Illicite capital flow 21 nov 2014

Illicit Financial Flows Transparency and Accountability

DÉSIRÉ ASSOGBAVI Head of Oxfam Liaison Office to the African Union 21 November 2014

What Are Illicit Financial Flows?

• IFFs are Money from transactions, illegally removed from

countries.

• Money, illegally earned, transferred or utilized.

• Money that escaped public knowledge and understanding

• 50% of illicit financial flows result from profit shifting by

multinationals • Up to 70% IFF in Africa are from Extractive Industries • Economic growth in sub-Saharan Africa --- mostly from Natural

resource exports

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• Thabo Mbeki Panel: Illicit outflow from Africa: $ 50-60 billion per year • Illicit outflows through trade mispricing from Africa grew at a real rate

of 32.5% between 2000-2009, the highest rate of any developing country region in the world • Africa: long-term net creditor to the rest of the world: • Report by the AfDB and Global Financial Integrity: Africa suffered

between $597 billion and $1.4 trillion in net outflows between 1980 and 2009 • Most illicit financial outflows from Africa are relate to tax evasion

• Angola: One of the world’s fastest growing economies, but ---- under-

5 mortality rate is the 8th highest in the world.

• Africa Growth is from Extractives : 14 out of 17 countries with

consistent growth rates above 5% in Africa … are resourcedependent Page 3

• Governance & institutional Failures have prevented the

effective use of resource revenues • Absence of controls & safeguards • Africa Progress Panel:: $38bn leave Africa every year

through trade mispricing only (companies undervalue the

prices of imports and exports so they don’t have to pay the appropriate amount of tax.)

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Solutions ?

 Transparency is a great disinfectant. It will put pressure on governments to account for how they spend money received

 African

governments should put transparency accountability at the heart of natural resource policy



and

secure a fair share of natural resource revenue for their citizens; and spread the benefits via equitable public spending.

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 The EU last year: Deal on a law to make oil, gas, mining firms companies declare payments to governments in the countries where they operate. Similar to a legislation in the US under the Dodd-Frank financial reform law. 

The international community should build on the US & EU legislation to develop a global standard for transparency and disclosure. Need for an effective multilateral response to tax evasion

 Some African states: Right moves to manage resource wealth responsibly: Ghana, Botswana, Liberia 

Ghana: Petroleum Revenue Management Act is a good example of how targeted regulation can promote shared prosperity – the Act requires quarterly disclosures of payments and production figures.

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 In Liberia, a voluntary Extractive Industries Transparency

Initiative has been turned into a binding statutory requirement.

 At the Africa – US Summit, a New partnership was agreed

upon to combat illicit finance. An experts group will develop an action plan to promote transparency  Governments must enact legislation and policies that support

transparent mechanisms for the management and collection of revenues obtained.  Government must guarantee that negotiations are transparent

and accessible to the general public in order to enhance confidence, build trust and promote transparency around extractive issues.

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SHARING BEST PRACTICES & Role of regional Bodies

• African Mining Vision…. To be known, used and

reinforced :The AMV was adopted at the 2009 AU Heads of State Summit to encourage “transparent, equitable and optimal exploitation of (Africa’s) mineral resources to underpin broad based sustainable growth and socio-economic development”.

• ECOWAS Mining Code….? Other regions • Build Capacity in tax collection….. Share experience:

Togo, Rwanda.

• Avoid long-term lease • Model Contracts?

• Role of NSA on transparency

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Thanks !

Contact: Desire.Assogbavi@Oxfaminternational.org Blog: assodesire.wordpress.com

Tel.: +251 911208332