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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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Dr. Kazeem Kolawole Raji, director general, National Board for Technology Incubation (NBTI), has promised to engage in the empowerment of youths in digital and technological innovations for the nation’s economic growth.
Raji, who stated this when he officially took over the mantle of leadership from immediate past director general, in Abuja, explained that the Board remained an economic base in which the Gross Domestic Product, GDP, of the country could be grown.
He said, “Presently, what we are doing is electromechanical. And I’m bringing new initiatives on emerging technologies. Because when you talk about technology today, you talk about AI, that’s artificial intelligence. You talk about nanotechnology. You talk about blockchain technology. And if you look at what is happening today in Nigeria, you see that a lot of our youths, if you tap their brains, they can become useful to this country and to themselves, rather than engaging in nefarious activities.
“And most importantly, we are a knowledge-based economy where the frontier, top-level elites of most Nigerian youth can be put into place and help drive the economic base of Nigeria, grow our economy, and increase our GDP.”
The director general pointed out that the Board had offices in all 36 states of the Federation and 15 extensions in some states and would ensure grassroots technological advancement.
“First and foremost, let me thank His Excellency President Bola Ahmed Tinubu GCFR for appointing me as the new Director General and CEO of the National Board for Technology Incubation, Abuja. Presently, we have offices in 36 states of the Federation and 15 extensions in other states. That means if you add 36 plus 15, you’d have around 51 centers.”
“These centers are meant to advance technological innovation and skillsets for our youth to enjoy. If you look at it presently, MBTI is tasked with establishing and managing technology incubation centers in Nigeria. And the skillset of most of our youth in Nigeria today shows that many come up with a lot of innovations.”
“Just like very recently, last month in January, in Nigeria, an incubatee of MBTI, Mr. AbdulLateef Olaosebikan, won $1 million in a keenly contested competition in Abu Dhabi. He called that prize the Zaihe Sustainable Prize Award, and he won it in the food category.”
“He competed with 5,980 other applicants from all over the world. That is to show you the kind of skillset in Nigerian youth. And that’s part of the reason why, when Mr. President said he’s going to draw water from the dry well, it means technology. Because the only way you can draw water from a dry well is through technology. And that technology is what I’m here to drive,” he stressed.
On the proper packaging of products, Raji stated that a memorandum of understanding had already been signed with the Kwara State Government in that regard.
“Just last week, I was in Kwara State to sign a memorandum of understanding with the Kwara State government with our incubatees and post-incubatees. One of the things I discovered there is about packaging and how we can package our products so that they can rival international products.”
“Presently, we are engaging with NAFDAC and the Standard Organization of Nigeria to achieve that kind of product quality. Because part of the mandate of MBTI is to commercialize the research products coming out of our incubatees and the National Board for Technology Incubation.”
“So, I can assure you, with the caliber of people at the Standard Organization of Nigeria and NAFDAC, partnering with them, by next week or so, we’ll be engaging with them officially on how we can work together to help our entrepreneurs package their products well in view of international standards.”
“You don’t have to go somewhere else to look for any product. If you see the kind of products coming out of Kwara State, you will marvel. Just very recently, someone came up with the idea of a trytractor.”
“And the trytractor, if you see the kind of output coming from this trytractor, if you help this person commercialize this product, imagine Nigeria as an agrarian nation and how we can make use of this. We won’t need to go outside and import tractors again if we develop our own local entrepreneurs. That is the reason why I’ve always been advocating, even while I was Executive Director at Nigerian Communications Satellite, that Executive Orders 003 and 005 on ICT local content should become an Act of Parliament.”
“It’s not just an Executive Order alone. They need to become an Act of Parliament so that if they become law, Nigerians will embrace our own local technology. We won’t have to go outside to rely on foreign technology.”
“And if you are working on your own local technology, you will be assured that capital flight will become a thing of the past, and we can shore up our foreign reserves and address the fluctuation of the Naira and Exchange Rates today in Nigeria,” Raji further explained.
Earlier, Dr. Chukwu, the immediate past director general of NBTI, said deliberate efforts were made for grassroots development.
“NBTI is an agency that spans the whole nation, and there is a grassroots project that, at the end of the day, if we put in our best, people will be able to benefit from the dividend of democracy. Thank you very much.”
“I am here this morning to start the handing over process, and usually, in the handing over, I’m expected to have inputs from departments, units, zonal offices, and centers to ensure that the handing-over note is comprehensive enough for the incoming DG, CEO.”
“So, on my part, I’ve been able to do a template that will guide the departments, the heads of units, zonal directors, and center managers to submit their inputs. That was what even delayed me a bit. Though I have it in soft copy, for the departments and others, I will give them a hard copy here.”
“Let me also use this opportunity to welcome my brother to the National Board for Technology Incubation. National Board for Technology Incubation is an agency that cuts across the whole nation, and there is a grassroots project that, at the end of the day, if we are able to put in our best, our people will also be able to benefit from the dividend of democracy. Thank you very much,” Chukwu said.
WiSolar, African provider of solar-as-a-service solutions, has announced a new programme for its Partner Merchants.
The company has implemented a base pay structure for Partner Merchants and collaborated with Ecobank Nigeria to ensure seamless and fast mass disbursements.
This programme, according to the business, is part of WiSolar’s continued efforts to strengthen its merchant network, which drives solar adoption throughout Nigeria.
WiSolar will use Ecobank Nigeria’s digital payment infrastructure to provide rapid and reliable payouts to its increasing network of Partner Merchants.
The arrangement avoids payment delays and gives businesses rapid access to their earnings, according to WiSolar.
It added: “By implementing a base pay, the company ensures that Partner Merchants receive a stable income, complementing their commission-based earnings from solar product sales and installation.”
Preye Irims, service architecture and partner enablement at WiSolar, explained further: “Our Partner Merchants are at the heart of our mission to make clean, affordable solar power accessible to more Nigerians.
“Introducing a base pay is a way of recognizing their efforts and providing financial stability as they help accelerate the transition to solar energy. With Ecobank Nigeria’s support, we are ensuring that payments are processed efficiently and securely.”
Tigran Gambaryan, top official of Binance, at the weekend, maintained his stance on the bribery allegations against some Nigerian government officials and House of Representatives members.
Tigran Gambaryan
Gambaryan insisted Nigerian officials demanded bribes from him despite the denial of the Federal Government.
Recall that Gambaryan, who is Binance’s head of financial crime compliance, was detained in Nigeria from February to October 2024.
Nigerian government said his arrest was part of a broader investigation into alleged money laundering and economic destabilisation attributed to Binance’s activities in Nigeria.
On Friday, while recounting his initial experience on the issue on Twitter, Gambaryan accused some Nigerian lawmakers of demanding substantial bribes in cryptocurrency.
He specifically accused three lawmakers of soliciting a $150 million bribe from him, naming Philip Agbese, Ginger Onwusibe and Peter Akpanke as the three federal legislators who demanded the huge bribe from him to allegedly forestall his arrest and prosecution.
He further alleged that Nuhu Ribadu, National Security Adviser, sought significant payouts from Binance for his political ambition.
But in a swift response, Mohammed Idris, minister of Information and National Orientation, dismissed Gambaryan’s allegations as “outrageous” and “defamatory”.
Idris explained that the Nigerian government had rejected a $5 million offer from Binance intended to secure Gambaryan’s release, opting instead for a more favourable settlement with the US government.
He said Gambaryan’s claims lacked credibility and appeared to be an attempt to discredit Nigerian officials.
But Gambaryan in his latest post on the development on Saturday on his X, said the Federal Government used him as leverage to negotiate a beneficial settlement with the US government.
He wrote, “I was invited by the Nigerian FIU to a meeting in January. Last time I checked, they are part of the Nigerian government. House members also invited us to the meeting. Last time I checked, the legislative branch is also part of the Nigerian government.
“You said the second part was part of a probe? Lol. So when you invited us to a friendly meeting, you even lied about that. I was in a safe house for a month, watching TV, while you were trying to use me as leverage. You then panicked and knowingly charged me with blatantly false accusations.
“So I was released on humanitarian grounds? At least you’re finally admitting the need to release me. Last time you posted, you claimed my health was fine and that there was nothing wrong with me”.
The crypto expert further stated, “You investigated? Yet you didn’t take a statement from me? A person with direct knowledge. What a joke.
“You dragged my name through the mud for the past year with zero evidence against me, nearly killed me, and caused trauma to my family. And now you have the nerve to talk about defamation?
“I’ll put my credibility on the line anytime. In court? You mean like last time, when your attorneys didn’t even show up to the human rights suit in Abuja?
“Get your facts straight. I am done with this foolishness. I said my part. I’ll be off Twitter now since it’s pointless to argue with evil.”
While insisting that his claim was factual despite the denials, Gambaryan added, “What I shared was factual, based on my personal experiences and conversations with those who have direct knowledge of the events I discussed; information that was shared with both Nigerian and US law enforcement.
“So please, allow me to leave this behind and find peace”.
The Binance executive said it was the responsibility of law enforcement agents in both Nigeria and the US to see the investigation into the matter through.
He said he is no longer in law enforcement, adding that the responsibility of seeing this through to a logical conclusion now falls on those still serving in the United States and Nigeria.
He added, “Many requested that I stay on and provide further commentary on the issues I posted about yesterday (Friday). Here’s the hard truth: what I shared was meant to fill in the gaps left by Wired and NPR’s reporting.
“The reality is that last year was incredibly painful for me and my family. I dedicated my life to fighting crime as a Special Agent with the United States Department of the Treasury and as a compliance professional. It was an honour to serve my country and it was a blessing that they came to my rescue and mobilised the full force of the US Government when I was in need.
“Being dragged through court on “outrageous, baseless, and trumped-up charges”, he posited, “didn’t just hurt me but also brought immense pain to my family.
“I don’t want to see my kids cry because I’m not around. I don’t want to see videos of my 75-year-old mother on television in tears. I don’t want to see my wife crying on TV. I want to put this nightmare behind me and move on.”
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