Africa: Over $1 trillion lost through Illicit Financial Flows
Over $1 trillion has been lost through Illicit Financial Flows (IFFs) from the African Continent in the last 50 years.
Currently, the continent is estimated to be losing more than $50 billion annually in IFFs.
Accounting for the loss through IFFs are commercial transactions (65%), organized criminal activities (30%) and corruption (5%).
A study conducted on the continent on the loss of funds through IFFs over a 39 year period revealed that approximately $854 billion has been moved out of Africa.
“Mineral and fuel producing African countries are losing and estimated $50 billion per annum through IFFs, other estimates show that approximately $854 billion has been moved out of Africa over a 39 year period, making Africa a net creditor to the rest of the world,” noted the study.
Another study on IFFs reveals that the continent within the period from 2003 to 2012 lost some $528.9 billion.
According to the study, the developing world has lost in excess of $6.6 trillion in IFFs outflows between 2003 and 2012 alone with Sub-Saharan Africa losing some $528.9 billion.
Of the total funds lost, West Africa accounted for 38% of all IFFs from the African Continent.
North Africa, Central Africa, Eastern Africa and Southern Africa contributed to 28%, 10%, 11% and 13% respectively to IFFs from the continent.
IFFs refer to money that is illegally earned, transferred or utilised.
Touching on the subject, Dr Ali-Nakyea, a Tax Consultant and Senior Lecturer at the University of Ghana Law School, noted that some challenges in dealing with IFFs include poor resource governance models, weak tax administrations coupled with multinational tax avoidance schemes and tax havens beyond the influence of the government.
On the way forward in dealing with IFFs, he noted that government should strengthen the capacity of its financial institutions, particularly revenue authorities and the ministries responsible for negotiating mining and petroleum contacts to monitor transfer pricing, thin capitalisation among others.
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Also, government should expeditiously develop a road map and action points for implementation of the key recommendations of the High Level Panel on IFFs from Africa.
Meanwhile, Ghana is said to have lost a cumulative amount of $14.39 billion over a ten year (2002 to 2011) period through trade mis-invoicing in the extractive Industry.
This is per a report by the African Centre for Energy Policy (ACEP) on illicit financial flows (IFFs) from the extractive sector.
The report further indicates that, if the time period is taken from 1960 to 2012, then IFFs through trade mis-invoicing amounts to $40 billion.
Trade mis-invoicing in the extractive sector, the report further states, occurs in the export of gold to other countries.
“About $6 billion worth of gold exports from Ghana to India, Dubai and Switzerland between 2013 and 2016 has not been reported and accounted for,” the report revealed.
Trade mis-invoicing which falls under illicit financial flows (IFFs) is the deliberate over-invoicing or under-invoicing of exports for the purpose of avoiding paying tax to the country.
