The African Union (AU) is to target trade-related illicit financial outflows from Africa, which constitute the bulk of money leaving the continent illegally ? costing the continent $52.9 billion annually from 2003 to 2012, roughly five per cent of GDP.
It accounted for 68.8 per cent of all outflows from Africa over the decade.
A new report from the AU and the Economic Commission for Africa?s (ECA) High Level Panel (HLP) on Illicit Financial Flows from Africa is expected to change the game regarding the movement to curtail illicit financial flows and promote financial transparency.
Chaired by former South African President Thabo Mbeki, the HLP?s final report, which was launched in Addis Ababa during last week?s 24th AU summit, recommended that greater emphasis should be placed on African and global efforts to curb the ongoing illegal outflow of the continent?s wealth.
Mr Mbeki said that the continent was losing needed funds and something needed to be done about it.
?In terms of the work we have done, it is clear that the principal source of this illicit outflow, are in fact the commercial companies,? he said.
?The estimate that we have is something like 60 per cent of the outflows originate from the activities of large commercial companies that operate from Africa.?
The report called for ?a more rigorous effort in support of a unified global architecture on the issue of IFFs. The starting point of this effort should be a clear United Nations Declaration on the issue of IFF?.
It said it was important to ensure ?that efforts to combat IFFs are included in the Post-2015 Development Agenda. Similarly, Africa needs to initiate steps for the United Nations to adopt a unified policy instrument on IFFs in order to place the matter squarely on the agenda of the world organisation?.
With the Millennium Development Goals (MDGs) expiring this year, the international community is preparing to adopt a new set of goals ? the Post-2015 Development Agenda, or the Sustainable Development Goals (SDGs) ? which will frame global development efforts over the next 15 years.
Beyond merely calling for the SDGs to address illicit flows generally, the HLP?s final document stated: ?The Post-2015 Development Agenda should reflect the recommendations contained in this report.?
Misinvoicing is the deliberate over- and under-invoicing of trade transactions.
A study by Washington DC-based Global Financial Integrity (GFI) noted in a study in May last year that trade misinvoicing was hindering investment of billions of dollars and domestic financial flows in a number of African countries.
As such, the HLP?s primary recommendation reads: ?Given that most measurable IFFs are trade-based, actions set forth in the recommendations below for improving capacity and accountability to curtail trade-related IFFs should be given primacy.?
Multinational companies came in for specific criticism for facilitating illegal financial flows from Africa.
Mr Mbeki said there were ?a whole number of ways? these multinationals caused illicit flows of funds, calling for ?strong and purposeful political leadership? in Africa to seriously address the issue.
Speaking at the launch of the report, Guinea?s Minister of Mines and Energy, Kelfalla Yansane, said his country, a resource dependent nation, was trying to restructure its business regulations because ?we don?t have knowledge of how these companies are run. They make huge money but bring in very little into Guinea?.
He gave an example of how a foreign businessman bought a mine in Guinea for $150,000 and sold it for over $2 billion within three years.
Apart from calling for trade misinvoicing to be curtailed, the report included a number of other important policy recommendations.
These include the introduction of public registries of corporate ownership information to curb the abuse of anonymous companies and requiring all multinational corporations to publicly report their financial information on a country-by-country basis.
Other key recommendations included a call for illicit financial flows to be ?integrated as a specific component in the African Union Convention on Preventing and Combating Corruption?; and a recommendation that ?the Bank for International Settlements publish the data it holds on international banking assets by country of origin and destination in a matrix format, along the lines of the data published by the IMF for bilateral trade; foreign direct investment and portfolio investment, so that it can inform the analysis of IFFs from Africa?.
The recommendations also urged ?the global community in all of its institutions, including parliaments, [to] take all necessary steps to eliminate secrecy jurisdictions, introduce transparency in financial transfers and crack down on money laundering?.