Illicit financial flows: why Africa needs to “track it, stop it and get it”

Abstract

In the light of the recent global economic and financial crises and the approaching deadline for achieving the Millennium Development Goals, a structural transformation agenda will require an adequate, predictable, sustainable and integrated financing mechanism geared towards financing development goals. The continent must embark on reforms to capture currently unexplored or poorly managed resources. This includes curtailing illicit financial flows and transforming those funds into a powerful tool for enhancing domestic resource mobilization, as a way of furthering the continent’s development. The panel has adopted a clear and specific definition of illicit financial flows. Such flows are defined as money that is illegally earned, transferred or utilized. This represents a major break from the dominant work on capital flight, which emphasizes macroeconomic instability, including the business environment, as the main driver of capital outflows and therefore places the burden of resolving the problem on developing countries rather than promoting shared responsibility. It also focuses attention on the structural and governance limitations that fuel such flows from Africa. The Panel’s focus on hidden resources and their potential impact on development places the issue of illicit financial flows firmly in the broader realm of international political economy and emphasizes the role of governance at both the origin and the destination. The report is based on rigorous research, country case studies and regional consultations within and outside Africa.