February 1, 2015
Clark Gascoigne, +1 202 293 0740 ext. 222
Game-Changing Recommendations Urge Institutionalization of Efforts to Combat Illicit Flows, Promote Financial Transparency
Mbeki-Led Group Also Calls for Public Registries of Beneficial Ownership, Public Country-by-Country Reporting for Multinationals
WASHINGTON, DC / ADDIS ABABA, Ethiopia – Global Financial Integrity (GFI) welcomed a new report from the African Union (AU) and United Nations Economic Commission for Africa’s (UNECA) High Level Panel (HLP) on Illicit Financial Flows from Africa as a game-changer in the movement to curtail illicit financial flows and promote financial transparency. Chaired by former South African President Thabo Mbeki, the HLP’s final report recommends putting efforts to curtail trade-related illicit flows—constituting the vast majority of measurable illicit financial flows (IFFs)—foremost in African and global efforts to curb the ongoing illegal outflow of African wealth.
The HLP report, which was published in Addis Ababa today alongside the 24th African Union Summit, calls for “a more rigorous effort in support of a unified global architecture on the issue of IFFs. The starting point of this effort should be a clear United Nations Declaration on the issue of IFFs.” The report, which cites GFI research, goes on to state the importance of “ensuring that efforts to combat IFFs are included in the Post-2015 Development Agenda. Similarly, Africa needs to initiate steps for the United Nations to adopt a unified policy instrument on IFFs in order to place the matter squarely on the agenda of the world organization.”
“This is a turning point in the movement to curtail illicit financial flows and promote financial transparency, both within Africa and globally,” commented GFI President Raymond Baker, who is a member of the High Level Panel led by President Mbeki. “The recommendations in this report call for the institutionalization of efforts to address illicit financial flows at international bodies like the United Nations, in advanced economies such as Europe and the United States, and across the African continent. This is truly an historic moment in the fight to curb the most pernicious economic problem plaguing Africa.”
Curbing Trade Misinvoicing the Top Priority
According to latest research from GFI, a Washington, DC-based research and advisory organization, Sub-Saharan Africa lost an annual average of $52.9 billion—roughly 5.5% of GDP—in illicit financial outflows from 2003-2012 (the most recent year for which data is available), taking an enormous toll on African economies. Trade misinvoicing, the deliberate over- and under-invoicing of trade transactions, accounted for 68.8% of all outflows from the continent over the decade. As GFI noted in a May 2014 study funded by the Danish Ministry of Foreign Affairs, trade misinvoicing is undermining billions of dollars of investment and domestic resource mobilization in at least a number of African countries.
As such, the High Level Panel’s primary recommendation reads, “Given that most measurable IFFs are trade based, actions set forth in the recommendations below for improving capacity and accountability to curtail trade-related IFFs should be given primacy.”
In Addis Ababa for the launch of the report, GFI President Raymond Baker noted, “The misinvoicing of ordinary trade transactions is the most widely documented method for transferring dirty money across international borders, and it accounts for the vast majority of measurable illicit financial flows from Africa. As such, African governments and the global community must prioritize efforts to curtail trade misinvoicing by, for example, equipping customs authorities with the latest, comparable global pricing data, so they can detect and interdict the misinvoiced transactions on the docks in real-time.”
“Post-2015 Development Agenda Should Reflect [HLP Report’s] Recommendations”
With the Millennium Development Goals (MDGs) expiring this year, the international community is preparing to adopt a new set of goals—the Post-2015 Development Agenda, or the Sustainable Development Goals (SDGs)—which will frame global development efforts over the next 15 years. Beyond merely calling for the SDGs to address illicit flows generally, the HLP’s final document states: “The Post-2015 Development Agenda should reflect the recommendations contained in this report.”
“The Mbeki Panel has hit the nail on the head,” said GFI Managing Director Tom Cardamone, who is leading GFI’s work on the Post-2015 Development Agenda. “The SDGs must address illicit financial flows, and trade is the most widely used channel for moving illicit money. That is why the final SDGs should include a clear, concise, and measurable target to curb illicit financial flows from trade misinvoicing by 50% by 2030.”
Public Registries and Country-by-Country Reporting
Beyond addressing the misinvoicing of trade transactions, the report includes a number of other important policy recommendations supported by GFI, including the introduction of public registries of corporate ownership information to curb the abuse of anonymous companies and requiring all multinational corporations to publicly report their financial information on a country-by-country basis.
Other key recommendations include:
- Calling for illicit financial flows to be “integrated as a specific component in the African Union Convention on Preventing and Combating Corruption”;
- Recommending that “the Bank for International Settlements publish the data it holds on international banking assets by country of origin and destination in a matrix format, along the lines of the data published by the IMF for bilateral trade; foreign direct investment and portfolio investment, so that it can inform the analysis of IFFs from Africa”;
- Urging that “the global community in all of its institutions, including parliaments, take all necessary steps to eliminate secrecy jurisdictions, introduce transparency in financial transfers and crack down on money laundering. The AU, G20, IMF and OECD should provide required leadership in these efforts”; and
- Recommending that civil society organizations (e.g. media, non-governmental organizations, academia, and think tanks) “be given the operating space and legal freedoms required for advocacy, activism and research in this area.”
GFI spokespersons are available to comment on the report. To schedule an interview with Mr. Baker in Addis Ababa or with Mr. Cardamone or other GFI experts in Washington, contact Clark Gascoigne at +1 202 293 0740 ext. 222 (office) / +1 202 815 4029 (mobile) / email@example.com.
Notes to Editors:
- Click here to read an HTML version of this press release on our website.
- To learn more about the AU/UNECA High Level Panel on Illicit Financial Flows from Africa, visit uneca.org/iff.
- Click here, to download the final PDF of the High Level Panel Report.
- Click here to read GFI’s latest annual global report on illicit financial flows, “Illicit Financial Flows from Developing Countries: 2003-2012,” published in December 2014.
- Click here to read GFI’s May 2014 report, “Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011.”
- Click here to read GFI’s May 2013 joint report with the African Development Bank, titled “Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009,” which found that Africa was a net creditor to the rest of the world after recorded transactions were adjusted for illicit financial flows.
- To learn more about the impact of illicit financial flows on Africa, see “Illicit Financial Flows a Drain on Development in Sub-Saharan Africa,” by GFI Junior Economist Joseph Spanjers, published January 20, 2015.
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Global Financial Integrity (GFI) is a Washington, DC-based research and advisory organization, which promotes transparency in the international financial system as a means to global development.