IFFs

IFFs

Illicit Financial Flows From Africa

Key messages from Africa

Over a period of 50 years prior to 2015, it is estimated that Africa has lost in excess of 1 Trillion USD to Illicit Financial Flows. This is roughly equivalent to the amount of the Official Development Assistance that the continent has received during that period.....
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The Consortium to stem IFFs from Africa

The Consortium to stem IFFs from Africa is a broad coalition of African institutions which works to address the scourge of Illicit Financial Flows from Africa. It does this by overseeing and engaging in the implementation of the recommendations of the High-Level Panel.
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The journey so far

History and Information on ongoing efforts to curb Illicit Financial Flows from Africa.
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High Level Panel Report

The report of the African Union/ECA High-Level Panel on Illicit Financial Flows from Africa (The HLP Report) chaired by H.E. Thabo Mbeki, former President of the Republic of South Africa, was adopted at the 24th Assembly of the African Union in 2015.
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Common African Position on Asset Recovery (CAPAR)

The CAPAR is essentially the bedrock for our continent’s legal instrument and technical framework for negotiating the return of Africa’s illicitly removed assets, artefacts and funds.
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Successfully achieving Domestic Resource Mobilization (DRM) in Africa is the basis for CoDA’s support to the African Union efforts to stem illicit financial outflows from the continent. In order to significantly improve its domestic resource mobilization through efforts including the recovery of illicit assets consigned in foreign jurisdictions, African leaders agree that the continent has to urgently address the critical challenge of Illicit Financial Flows (IFFs) from Africa. These illicit outflows derive from proceeds of tax evasion and laundered commercial transactions; proceeds of criminal activities; and proceeds of theft of public resources, bribery and other forms of corruption. IFFs are a huge drain on Africa’s resources, including tax revenues, and hinder the level of savings required to address key development issues.

The journey to reducing these outflows began when African Finance, Planning and Economic Development Ministers at their meeting which took place in Lilongwe, Malawi in 2011 deliberated on the negative impact of IFFs on African economies and initiated action to have the matter investigated further.  This was the genesis of the establishment of the High Level Panel (HLP) on Illicit Financial Flows from Africa. The HLP began working on the issue and firstly delivered a progress report to the Ministerial Conference in March 2014 in Abuja, Nigeria before presenting the final ‘Report of the HLP on IFFs from Africa’ at the 24th Ordinary Session of the Assembly of African Union Heads of State and Government in January 2015 in Addis Ababa, Ethiopia.

HLP key messages

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The Consortium to Stem IFFs from Africa

The Consortium to stem IFFs from Africa is a broad coalition of African institutions which works to address the scourge of Illicit Financial Flows from Africa. It does this by overseeing and engaging in the implementation of the Recommendations of the High Level Panel. Established in 2016 following the adoption of the HLP Report by African leaders, the Consortium is co-chaired by H.E. Thabo Mbeki, former President of the Republic of South Africa & Chair of the High Level Panel and H.E. Thomas Kwesi Quartey, Deputy Chairperson of the African Union Commission. It consists of up to seventeen institutions and is guided by the by-laws within its Terms of Reference

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The Consortium also has its technical arm which is the IFF Working Group (IWG). The IWG operates under the guidance of the Consortium as outlined within its Terms of Reference . To further the work of the Consortium which leads the implementation of the HLP Recommendations, its Secretariat (AUC & CoDA) was established within the Coalition for Dialogue on Africa (CoDA) which is situated at the headquarters of the African Union Commission.

High-Level Panel Report

The Consortium to stem IFFs from Africa is a broad coalition of African institutions which works to address the scourge of Illicit Financial Flows from Africa. It does this by overseeing and engaging in the implementation of the Recommendations of the High Level Panel. Established in 2016 following the adoption of the HLP Report by African leaders, the Consortium is co-chaired by H.E. Thabo Mbeki, former President of the Republic of South Africa & Chair of the High Level Panel and H.E. Thomas Kwesi Quartey, Deputy Chairperson of the African Union Commission. It consists of up to seventeen institutions and is guided by the by-laws within its Terms of Reference

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The report of the African Union/ECA High-Level Panel on Illicit Financial Flows from Africa (The HLP Report) chaired by H.E. Thabo Mbeki, former President of the Republic of South Africa, was adopted at the 24th Assembly of the African Union in 2015. The report detailed the various means by which IFFs take place in Africa through legal and illegal means. It outlined the practices that drive IFFs as well as the facilitating conditions including public sector corruption and global secrecy services that enable the practice to thrive. The report highlighted the dominant contribution of commercial transactions, especially those of Transnational Companies (TNCs) in IFFs from Africa, detailing such mechanisms as abusive transfer pricing, trade mispricing, mis-invoicing of services and intangibles and the use of unequal contracts among others for the purposes of tax evasion, aggressive tax avoidance and illegal export of foreign exchange. These are compounded by excessive tax concessions given to foreign companies.

The HLP Report further recommended that States take the following actions, among others: adopt a “whole of government approach” involving a coordinated approach of multiple institutions such as revenue authorities, financial and other regulatory bodies, anti-corruption agencies,  investigating and prosecuting authorities, law reform and law-making institutions among others; tackle money laundering; examine double tax treaties; tackle base erosion and profit shifting; establish transfer pricing units; build capacity and give teeth to the relevant institutional architecture for combatting IFFs; put in place the ABC of financial transparency i.e. Automatic Exchange of Tax Information (AETI); registration of the Beneficial Owners of companies (BOs), and  Country by Country Reporting (CBCR) of profits made by multinational companies; invest in research and analysis including organizing and making accessible relevant data; exchange information across nations and empower citizen groups to hold governments to account and contribute to task of combatting IFFs.In demonstration of their concern, African leaders endorsed the Report and passed a Special Declaration on IFFs from Africa (Assembly/AU/Decl.5. (XXIV))  The Special Declaration noted in particular that IFFs constitute a drain on the resources required for Africa’s development, particularly given the domestic resource requirements for actualizing AU Agenda 2063 and the Post 2015 Development Agenda.  The Special also called on African Governments to take steps to curtail these flows through, among others, institutionalizing prudent legal and regulatory regimes, including fiscal policies that disallow financial secrecy, fight corruption, strengthen African institutions, build African member states’ capacity for contract negotiation and tax administration and identify and return the resources lost through illicit financial flows in to finance Africa’s development agenda. Closely following the summit in July 2015, the issue of IFFs was prominent for the first time during discussions at the Third International Conference on Financing for Development (FfD3), also held in Addis Ababa, Ethiopia. This was evident in the outcome document of the conference – the Addis Ababa Action Agenda (AAAA) which underlined the importance of tackling multinational tax avoidance and was evidently instrumental in the inclusion of Target 16.4 to reduce IFFs in the Sustainable Development Goals (SDGs). The Declaration of the Second African Union STC on Finance, Monetary Affairs, Economic Planning and Integration held in Addis Ababa, Ethiopia on 16 & 17 April, 2018 further reiterated the commitment by the Ministers and Central Bank Governors to fully implement the recommendations of the High Level Panel on Illicit Financial Flows adopted by the AU Assembly. Additionally, the Declaration on the African Anti-Corruption Year (Assembly/AU /Decl.1 (XXXI))  from the 31st Ordinary Session of the Assembly of African Union Heads of State and Government (July, 2018) held in Nouakchott, Mauritania recalled the Special Declaration on IFFs and called for the efficient recovery and return of stolen assets to Africa with due respect for the sovereignty of States and their national interests. This led to the development of the Common African Position on Asset Recovery (CAPAR) as well as its unanimous adoption reflected in Assembly/AU/Dec.774 (XXXIII)  by the Heads of State and Government of the African Union Member States at their 33rd Ordinary Assembly held in Addis Ababa, Ethiopia on 9&10 February, 2020. 

For more details download  – High-Level Panel report

Common African Position on Asset Recovery (CAPAR)

The African Union Special Declaration on IFFs from Africa, passed in January, 2015 called for all the financial resources lost through illicit capital flight and IFFs to be identified and returned to Africa in order to finance the continent’s development Agenda. The declaration further directed the African Union Commission, supported by member states, to mount a diplomatic and media campaign for the return of illicitly out flown assets. Subsequently, the Declaration on the African Anti-Corruption Year (Assembly/AU /Decl.1 (XXXI))  from the 31st Ordinary Session of the Assembly of African Union Heads of State and Government (July, 2018) further called for the efficient recovery and return of Africa’s illicitly removed assets with due respect for the sovereignty of its States and their national interests.

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In addition to this, the Report of H. E. Muhammadu Buhari, President of the Federal Republic of Nigeria And AU Champion on the African Anti-Corruption Year also reiterated the need to develop a Common African Position on the recovery of African assets hosted in foreign jurisdictions in Addis Ababa, Ethiopia (February, 2019) (Assembly/AU/19(XXXII).

This led to the enthusiastic development of the Common African Position on Asset Recovery (CAPAR) by the African Union Advisory Board on Corruption (AUABC) with the support of the Consortium to Stem IFFs from Africa through its members – the African Legal Support Facility (ALSF)  and CoDA. In its role as the Member State led by the AU Champion on Anti-Corruption, the Government of the Federal Republic of Nigeria presented the CAPAR to African leaders at the 33rd Ordinary Assembly of the AU held in Addis Ababa, Ethiopia on 10 February, 2020. Its unanimous adoption reflected in Assembly/AU/Dec.774 (XXXIII) by the Heads of State and Government of the African Union indicated the continued support of African leaders to the anti-corruption and anti-IFF agenda. The Decision called for the sensitization of African countries as well as their non-African counterparts and other stakeholders on the CAPAR towards its implementation. Since then, several efforts have been undertaken to position it at national and regional levels. At the global level, the CAPAR has already been discussed and brought forward in various forums by the African Permanent Representatives to the UN. This highlights its importance since the implementation of the CAPAR ties in directly with the work of the High Level Panel and should accordingly be acknowledged by the UN General Assembly as a tool for the concrete implementation of the IFF agenda. 

The CAPAR is essentially the bedrock for our continent’s legal instrument and technical framework for negotiating the return of Africa’s assets and funds, taken illicitly from the continent and hosted in foreign jurisdictions. It is aimed at assisting African Union Member States to identify, repatriate and effectively manage these assets in a manner that respects their sovereignty. The CAPAR was also developed on the basis that Illicit financial outflows and the illicit consignment of African assets to foreign jurisdictions have and will continue to undermine Africa’s development goals and aspirations, unless acted against by the global community, as well as the African Union and its Member States. It maintains that all these stakeholders must speak with one voice and act in unity to ensure that Africa’s voice is heard and is fully recognized in efforts to shape the global ecosystem of asset recovery. As a policy instrument, it outlines Africa’s priorities for asset recovery and groups them into four pillars. These are:

Addressing the issue of asset recovery and implementing the CAPAR are why the next steps of the AUABC and other members of the CAPAR Working Group are to actively sensitize national, regional, continental and international stakeholders on the CAPAR in view of their full support and adherence to its implementation. Going forward, the CAPAR which represents Africa’s collective voice on the recovery of its assets will be put forward in all relevant arenas and forums in order to build coherent and fair action in the repatriation of what is rightfully ours.