The cost of complacency: African MPs pledge to amplify continent’s voice on war against illicit financial flows

By Steve UMIDHA

African legislatures used a Nairobi sitting on Wednesday and Thursday to hit out against their corrupt foils who launder money through holding companies and moving them to offshore countries with the help of western consulting firms.

It is a renewed pledge by over 40 different African lawmakers who took part in the forum, themed, Africa’s Leadership in Combating Illicit Financial Flows, to amplify the continent’s voice on the war against illicit financial flows – a significant development in the ongoing efforts to combat economic crimes and promote financial transparency in Africa.

Illicit financial flows (IFFs) refer to the illegal movement of money or assets across borders, often involving activities such as tax evasion, money laundering, corruption, and other financial crimes.

These activities have significant negative impacts on African economies, including reducing government revenue, hampering development, and perpetuating poverty.

But despite repeated calls for action against IFFs, there has been little commitment on the part of African Members of Parliaments (MPs), and their successive governments across the continent to tackle the problem.

The APNIFFT 2023 continental meeting provided a platform for its members, African legislators, to strategise, learn from each other and build their capacities in tackling illicit financial flows (IFFs) and tax injustices in the continent.

It is organized by Tax Justice Network Africa (TJNA) and The African Parliamentary Network on Illicit Financial Flows and Taxation (APNIFFT).

Illicit finance, as dirty money is politely known, spreads corruption across the continent and costs every home and every community. In fact, Africa is believed to be losing at least $50 billion annually to illegal transactions. Some reports suggest the continent may have lost up to $1 trillion in the past 50 years.

Global Financial Integrity, a Washington, D.C based nonprofit research and advisory organization heavily involved in the IFF fight, lists the main channels for IFFs as: nefarious commercial activities of multinational companies, drug trafficking and smuggling, and bribery and embezzlement.

Rogue companies are also heavily engaging in over-invoicing or underpricing trade deals, transfer pricing (avoiding taxes by setting prices in trading between their divisions), offshore banking and the use of tax havens.

IFFs deprive African countries of the much-needed resources for their development, and while definitions may vary, IFFs are broadly accepted as cross-border financial transfers with illegal origin or destination.

The impact of illicit financial flows on Africa results in the loss of much-needed resources to finance the attainment of Agenda 2063 and the Sustainable Development Goals, according to the network.

“We wish to congratulate the African Group for remaining resolute in its commitment to reform the global tax system and urge other member states to support this historic effort to correct the imbalances that currently exist.

During the Second Committee, African states reiterated that the current tax system remains ineffective, exclusive and accommodating only of the interests of a few. The discussions taking place in New York are the first step in addressing these mistakes of the past,” noted Chenai Mukumba, TJNA Executive Director.

The event also brought together tax justice stakeholders and policymakers from across Africa.

It focuses on the role members of parliament play in addressing the pressing issue of illicit financial flows and its detrimental impact on Africa’s development and poverty reduction efforts.

African Members of Parliament (MPs) play a crucial role in addressing IFFs because they are responsible for enacting and overseeing legislation related to financial regulation and transparency. When they pledge to amplify the continent’s voice on this issue, it typically means that they are committed to taking actions such as:

Advocating for stronger legal frameworks

MPs can push for the creation or revision of laws and regulations that are more robust and effective in preventing and combating illicit financial flows. This includes laws related to taxation, anti-money laundering, and anti-corruption.

Oversight and accountability

The legislatures can ensure that government agencies responsible for financial oversight and enforcement are adequately funded and are carrying out their mandates effectively. They can also investigate and hold those involved in IFFs accountable.

International cooperation

They can engage in diplomacy and collaboration with international organizations and other countries to address cross-border illicit financial flows. Cooperation with other nations is often crucial since IFFs frequently involve global networks.

Raising awareness

The lawmakers can also use their platforms to raise public awareness about the impacts of IFFs on their countries and the continent as a whole. This can build public support for measures to combat these illicit activities.

Supporting transparency initiatives

MPs can endorse and work towards the implementation of initiatives like the Extractive Industries Transparency Initiative (EITI) and the Common Reporting Standard (CRS), which promote transparency in financial transactions.

The commitment of African MPs to amplify the continent’s voice on the issue is a positive step in the fight against illicit financial flows.

However, it’s important that this commitment translates into concrete actions and policy changes to effectively address the problem and promote economic growth and stability in Africa.