Anything illicit is dishonest, forbidden, illegal, or not in accordance with the law. Illicit financial flow (IFF) therefore is illegal or forbidden transfer of assets, including cash out of a jurisdiction to another jurisdiction through covert or dubious means. The purpose of Illicit Financial Flows is to sabotage the development of the originating countries by denying them the benefit of such assets in forms of taxation, tenement or any other revenue accrue to the state.
African states are the major victims of Illicit Financial Flows in the world because of their weak regulatory institutions and absence of effective financial management regulations.
In commercial transaction, IFF is manifested in three stages, namely: illegal transaction, illegal transfer, and Illegal use. The perpetrators of IFF engage in various illegal activities including falsification of records, invoices, tax documents, tax evasion, and tax avoidance, which has direct implications for the economies of the victim counties, such as increase in the cost of operations and reduction in profit sharable to shareholders, resulting in prolonging the payback period of investment, scaring prospective investors, and Increasing the cost of borrowing.
The proceeds of IFF come from many sources among which are stolen funds by public officials or their surrogates, drug peddling, human trafficking and terrorist activities, who launder their proceeds to other jurisdictions in Africa, Europe, Middle east and Americas through building of mansions, plazas, and operating transport services. Terrorist groups use oil companies to move money from one location to another.
Recently, the Presidential Advisory Committee Against Corruption (PACAC) hosted a two day International conference in Abuja to fast track previous gains and mobilize international support for the fight against illicit financial flows and enhanced asset recovery to finance sustainable development in Africa.
The conference, held under the theme “International Conference on Combating Illicit Financial Flows and Enhancing Asset Recovery for Sustainable Development” brought together experts, professional and technocrats from Africa, Europe, Americas and Asia to brainstorm, share experiences, and exchange knowledge on this crucial issue retarding Africa’s development.
Panelists and participants at the conference were in agreement that the consequences of IFF on Africa’s developing are dire, and must be addressed holistically for the continent to make any appreciable progress in achieving the U.N. Sustainable Development Goals.
The experts noted that Africa loses $50bn annually to IFF, which are money meant for development but siphoned off and deposited in foreign banks and economies. They expressed concern that the trend is denying African states the needed fund to implement capital projects and provide other services like health care, security, education which improve the quality of life of their citizens.
One take away for me from the conference was the practical illustration of the link between Africa’s poverty and Illicit Financial Flows. Some of the panelists demonstrated with figures how the illegal movement of assets from Africa has slowed down the quality of life of Africans who have been denied quality health care services, good education, sanitation and hygiene, as well as adequate security. All of these have helped in reducing the life expectancy of Africans, as they fall prey to common treatable diseases.
The conference further highlighted the challenges of fighting illicit financial flows in Africa, which are largely institutional. They include lack of access to information, poor documentation, low inter-state cooperation, lack of skills, interagency rivalry, rising new payment systems/platforms, absence of feedback mechanism, lack of effective sanction regime, poor reporting system.
Other panelists offered some suggestions for overcoming the challenges, which include robust policy implementation, improved efficiency and transparency of reporting institutions, resistance to harmful tax practices, improved regional and inter-regional cooperation, collaboration with destination countries instead of combative confrontation, and advocacy and awareness.
Other measures are extending punishment to facilitators of IFF, committed leadership, imposition of sanctions on ECOWAS member states that did not comply with the Mbeki Report.
They also urged Africans to rise up and demand accountability from their leaders and intensify the whistle blowing policy through legislations and enforcement.
This last point hit my mind like a thunderbolt because I know that asking Africans to hold their leaders accountable is like passing the camel through the needle hole. It’s an impossible task for citizens hamstringed by poverty, ignorance and disease to demand accountability from their corrupt leaders who use financial inducement to suppress any semblance of resistance or confrontation.
What is the way forward for domesticating this beautiful agenda? I think we have to start from the basics. Citizens can only demand accountable leadership when they are informed, and for them to be informed they must have the tools to interrogate leaders, engage with them and elicit serious commitments.
What this means is we have to scale up civic education not only in our formal schools but at community levels, to explain the role of citizens in democracy, and how they can play this role without endangering their lives. This is where civil society and community based organizations, including faith-based, come into the equation.
Over the years, our civil society organizations have played the role of fighting for democracy. Now that democracy has been planted and is already germinating, many of the civil society groups are confused as to their role in the new power game. Some of them have become willing tools in the hands of the political players who employ their services to secure votes.
The faith-based groups have become an appendage of money-bag politicians who manipulate religion for political gains. Many churches and mosques are preaching preferred candidates and asking their congregations to strive and get their PVCs to vote a candidate of God.
Another take away from the conference is the confession from many public officials whose organizations are responsible for monitoring and reporting fund transfers and other suspicious financial transactions that some of their staff might be guilty of throwing ethics to the dogs. Others agree that Nigeria and many African countries have weak or no database to rely on for monitoring of some of the activities of the perpetrators of the IFF.
One major area of interest discussed by the conference is the issue of recovery and management of returned assets. Some panelists shared the best practice in their countries, while others advised that originating countries must get all their facts before approaching any destination country to return their stolen assets. What are these facts that need to be presented to the destination countries for them to respond favourably? These include the amount involved, the persons involved, the place where the transfer took place, date of the transfer, and how the transfer was conducted .
Without these facts, victim countries like Nigeria will continue to shout, present their cases in every arena, but recovery will be impossible. Some experts hinted on the recent recovery and return of $322 million Abacha loot by Swiss government as a good example of how facts play a key role in recoveries. But even then, they argued that the returned loot is far below what Nigeria should have received.
My understanding of the recovery and returned process is that any nation with a genuine case of IFF must mobilize international support and cooperation, in addition to whatever facts they have at hand because no country holding such sum will release it without getting a part of the pie by way of charges or whatever name called.
The major task before African countries therefore is to form a formidable coalition against IFF for intelligence sharing, build networks around the world through joining international professional associations of judges, accountants, auditors, information technology experts, data analysts, whistleblowers, and even journalists against IFF so that they make IFF a bad business, and collaborating with IFF receiving countries on the basis mutual respect and understanding to build trust.
The experts have identified four key areas that African nations need to make big improvement, namely institutional and legal frameworks, intelligence gathering and sharing, civil society engagement, and advocacy and awareness.
Participants observed that Nigeria, like many African countries, has no reliable database that can provide the details of who owns what in Nigeria which makes tracking difficult and tax evasion and avoidance easier. The Bank Verification Number seeks to fill this gap but much still need to be done, as many people influential Nigerians have more than one BVN. Others have hidden bank accounts that are not captured by the policy.
Without people being aware of IFF and its effects on their lives it will be difficult to get them involved. Therefore, government information machinery like the National Orientation Agency, Radio and Television services must step up campaigns to enlighten Nigerians on IFF, its manifestations, and how it reduces the quality of life of our people by denying them basic social services.
The civil society needs to take the front seat in combating IFF through sustainable engagement with relevant regulatory agencies that oversee financial transactions of individuals, corporate organizations, and multi-national companies to ensure that they carry out their functions without fear or favour. This calls for special training for journalists covering the financial and investment sectors as well as tax matters. The training should provide the reporters with the tools they need to engage with such professionals, and to conduct independent research on their activities.
The two-day conference was attended by delegates from the African Union, ECOWAS, UN Economic Commission for Africa, United Kingdom, Honduras, and about fifteen countries from Africa, which include Botswana, Zimbabwe, Cape Verde, Ethiopia, Guinea, Gambia, Mali, and Kenya. Tagged Abuja IFF/AR, the conference is the second in a row. The maiden edition took place in 2017 during which leaders of participating countries pledged to combat illicit financial flows, giving it the name Abuja Declaration 2017.
PACAC is Nigeria’s anti-corruption think-tank established by President Buhari administration in 2016 to provide an operational policy framework for the anti-corruption agencies and other government agencies in the governments’ renewed fight against corruption. The Committee has conducted several sensitization workshops for major stake holders, including judges, prosecutors, and law enforcement agents as well as produced manuals for anti-corruption prosecution, asset recovery, management and communication.
Ibrahim Dan-Halilu is a freelance journalist, communication consultant and political analyst based in Abuja.
