Institutional architecture to address illicit financial flows from Africa

Abstract

Africa is losing significant resources through illicit financial flows (IFFs), conservatively estimated by the 2015 report of the High-Level Panel on IFFs from Africa at $50 billion a year. The $50 billion loss, expressed in terms of the resources Africa needs to meet its SDGs. Illicit financial flows refer to activities considered as criminal offences but also to some behavior related to tax and commercial practices. The International Classification of Crime for Statistical Purposes defines four main types of activities that can generate IFFs: tax and commercial activities, corruption, theft-type activities and financing of crime and terrorism, and illegal markets. This report focusses on the first two. This Economic Governance Report focusses on what African countries need to put in place to stem IFFs leakages before they leave Africa’s shores. The report addresses the institutional architecture required to curb the illicit loss of financial resources from Africa through tax avoidance, tax evasion, trade mis-invoicing and illicit enrichment, including corruption. It takes a holistic approach to institutions, an approach that spans legal and regulatory frameworks, formal and informal practices, and organizational structures that act as enablers or curtailers at the national, regional and international levels in the IFFs value chain.