By Anthony Isibor
LIMITED understanding of Illicit Financial Flows, IFFs and related risks, inadequacies of legal and regulatory frameworks, limited human, financial and technical resources, challenges of independence and autonomy of critical institutions, weak domestic coordination and international cooperation have been listed as some of the reasons why African countries find it difficult to tackle the challenges of IFFs.
Edwin W. Harris Jr. Director-General of the ECOWAS Inter-Governmental Action Group Against Money Laundering In West Africa, GIABA, disclosed this at the Realnews 11th Anniversary Lecture on Tuesday in Lagos.
The DG, who was speaking as the guest lecturer on the topic “The Threats of Illicit Financial Flow to the African Economy”, also listed weak regulatory/supervisory regime, poor governance, lack of a comprehensive sanctions regime and non-application of sanctions or sanctions applied are not effective, dissuasive, and proportionate, complexity in tracking the money, and the lack of capacity to monitor the large multinational firms operating in the extractive sector in many African countries, as well as the lack of political will contribute to inhibiting the effective prevention of IFFs in Africa.
“In many cases, corrupt officials tend to protect their own interests by remaining passive to the mechanisms that are essential to combat IFFs and to promote asset recovery. In cases where the necessary initiatives have been adapted, there is often a lack of implementation of laws and policies owing to the lack of will.
“IFFs in Africa are also sustained by the existence of a vulnerable financial system that allows huge financial outflows. The features that make Africa’s financial system vulnerable to IFFs include a cash-based informal financial system; weak banking, regulatory and supervisory frameworks; and low levels of compliance in AML/CFT preventive measures.
Harris explained that although many countries in Africa have several initiated programmes and policies, including efforts at global, regional and national levels to curb this growing trend, it is worrisome that IFFs remain a major threat to the African economy.
He noted that the efforts to curb IFFs are a systemic problem requiring a systemic solution and called on member states to leverage on the support provided by GIABA and undertake necessary reforms to enhance their effectiveness in addressing money laundering, terrorist financing and IFFs.
“African countries can’t afford to relax as IFFs threaten sustainable development. Africa’s efforts to ensure the reduction of IFFs must be pro-active, firm and unwavering while activities that give rise to IFFs must be vigorously fought without compromise. We must act quickly and act now. The key task is to take bold steps, cooperate and coordinate efforts, and unit to dismantle the system extracting wealth from Africa. This requires collective actions by all critical stakeholders, including national authorities, the private sector and civil society organisations to press for change in their countries and the continent at large.
GIABA’s Work in addressing IFF
GIABA’s response to the challenge of IFFs in the region is within the context of its core mandates as an FATF style regional body and a specialized institution of ECOWAS. Some of the specific examples of our work with direct impact on IFFs include:
a) Capacity enhancement – We are working with member States to help them build capacity in critical areas for reducing money laundering, terrorist financing as well as IFFs. This support is targeted at relevant competent authorities such as financial intelligence units; supervisory, law enforcement and prosecutorial authorities and the private sector. Other related programmes include Inter-University debates, open house targeted at youth and the journalist programme. Similarly, GIABA deployed AML/CFT analytical softwares to 13 ECOWAS member States and also provided critical infrastructures such as computers and analytical tools to strengthen the operational efficiencies of key institutions.
b) Promotion of risk understanding – We are supporting member States with technical and financial assistance to identify and respond to ML/TF risks through the conduct of National Risk Assessment, NRA. Broadly, the NRA focuses on most of the offenses that generate illegal proceeds, including corruption, tax evasion, organized crime, and environmental crime and helps member States to understand the extent of their exposure to many of the activities that give rise to IFFs. Similarly, GIABA has published several typologies and research reports, including the report on Illicit Financial Flows – The Economy of Illicit Trade in West Africa, which provide better understanding of methods, trends and risk of IFFs.
c) Strengthening of domestic and regional cooperation – GIABA specific initiatives in this regard include the establishment of AML/CFT Inter-Ministerial Committee/National Coordination Committee, GIABA public-Private sector consultative Forum, Compliance Officers Forum of GIABA member States, and the Forum of Financial Intelligence of GIABA member States. These were all aimed at strengthening domestic coordination and regional cooperation in AML/CFT efforts and to improve public-private partnership in AML/CFT implementation.
d) Support for legal and regulatory reforms – We support, on need basis, the review of AML/CFT legal and regulatory framework of member States to ensure their consistency with international requirements so they could adequately address ML/TF as well as IFFs.
e) Mutual evaluation/assessment and compliance monitoring – In line with our mandate as an FSRB, we assess compliance of member States with AML/CFT international standards. Under the current round of evaluation, 16 member States have been assessed, with 14 evaluation reports published and two at various stages of completion while the assessment for the last country, STP, will be conducted in January 2024. The assessments highlight areas of progress, strategic deficiencies in the AML/CFT regime and priority/recommended actions that countries need to implement to further strengthen their regime. Overall, while significant progress has been made in terms of technical compliance across member States, fundamental to major improvements are required in terms of effectiveness.
-November 08, 2023 @ 17:43 GMT |