ECOWAS says Africa loses $88.6 billion yearly to illicit financial flows

The Economic Community of West African States (ECOWAS) has said that illicit financial flows cost Africa a whopping $88.6 billion yearly.

Abdel-Fatau Musah, the ECOWAS commissioner for political affairs, peace, and security, said this during a training on financial investigation for anti-corruption institutions across its member-states. The training wad held in Zuba, Niger State on Monday.

Mr Musah, who was represented by Ebenezer Asiedu, the commission’s head of the democracy and good governance division, according to TheCable , also linked the fragility of democracy in the region to corruption, which is a key driver of illicit financial flows.

He said “democracy in most of our member states faces fragility, particularly due to the menace of corruption.”

Illicit financial flows refer to the movement of money across borders. Such flows are illegal in its source—as in corruption and smuggling; its transfer, as tax evasion; or its use, as in terrorist financing.

Weak laws, regulations and law enforcement activities, bribery and corruption, weak tax and anti-money laundering regimes contribute significantly to the capital haemorrhage through illicit finnacial flows out of Africa.

“For instance, research indicates that Africa loses a staggering $88.6 billion annually due to corruption and illicit financial flows, which takes up 3.7 percent of our continent’s GDP,” Mr Musah said.

He added that, indeed, “corruption and financial crime are among the biggest obstacles to economic and social development in West Africa and around the world.”

Menace of corruption and quest for solutions

He said the regional organisation is making progress in supporting the deepening of democratic governance norms and practices within the region.

“To a greater extent, these efforts have yielded considerable progress in the democratic consolidation in the reqion. In spite of the progress, democracy in most of our Member States faces fragility, particularly due to the menace of corruption,” he said.

He expressed concern on the increasing adoption of crypto-currencies and other emerging forms of online financial systems, saying that it has introduced new risks and vulnerabilities across member states as the financial industry evolves in West Africa.

The commissioner added that this evolution necessitated the need for anti-corruption institutions to develop specialised skills and knowledge to effectively combat these crimes.

“This (training) is part of our renewed commitment to strengthen anti-corruption institutions with advanced investigative techniques to detect, counter, and recover assets linked to financial crimes,” Mr Musah noted.

He also stressed the need to tackle illicit financial flows in the region.

“As we work toward realising the ECOWAS Vision 2050, tackling corruption and illicit financial flows (IFFs) is essential to achieving sustainable development and regional stability.”

He painted a picture of a bright future, saying Africa is making progress in supporting the deepening of democratic governance norms and practices within the region.

‘Strategic partnership’

Also speaking at the gathering, Ola Olukoyede, chairman of the Economic and Financial Crimes Commission (EFCC), explained that the training was as a result of a strategic partnership between the Network of Anti-Corruption Institutions in West Africa (NACIWA), EFCC and the ECOWAS commission.

“It reflects our shared determination to go beyond rhetoric and invest in tangible capacity-building efforts that enhance the operational capabilities of our institutions.

“Today, we welcome participants from across the sub-region, men and women who are on the frontlines of the fight against corruption, money laundering, terrorism financing, and other financial crimes,” the lead of the Nigerian anti-graft agency noted.

Illicit Flows

The World Bank says illicit financial flows reduce domestic resources and tax revenue needed to fund poverty-reducing programs and infrastructure in developing countries; accordingly, they are receiving growing attention as a key development challenge.

Experts say that illicit and tax avoidance related financial flows (ITAFF) have significant impact on the economic stability of a country and the global financial system as they can drain foreign exchange reserves, distort competition, inflate prices for real estate, lower tax receipts, and reduce government revenue.

Individuals and entities that perpetrate illicit finance divert resources from public spending and cut into the capital available for private investment while such flows can encourage criminal activity, undermine the rule of law, erode trust in public institutions, and threaten political stability.

Many African countries lose billions of dollars in capital to illicit flows, which relate principally to commercial transactions, tax evasion, criminal activities (money laundering, and drug, arms and human trafficking), bribery, corruption and abuse of office.