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Illicit Financial Flows from Africa – Track It, Stop It, Get It
Illicit money outflows are draining Africa’s domestic resources, depriving it of crucial investment funds
The figures are staggering: between $1.2 trillion and $1.4 trillion has left Africa in illicit financial flows between 1980 and 2009 – roughly equal to Africa’s current gross domestic product, and surpassing by far the money it received from outside over the same period.
Illicit financial flows are money earned illegally and transferred for use elsewhere. The money is usually generated from criminal activities, corruption, tax evasion, bribes and transactions from cross-border smuggling.
The numbers tell only part of the story. It is a story that exposes how highly complex and deeply entrenched practices have flourished over the past decades with devastating impact, but barely made it into the news headlines.
“The illicit haemorrhage of resources from Africa is about four times Africa’s current external debt,” says a joint report by the African Development Bank (AfDB) and Global Financial Integrity, a US research and advocacy group.
The report, Illicit Financial Flows and the Problem of Net Resource Transfers from Africa: 1980-2009, found that cumulative illicit outflows from the continent over the 30-year period ranged from $1.2 trillion to $1.4 trillion.
The Guardian, a British daily, notes that even these estimates – large as they are – are likely to understate the problem, as they do not capture money lost through drug trafficking and smuggling.
Turning logic upside down “The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private-sector flows, without receiving much in return,” said Raymond Baker, president of Global Financial Integrity, in a statement released at the launch of the report earlier this year.
Mr. Baker said the report turns that logic upside down, adding that Africa has been a net creditor to the rest of the world for decades.
Professor Mthuli Ncube, chief economist and vice-president of the AfDB, agrees: “The African continent is resource-rich. With good resource husbandry, Africa could be in a position to finance much of its own development.”
The composition of these outflows also challenges the traditional thinking about illicit money.
According to estimates by Global Financial Integrity, corrupt activities such as bribery and embezzlement constitute only about 3% of illicit outflows; criminal activities such as drug trafficking and smuggling make up 30% to 35%; and commercial transactions by multinational companies make up a whopping 60% to 65%.
Contrary to popular belief, argues Professor Baker, money stolen by corrupt governments is insignificant compared to the other forms of illicit outflow.
The most common way illicit money is moved across borders is through international trade. Information scanty and scattered
A ten-member high-level panel chaired by former South African President Thabo Mbeki leads research by the UN Economic Commission for Africa (ECA) into illicit financial flows, assisted by ECA Executive Secretary Carlos Lopes as the vice-chair.
Other members of the panel include Professor Baker and Ambassador Segun Apata of Nigeria. The ECA blames illicit outflows for reducing Africa’s tax revenues, undermining trade and investment and worsening poverty.
Its report will be released in March 2014. Undoubtedly the panel faces a daunting task. Charles Goredema, a senior researcher at the South Africa-based Institute of Security Studies, cautions the panel on the challenges ahead.
Writing in the institute’s newsletter, ISS Today, Goredema warns the panel that it will find that in many African countries, data on illicit financial flows “is scanty, clouded in a mixed mass of information and scattered in disparate locations.”
He ranks tax collection agencies and mining departments among the bodies most reluctant to share data.
Goredema lists Transparency International, Global Financial Integrity, Christian Aid and the Tax Justice Network as some of the advocacy groups that have tried to quantify the scale of illicit financial flows.
The extent of such outflows remains a matter of speculation, he says, with the figures on Africa ranging between $50 billion and $80 billion per year.
Other estimates by the ECA put the figure at more than $800 billion between 1970 and 2008.
“The absence of unanimity on [the amount] is probably attributable to the fact that the terrain concerned is quite broad, and each organisation can only be exposed to a part of it at any given point in time,” Goredema writes, adding, “It is less important to achieve consensus on scale than it is to achieve it on the measures to be taken to stem illicit financial outflows from Africa.”
Underpricing trade deals Nonetheless, research and advocacy groups who have worked on illicit outflows see a direct link between these outflows and Africa’s attempts to mobilize internal resources.
Despite annual economic growth averaging 5% over the past decade – boosted in part by improved governance and sound national policies – Africa is still struggling to mobilize domestic resources for investments.
If anything, the boost in economic growth has caused a spike in the illicit outflows, says Ambassador Apata in an interview with Africa Renewal.
Overseas development aid, while helpful, has its limits, says the ECA. There are many channels to move illicit money.
These include over-invoicing or underpricing trade deals, transfer pricing and using offshore financial and banking centres and tax havens.
Transfer pricing occurs when multinationals decide how much profit to allocate to different parts of the same company operating in different countries, and then determine how much tax to pay to each government. About three-fifths of global trade is conducted within multinationals.
“Many developing countries have weak or incomplete transfer pricing regimes,” according to the Guardian, citing an issue paper authored by the Paris-based Organization for Economic Cooperation and Development (OECD), a group of high-income economies.
The paper says poor countries have weak bargaining power. “Some [countries] have problems in enforcing their transfer pricing regimes due to gaps in the law, weak or no regulations and guidelines for companies,” says the OECD paper, adding that poor countries have limited technical expertise to assess the risks of transfer pricing and to negotiate changes with multinationals.
Offshore tax shelters According to the OECD paper, member countries are failing to identify company owners who benefit from money laundering.
It criticizes OECD members for not doing enough to crack down on illicit outflows. In order to prevent, uncover or prosecute money laundering, says the paper, authorities must be able to identify company owners.
The OECD advises its members to invest in anti-corruption and tax systems in poor countries, as this has high payoffs.
The bulk of illicit money today is channelled through international tax havens, says the Thabo Mbeki Foundation, an NGO set up by the former president to promote Africa’s renaissance.
The foundation accuses “secrecy jurisdictions” of running millions of disguised corporations and shell companies, i.e., companies that exist on paper only.
These jurisdictions also operate anonymous trust accounts and fake charitable foundations that specialize in money laundering and trade over-invoicing and underpricing.
“Developing countries lose three times more to tax havens than they receive in aid,” said Melanie Ward, speaking to the Guardian.
Ms. Ward is one of the spokespersons for the Enough Food for Everyone IF campaign, a coalition of charities calling for fairer food policies, and head of advocacy at ActionAid, an anti-poverty group.
The money lost, she says, should be spent on essential development of schools, hospitals and roads, and on tackling hunger, not siphoned into the offshore accounts of companies.
A 2007 joint report by the World Bank and UN Office on Drugs and Crime estimated that every $100 million returned to a developing country could fund up to 10 million insecticide-treated bed nets, up to 100 million ACT treatments for malaria, first-line HIV/AIDS treatment for 600,000 people for one year, 250,000 household water connections or 240 km of two-lane paved roads.
Support for new rules to rein in offshore tax shelters has come from an unlikely source – the leaders of eight of the world’s biggest economies, the Group of Eight (G8).
Having been stung by the 2008 global financial crisis, the G8 leaders at this year’s summit in Lough Erne, Northern Ireland, introduced – for the first time – rules to fight tax evasion.
The rules will now require multinationals to disclose the taxes they pay in countries in which they operate.
During the run-up to the G8 summit, advocacy groups campaigned to get rich countries to introduce laws on transparency in corporate taxes.
Among them was the Africa Progress Panel, chaired by former UN Secretary-General Kofi Annan.
On the eve of the summit, it published its annual flagship report, Africa Progress Report 2013, strongly criticizing the current rules on corporate transparency. Unconscionable acts
“It is unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximize their profits while millions of Africans go without adequate nutrition, health and education,” Mr. Annan wrote in the foreword to the report.
Tax evasion, he said, has cut into African citizens’ fair share of profits from their abundant resources.
In the end, the G8 leaders adopted the Lough Erne Declaration, a 10-point statement calling for an overhaul of corporate transparency rules.
Among other things, the declaration urges authorities to automatically share tax information with other countries to fight tax evasion.
It states that poor countries should have the information and capacity to collect the taxes owed to them.
The declaration further calls on extractive companies to report payments to all governments, which should in turn publish them.
While the Financial Times embraced the declaration as “an advance” in corporate transparency, Sally Copley, another spokesperson for the IF campaign, says in a statement, “The public argument for a crackdown on tax dodging has been won, but the political battle remains.” Copley wants the G8 to impose strict laws on tax evasion.
For its part, Africa Progress Report 2013 calls for multilateral solutions to global problems because “tax evasion, illicit transfers of wealth and unfair pricing practices are sustained through global trading and financial systems.”
It urges African citizens to demand the highest standards of propriety and disclosure from their governments, and rich countries to demand the same standards from their companies.
Initiatives by institutions in Africa and the adoption of the Lough Erne Declaration raise hopes for strict rules against illicit financial flows from Africa.
“Seizing these opportunities will be difficult. Squandering them would be unforgivable and indefensible,” Mr. Annan warns in his foreword to the panel’s report.
Meanwhile, ECA’s slogan “Track it. Stop it. Get it” aptly captures what needs to be done about money flowing illicitly out of Africa.
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Corporate Accountability and Public Participation Africa (CAPPA) has condemned the loss of over N200 billion annually due to gaps in the implementation of the sugar-sweetened beverages (SSB) tax.
Mr. Akinbode Oluwafemi, executive director, CAPPA, who spoke on Tuesday during a media roundtable on the SSB tax, remarked that the funds could directly support Nigeria’s goal of increased healthcare financing, including the Basic Healthcare Provision Fund, the National Health Insurance Authority, and school feeding programmes — helping to build a healthier and more equitable society.
Stressing the need to discourage excessive consumption of SSBs, reduce public addiction to sugary drinks, and stem the rising tide of non-communicable diseases (NCDs) among Nigerians, he called on President Bola Ahmed Tinubu to fulfil his campaign promises of implementing consumption taxes to deter behaviour that undermines individual and community health.
Oluwafemi urged the authorities to increase the SSB tax from ₦10 per litre to at least ₦130 per litre to reduce consumption and encourage manufacturers to reformulate their products.
He noted that the President has a clear opportunity to strengthen the SSB tax and ensure its transparent implementation as part of his duty to protect the health and future of all Nigerians.
Oluwafemi insisted that Nigeria is in the midst of a public health crisis, a ticking time bomb driven by the excessive consumption of unhealthy diets, particularly SSBs.
He said, “These sugar-sweetened beverages, popularly known as soft drinks and their likes, are killing us slowly, turning our streets into graveyards and our hospitals into crowded waiting rooms. According to scientific and medical evidence, they are directly fueling the explosive rise in non-communicable diseases (NCDs), including the slump and die trend we are currently witnessing across various parts of the country.
“Not too long ago, conditions like diabetes, hypertension, stroke, heart diseases, and obesity were all rare and described as afflictions of big men and women. Today, they are snatching our fathers, crippling our mothers, sending young people to early graves, and draining the life savings of entire families. According to the World Health Organisation (WHO), NCDs now account for 1 in 3 deaths in Nigeria.
“They are no longer the diseases of the rich or the elderly; they are aggressively decimating our workforce, destabilising our families, and undermining national productivity.
“Families are forced to sell land, liquidate lifelong savings, and descend into absolute poverty in desperate bids to save loved ones. Mothers who should be growing small businesses or mentoring children are instead chained to hospital wards as unpaid, invisible caregivers.”
He contended that a more robust SSB tax would reduce the consumption of sugar-laden drinks, lower the incidence of preventable illnesses, and improve national health outcomes, while also offering a practical way to expand Nigeria’s fiscal space without increasing broad-based taxes.
He emphasised the need to mandate transparent front-of-pack labelling on all food and beverage products, enabling Nigerians to know what they consume. This, he added, would require annual public reporting by the Federal Inland Revenue Service, the Nigeria Customs Service, and the Ministries of Finance and Health to ensure accountability.
Born and raised in a world of fast-evolving technology, Gen Z is the most Internet-savvy generation yet, known for their digital fluency and trendsetting influence. From their earliest years, they have been shaping and redefining the digital landscape, leaving footprints online long before they fully grasp its risks.
But as they navigate a world of hyperconnectivity, social media and online shopping, cyberthreats are evolving just as rapidly.
With its new game “Case 404”, Kaspersky sheds light on how cybercriminals are turning Gen Z’s online habits into attack vectors — and offers practical tips to turn awareness into digital resilience.
- Oversharing and digital footprint increase
For Gen Z, sharing life moments online is second nature. Social media platforms like Instagram, TikTok and Snapchat are filled with geotagged selfies, daily updates and personal stories. However, this constant sharing creates an extensive digital footprint that cybercriminals can exploit for identity theft or social engineering attacks.
Oversharing can inadvertently reveal sensitive details, from home addresses in the background of photos to routines that make users predictable. Even seemingly harmless content, like a photo of their partner or pet, can provide clues for password recovery questions.
- Fear of Missing Out
The Fear of Missing Out (FOMO) refers to the anxiety or unease that arises from a fear of being left out or not being part of the latest updates or connections if they don’t follow what other people are doing on social media. FOMO is a powerful driver for Gen Z, fueled by social media updates about product launches, concerts and events.
Seeing peers attend events, acquire new products or achieve milestones can lead to feelings of inadequacy or exclusion. Whether it’s a new iPhone drop, Taylor Swift’s Eras Tour or a major sporting event, FOMO can push users to click on unverified links promising early access or exclusive deals.
Cybercriminals exploit this urgency by creating clickbait phishing schemes, leading users to malicious sites that steal login credentials or distribute malware. Fake event tickets, pre-order scams and “leaked” insider information are just some of the tactics used to manipulate this fear.
- Nostalgia of Y2K fashion and early 2000s culture
For Gen Z, who were born around or after this era, Y2K fashion represents a blend of nostalgia for a simpler, pre-digital time and a desire to reinvent those styles with a modern twist. Platforms like TikTok and Instagram have amplified Y2K’s resurgence, with influencers recreating vintage looks and sharing thrifted finds. Hashtags like #Y2Kfashion and #Y2Kaesthetic have garnered billions of views.
Gen Z’s fascination with early 2000s culture, from Y2K aesthetics to childhood games, has revived interest in retro titles like The Sims 2, Barbie Fashion Designer and Bratz Rock Angelz.
While these games evoke nostalgia, searching for unofficial downloads often leads users to malware-infested sites. Cybercriminals target this niche interest by embedding malicious software into counterfeit game files. What seems like a trip down memory lane could result in compromised devices or stolen data.
- Fast Fashion
Gen Z loves expressive clothes, wants to stand out rather than fit in and has an ever-changing style — what was in a month ago might already be out. Their trend-chasing habits are supported by fast-fashion retailers supplying accessible ways to switch it up. For instance, Chinese fast-fashion giant Shein, loved by Gen Z, adds 6,000 new products to its website per day.
For Gen Z, fast fashion is more than just a shopping preference — it’s a lifestyle. Fast-fashion brands like Shein, ASOS and Fashion Nova deliver affordability and instant gratification, making them staples for this generation. However, the allure of these brands comes with a dark side.
Fake shopping websites, hoax promocodes and phishing ads capitalise on their popularity, using convincing imitations to lure users into entering their sensitive details. The higher the engagement in online shopping, the higher the risk of encountering fake websites and phishing scams designed to steal personal and financial information.
- iDisorder
Gen Z face a phenomenon called iDisorder, a condition where the brain’s ability to process information changes because of overexposure to technology. This obsession with technology can result in psychological, physical and social disorders, including depression and anxiety.
This is proven by public research: one in three 18- to 24-year-olds now report symptoms indicating they have experienced such mental health problems.
That is why they are extensively turning to digital tools like teletherapy platforms and mental health trackers to alleviate stress.
However, these platforms store highly sensitive personal information, including emotional states, therapy notes and user routines. If breached, this data could be exploited for blackmailing or phishing.
“Trends may evolve rapidly, but the underlying cyberthreats remain constant. Whether it’s leveraging Gen Z’s love for online shopping, capitalising on the urgency created by FOMO or targeting the growing use of mental health apps, attackers are quick to turn popular behaviours into opportunities for phishing, scams and data breaches,” comments Anna Larkina, privacy expert at Kaspersky.
“Start by taking control: verify links and websites before engaging, use strong, unique passwords and enable two-factor authentication for an extra layer of security. Be mindful of what you share online — and most importantly, remember that staying informed is your best defense. Cybersecurity isn’t just about responding to threats; it’s about empowering yourself to navigate the digital world confidently and safely.”
Nigerian Postal Service (NIPOST) has vowed to clamp down on courier companies found to be aiding the trafficking of drugs and other illicit items through the country’s logistics network.
In a statement issued on by Franklin Alao, director of Corporate Communications, NIPOST expressed outrage over a recent report in some newspapers with the headline: “Nigerian courier services easily transporting hard drugs since Tinubu became president – NIPOST.”
The agency described the headline as false, misleading, and damaging to national security efforts. According to NIPOST, the article falsely attributes the claim to the postal regulator, thereby creating the impression that the agency had endorsed or confirmed such allegations.
“This is categorically FALSE,” the statement said. “At no point has NIPOST made such a statement or associated these activities with the administration of President Bola Ahmed Tinubu.”
NIPOST maintained that while it respects the role of the media in promoting accountability and transparency, the publication in question was reckless and sensational.
It warned that inaccurate reporting on sensitive national issues like drug trafficking not only misinforms the public but also undermines the collaborative work being done to sanitise the courier and logistics sector.
Restating its position, the agency said it strongly condemns the use of courier services for criminal purposes, including drug trafficking.
It reaffirmed its zero-tolerance policy toward the misuse of Nigeria’s postal infrastructure and said it remained committed to regulating the sector with integrity, transparency, and accountability.
NIPOST noted that it had embarked on a range of interventions aimed at improving surveillance and enforcement across the logistics industry.
It stated that all courier operators are currently undergoing a revalidation process and that Know-Your-Customer protocols and compliance audits are being enforced to tighten controls and prevent abuse of the system.
The postal regulator said it is also working closely with the National Drug Law Enforcement Agency, the Nigeria Police Force, the Nigerian Customs Service, and other relevant security institutions to investigate and deter the use of logistics channels for the transportation of narcotics and other contraband items.
In addition, NIPOST said it had intensified engagement with courier operators, transport unions, and logistics associations to promote sector-wide vigilance and encourage the reporting of suspicious packages.
It also revealed that a new Digital Postcode and Parcel Identification System is being deployed nationwide to enhance traceability, eliminate anonymity, and improve parcel screening from the point of dispatch to final delivery.
“The Nigerian Postal Service is fully committed to restoring the integrity of Nigeria’s courier and logistics industry,” the statement said. “Any operator found to be involved in criminal activity will face immediate regulatory sanctions, including license suspension or revocation, and be reported to appropriate authorities for prosecution.”
The agency urged members of the public to use only licensed courier companies and to report any suspicious activity either to NIPOST or relevant security agencies.
It also called on journalists and civil society groups to approach issues in the sector with accuracy, caution, and a shared sense of responsibility.
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