UN report calls for definition of corruption to include misinvoicing

The UN Economic Commission for Africa has published its fourth edition of the African Governance Report, which has a new emphasis on trade-based financial crime.

The report, entitled Measuring corruption in Africa: The international dimension matters, challenges the traditionally narrow notion of corruption as the “abuse of public office for private gain.”

Multinationals criticised

The traditional definition of corruption places too much emphasis on public office and neglects corrupt tendencies prevalent in the private sector according to the report.

It is particularly critical of multinational corporations that “manipulate pricing mechanisms to gain monopoly profits by mispricing and transfer pricing.”

The report concludes that while transfer pricing may be legal in principle, it is nonetheless illicit from a moral perspective while the mispricing of imports and exports leads to heavy losses in foreign exchange.

IFFs underestimated

The report also contemplates the difficulties estimating illicit financial flows (IFFs).

It points out that current estimates of IFFs mainly examine “discrepancies in recorded capital flows or discrepancies in recorded trade flows.” Such methods do not estimate the total amount of IFFs, but only the part that results in under- or over-reporting of either capital or trade flows.

Secretive flows

After some discussion, the report concludes that however IFFs are measured, Africa is estimated to be losing more than US$50 billion annually in illicit financial flows.

But according to the report, even this estimate may well fall short of reality because accurate data do not exist for all African countries and may exclude some IFFs that, “by nature are secret and cannot be properly estimated.”

The report Measuring corruption in Africa: The international dimension matters can be found here.

Categories: Trade Based Financial crimes News

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