By Joni Akpederi
Developing countries are losing more than $1 trillion a year to illicit financial flows (IFFs), participants at a session on the subject, yesterday, were shocked to learn. Africa alone is deprived of $55 billion a year which experts say supercedes all overseas assistance and foreign investment entering the continent.
For every $1 given to developing countries in assistance, $10 is lost to illegal flows. A cynical observer was motivated to liken the entire unfortunate issue to “reverse Robin Hood”, a scenario in which resources taken from the poor are handed over to the rich.
Raymond Baker, president Global Financial Integrity considers illicit flows “the greatest economic impediment to sustainable development”. He asserts that they have devastating effects on developing countries’ ability to promote and achieve economic progress. Worse, they drain currency reserves, undermine free trade and ultimately limit poverty alleviation schemes.
Atiur Rahman, Governor Central Bank of Bangladesh agrees with Baker that bad as the figures are, they are conservative estimates from official sources only, barely scratching the surface of the actual losses to the global economy. The figures do not include flows leaking through illegal drug sales, sundry opaque cash transactions, proceeds of official corruption and hard-to-track service deals.
Baker believes the problem can be contained but wants everyone to “pivot from agreeing there’s problem to fixing it” through cross-border cooperation as much of the leakage comes from mis-invoicing in trade transactions. If all hands are on deck, he argues, illicit flows can be cut in half in 15 years time.
While it is right for multilateral institutions to continue foraging for resources to fund the “end-poverty” campaign, attention should be paid to the challenges posed by illicit flows. A Bank source says “the case is clear and must be dealt with. Governments are at risk and cannot function well with illicit monies floating around.”
Mogens Jensen, Denmark’s Minister for Trade and Development Cooperation concedes that had much of the illicit funds remained in Africa, the continent would look different. He is quick, though, to observe that “they (illicit flows) are not just a problem for the Global South but also for rich countries too.”