The Africa Growth Initiative at the Brookings Institution has published a policy brief,  Illicit financial flows in Africa: Drivers, destinations, and policy options, that examines trends in illicit financial flows (IFFs) from Africa between 1980 and 2018.

The brief by the Washington-based non-profit public policy organisation assesses the drivers and destinations of IFFs and examines policy options to reduce them.

IFF schemes examined

The report examines several IFF schemes, including trade mis-invoicing, which relies on the purposeful false reporting of the cost and quantity of commodities.

The brief cites figures from another Washington-based non-profit, Global Financial Integrity, which estimates IFFs out of Africa totalled approximately US$1.3 trillion over the 30-year period 1980-2009.

2012 peak

The brief says that over the last four decades a generally increasing amount of funds have left the African continent, although the share of IFFs as a proportion of GDP and trade has not seen the same dramatic increase.

Total IFFs peaked in 2012, but IFFs as a percentage of GDP have remained relatively stagnant since 2004, following two decades of gradual increase. Meanwhile, IFFs relative to trade have fluctuated over time, but have generally declined.

One of the most significant of the report’s suggestions is that the sharp upturn in IFFs in the 2000s is a result of Africa’s greater involvement in global trade as further opportunities for fraud began to emerge.

Disproportionate flows

The report examines other trends in IFFs coming from Africa, noting that several nations and sectors tend to contribute disproportionately to IFFs.

In particular, the oil extraction and mining industries are particularly vulnerable to financial flow discrepancies, and four of the continent’s prominent economies – South Africa, Democratic Republic of Congo, Ethiopia, and Nigeria – are responsible for more than half the IFFs on the continent.

Smaller countries, like Sierra Leone and São Tomé and Príncipe, demonstrate the highest reported levels of IFFs relative to trade.

The Brookings Institution policy brief, Illicit financial flows in Africa: Drivers, destinations, and policy options, can be found here.

Categories: Trade Based Financial crimes News