IFF – codafrica

DOMESTIC RESOURCE MOBILIZATION

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.....

The journey so far

History and Information on ongoing efforts to curb Illicit Financial Flows from Africa.

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.

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.

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.

To contribute to domestic resource mobilization in Africa, CoDA supports efforts by the African Union to stem illicit financial outflows from the continent and the
recovery of illicit assets consigned in foreign jurisdictions. 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. CoDA operates as the secretariat of the African Union High-Level Panel on Illicit Financial Flows (IFFs) from Africa and as the joint secretariat (with the African Union Department of Economic Affairs) of the Consortium to Stem IFFs from Africa. Through CoDA’s efforts, the Consortium was established as a broad coalition of African institutions working to address IFFs from Africa and to implement the recommendations of the High-Level Panel on Illicit Financial Flows from Africa.

Under this programme, CoDA has facilitated the development of the Common African Position on Asset Recovery (CAPAR) and its adoption by the African Union Assembly of Heads of State and Government at their 33rd Ordinary Assembly held in Addis Ababa, Ethiopia, in February 2020. CAPAR is a crucial policy advocacy tool aimed to assist African Union Member States in identifying, repatriating and effectively managing assets held in foreign jurisdictions, in a manner that respects their sovereignty. Within a framework of CoDA’s support and collaboration with the African Union Department of Political Affairs, Peace and Security and the African Union Advisory Board on Corruption, CoDA is establishing a Working Group that will be responsible for the implementation of the CAPAR.

In response to a call by its Board of Directors to support Africa’s debt relief efforts, CoDA established a Technical Committee on Revenue Mobilization in early 2021, comprising high profile members who have been actively engaged in fiscal policy design, implementation, and management. Among others, the purpose is to drive high-level research, technical and advocacy support to African governments with the aim of enhancing revenue mobilization and providing a clear and convincing African voice to ensure an international tax regime that is more transparent and fairer to Africa.

HLP key messages

To eradicate underdevelopment and poverty and address the Sustainable Development Goals (SDGs), it is very important to address the issue of domestic resource mobilization. A critical element in the mobilization of these resources is the curtailment of IFFs from the continent. Failure to do this threatens the possibility of achieving the SDGs. The problem of IFF on the continent has been further compounded by the COVID-19 pandemic.
Over a period of 50 years prior to 2015, it is estimated that Africa lost more than one trillion US dollars to illicit financial flows. This is roughly equivalent to the amount of the official development assistance that the continent received during the same period.

The HLP has identified the three perpetrations of IFFs – illicit financial practices by commercial entities, organized crime, and looting of public funds. Cutting across these three channels is the important issue of corruption, and the HLP has delivered key recommendations to counter them in its report.
The Assembly of the African Union Heads of State and Government has adopted this report, thus transforming the recommendations into policy positions that are binding on all Member States. This adoption represents a very important progress indicating that all African countries have an agreed framework for the interventions needed to curtail illicit financial outflows. The Third International Conference on Financing for Development (FfD3) also made a global commitment to combat these outflows.
The African Union Heads of State and Government have requested the HLP to continue supporting Member States in the evaluation of their efforts to implement the recommendations. This support is important to ensure that the continent takes the necessary steps to combat IFFs and to highlight the capacity challenges faced by Member States in implementing the recommendations.
In line with this and with the view to include non-governmental stakeholders in the IFF work, the African Union and the HLP established a consortium of institutions dedicated to combatting IFFs from Africa.
IFFs is an African problem with a global solution, therefore, we need to establish a strong and inclusive global financial architecture to address the problem. It is the hope of the HLP that the Global FACTI Panel will help address the matters of policy coherence and the necessary international architecture.
There are three principal requirements to address the challenges in stemming IFFs from Africa. The first is the need to strengthen the capacity of the African Union to support the initiative. Second is the need to establish a global coherence of what has been agreed by African and non-African countries on efforts to curtail IFFs. The third is the need to develop a global mechanism that will ensure complete adherence to the implementation of these agreements. Addressing these challenges is critical to the achievement of the SDGs and this is further emphasized by the negative impact of COVID-19.

The Consortium to Stem IFFs from Africa

The Consortium to Stem IFFs from Africa is a broad coalition of African institutions working to address the scourge of illicit financial flows from Africa. The consortium oversees and engages in the implementation of the recommendations of the HLP. 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, former Deputy Chairperson of the African Union Commission. It consists of up to 17 institutions and is guided by the by-laws within its Terms of Reference.

The Consortium has a technical arm, the IFF Working Group (IWG), which operates under the guidance of the Consortium as outlined within its Terms of Reference. To advance its work of leading the implementation of the HLP recommendations, the Consortium’s secretariat (AUC & CoDA) was established within CoDA, which is situated at the headquarters of the African Union Commission.

High-Level Panel Report

The report of the African Union/United Nations Economic Commission for Africa (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 details the various means, legal and illegal, by which IFFs take place in Africa. It outlines the practices driving IFFs and the facilitating conditions, including public sector corruption and global secrecy services that make the practice thrive. The report highlights 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 recommends that Member States take the following actions, among others:

Adopt a “whole-of-government approach” involving a coordinated approach by 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 empower relevant institutional architecture to combat IFFs.
Establish 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 the 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 that IFFs constitute a drain on the resources required for Africa’s development, particularly given the domestic resource requirements for actualizing the African Union Agenda 2063 and the Post-2015 Development Agenda. The Declaration 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; fighting corruption; strengthening African institutions; building capacity of Member States for contract negotiation and tax administration; and identifying and returning resources lost through illicit financial flows to finance Africa’s development agenda.

Closely following the July 2015 summit, the issue of IFFs was prominent for the first time during discussions at the Third International Conference on Financing for Development (FfD3), held in Addis Ababa, Ethiopia. This was evident in the outcome document of the conference – the Addis Ababa Action Agenda (AAAA) which highlighted the importance of tackling multinational tax avoidance and was evidently instrumental to the inclusion of Target 16.4 to reduce IFFs in the Sustainable Development Goals.

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 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 African Union 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 financial resources lost through illicit capital flight and IFFs to be identified and returned to Africa to finance the continent’s development agenda. The declaration further directed the African Union Commission, supported by Member States, to mount diplomatic and media campaign for the return of illicitly outflown 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.

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 in Addis Ababa, Ethiopia (February 2019), reiterated the need to develop a common African position on the recovery of African assets hosted in foreign jurisdictions (Assembly/AU/19(XXXII).

In its role as the Member State led by the African Union 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 African Union 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, 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.

In response to these calls, and recognizing the efforts of the High-Level Panel; the African Union Champion on Anti-Corruption, H.E Muhammadu Buhari, in his report reiterated the need to develop a CAPAR as a priority in recognition of the adverse impact that the non-recovery and return of IFFs has on the enjoyment of human rights in the source country. Further acknowledging that the efforts and strategies towards the recovery and return of African assets must be situated and contextualized in the broader historical, political, economic and social narrative of Africa (including the theft of African artefacts, slavery and colonization of Africa), the African Union accordingly requested its Commission, African Union Advisory Board on Corruption, African Development Bank, United Nations Economic Commission for Africa, Coalition for Dialogue on Africa and other stakeholders in the Consortium, to scale up their collaborative work, in partnership with the National Anti-Corruption Agencies.

At the global level, CAPAR has already been discussed and brought forward in various forums by the African Permanent Representatives to the United Nations. This highlights its importance since the implementation of CAPAR is directly related to the work of the High-Level Panel and should accordingly be acknowledged by the United Nations General Assembly as a tool for the concrete implementation of the IFF agenda.

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 aims to assist African Union Member States to identify, repatriate and effectively manage these assets in a manner that respects their sovereignty. CAPAR was 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, CAPAR outlines Africa’s priorities for asset recovery and groups them into four pillars:

1.

The detection and identification of illicitly removed assets
2.

The recovery and return of illicitly removed assets
3.

The management of recovered assets
4.

Cooperation and partnerships to harmonize the process of identification and recovery

The Coalition for Dialogue on Africa (CoDA) is an independent, international, Africa-owned forum which identifies and discusses issues related to Africa’s development in
a global context. CoDA is a special, but independent, initiative of the African Union, African Development Bank (AfDB), African Export-Import Bank (Afreximbank), and the United Nations Economic Commission for Africa (UNECA), which promotes open, direct, and inclusive dialogue to further the work of the four institutions, with a view to giving Africa a greater voice on issues relating to peace, security, governance and development.

Established in 2009, CoDA is a policy-oriented platform that brings together various actors (African and international organizations) into African Union intergovernmental conversations in a structured manner through dialogues and debates that articulate ideas of diverse groups, including government leaders, policymakers, civil society,
the private sector, community and faith leaders, media, and youth on specific issues of continental interest.

Since its inception, CoDA has held more than 40 high-level dialogues and consultations on different development issues in Africa and supported implementation
of recommendations of some of the dialogues.

CoDA is headquartered within the African Union Commission in Addis Ababa, Ethiopia, and is governed by a Board of Directors consisting of eminent African and
non-African personalities.

CoDA seeks to play the role of a think-tank and change agent, which takes a proactive stand, and helps define new perspectives on a wide range of issues, including the most sensitive and most controversial. It aims to build strong partnerships and synergies with leading African institutions with the objective of grounding its work on solid evidence and bridging the gap between research and policymaking in Africa.

Addressing the issue of asset recovery and implementing the CAPAR are the reasons the next steps of the African Union ABC and other members of CAPAR Working Group are to actively sensitize national, regional, continental and international stakeholders on CAPAR in view of their full support and adherence to its implementation.

Going forward, CAPAR, which represents Africa’s collective voice on the recovery of its assets will be put forward in all relevant arenas and forums to build coherent and fair action in the repatriation of what is rightfully ours.