are a global issue, advanced economies play a significant role in enabling these illicit financial activities. Financial secrecy, poorly supervised banks, and unregulated intermediary professions facilitate cross-border corruption schemes, undermining the sustainable development of African nations. However, African governments are taking steps to address corruption and IFFs, with the ratification of anti-corruption conventions and the establishment of regional bodies to coordinate efforts in curbing illicit financial flows.
Despite these efforts, more needs to be done to tackle IFFs effectively. Stricter regulations on tax havens, mandatory disclosure of beneficial ownership, and penalties for financial institutions aiding illicit activities are crucial. Increased transparency, regulation of enablers, and strengthened asset recovery mechanisms are essential to combat IFFs and promote accountability in international financial systems.
As Africans, we face a critical juncture in our fight against IFFs. We must choose to confront this challenge head-on with bold action and unwavering determination to build a fairer and more prosperous continent. The battle against IFFs is not just an economic necessity but a moral imperative that demands our collective action and commitment to transparency and integrity.
Key Action Points:
1. Increase transparency
- Implement a regional standard on beneficial ownership transparency and establish beneficial ownership registers where lacking.
2. Regulate Enablers
- Enforce anti-money laundering rules for professionals, support bilateral relationships between authorities, and hold financial enablers accountable for their actions.
3. Strengthen asset recovery
- Enhance asset data, boost financial intelligence resources, improve cross-border cooperation, and prioritize the confiscation and return of stolen assets.
The fight against IFFs is a pivotal moment for Africa, requiring decisive and coordinated action at all levels. Let us stand together to combat corruption, promote transparency, and secure a brighter future for our continent.
