EDWIN Harris, director general of the ECOWAS Inter-Governmental Action Group against Money Laundering in West Africa, GIABA, has said that Illicit Financial Flows, IFFs, pose a significant threat to the developmental agendas of African countries.
Delivering the Realnews 11th Annual Lecture in Lagos on Tuesday, Harris stated that this lecture would boost the sense of urgency that “we have about the threats of IFFs and raise our collective response against such flows”.
Speaking on the theme “The Threats of Illicit Funds Flow to the African Countries Threats”, Harris stated that the theme “is apt and timely, because our continent is one where IFFs pose a significant threat to the developmental agendas of our countries. I strongly believe that this event will boost the sense of urgency that we have about the threats of IFFs and raise our collective response against such flows.”
Referring to the High-Level Panel Report on Illicit Financial Flows from Africa, he stated that IFFs from Africa typically originate from three sources: corruption, including money acquired through bribery and abuse of office by public sector and private sector officials and criminal Activities, ranging from trafficking in people and drugs, arms smuggling, fraud in the financial sector, such as unauthorized or unsecured loans, money laundering, stock market manipulation and outright forgery; and commercial Activities, arising from business-related activities, and having several purposes, including hiding wealth, evading or aggressively avoiding tax, and dodging customs duties and domestic levies
“Globally, IFFs are driven by a number of ‘push’ and ‘pull’ factors. The most obvious push factor driving IFFs is the desire to hide illicit wealth. Similarly, poor governance and structural deficiencies in the financial systems remain concerning and largely contribute to driving the outflow of illicit flows.
“Other push factors include weak regulatory structures, tax incentives, weak institutional capacities, and Double Taxation Agreements, DTAs. A major pull factor for IFFs from Africa is the existence of financial secrecy jurisdictions and/or tax havens (Mbeki Report).
According to him, IFFs are inherently difficult to measure due to several factors, including the illegality and opacity associated with some of these flows, their underlying activities, limited data, the absence of a uniform and consensual definition of IFFs and the lack of a universally accepted methodology to estimate or monitor IFFs.
“Consequently, the scale of IFFs out of African countries remains a matter of controversy with estimates varying greatly and are heavily debated. For instance, the United Nations Economic Commission for Africa, UNECA, High Level Panel, HLP, on IFFs stated that Africa is estimated to have lost $1 trillion or more over the past 50 years to IFFs and is estimated to be losing more than $50 billion annually in IFFs.
“This is corroborated by the Organisation for Economic Co-operation and Development, OECD, which estimated that Africa loses as much as $60 billion each year in IFFs,” he said.
According to him, despite the challenges in estimating the scale of IFFs in Africa and the critiques of the current estimates on IFFs, there is widespread agreement among critical stakeholders that their scale is huge, and growing and are almost equal to Official Development Assistance, ODA, and Foreign Direct Investments, FDI, flows to Africa combined.
On the threats of IFFs to African Economy, Harris noted that IFFs are a threat to sustainable development and one of the greatest contemporary challenges facing the international community and in particular, Africa shows that IFFs have severe economic, social and political consequences on Africa.
He observed that although the direct economic impacts of IFFs on Africa cannot be precisely quantified, IFFs constitute a major threat to Africa with significant devastating consequences as a vast volume of wealth is lost each year that could be used to fund sustainable economic development and provide public services.
“In particular, IFFs undermine domestic revenue collection and have adverse consequences on the ability of African countries to optimally benefit from the extractive sectors. Thus, IFFs exacerbate the challenges African governments face in mobilizing domestic resources to address the needs of citizens, to promote development, and to achieve the Sustainable Development Goals. Also, IFFs deprive the African countries of appreciable amounts of investment funds, which could otherwise spur economic growth.
“In addition to foregone investment, IFFs are presently curtailing Africa’s savings rate. Furthermore, IFFs are also inhibiting African economic development by stifling trade and macroeconomic stability,” he said, adding that on the social front, the negative social impact of IFFs on Africa manifest in several ways, including poverty and inequalities. As noted earlier, IFFs deplete government revenue.
-November 07, 2023 @ 16:05 GMT |