Experts from within and outside Africa recently converged on Abuja to find the solution to the scourge of illicit flow of money, which, more recent reports say, bleed Nigeria and other African countries of about $100bn annually. ADE ADESOMOJU reports
The High Level Panel on Illicit Financial Flows from Africa, chaired by a former President of South Africa, Thabo Mbeki, submitted its final report to the African Union Commission/United Nations Economic Commission in February 2015.
It was estimated in the report that Africa was losing over $50bn through illicit financial flows annually.
The UNECA suggests on its website that the $50bn “may well be short of reality as accurate data does not exist for all transactions and for all African countries”.
Even at that, the conservative figure of $50bn is said to be “approximately double the official development assistance that Africa receives”.
The effects of the huge losses on Africa are glaring – “the draining of foreign exchange reserves; reduced tax collection; cancelling out of investment inflows and worsening of poverty”.
The report indicates that such outflows “undermine the rule of law, stifle trade and worsen macroeconomic conditions”.
These outflows are said to be facilitated by “some 60 international tax havens and secrecy jurisdictions that enable the creating and operating of millions of disguised corporations, anonymous trust accounts, and fake charitable foundations”.
Other techniques used are said to include money laundering and transfer pricing.
With Nigeria said to be the victim of estimated 70 per cent of the illicit financial flows from West Africa, it implies that the nation is among the worst hit on the African continent.
This was why, for the second time, the Prof Itse Sagay-led Presidential Advisory Committee Against Corruption Nigeria recently organised the International Conference on Combating Illicit Financial Flows and Enhancing Asset Recovery for Sustainable Development.
The recently-concluded second edition organised by PACAC in collaboration with the African Union, Ministry of Foreign Affairs, Federal Inland Revenue Service; and the Federal Ministry of Justice, held at the NAF International Conference Centre, Abuja between September 11 to 12.
It could not have held at a better time than now that Nigeria is grappling with an alleged case of IFFs involving the telecommunication giant, the MTN.
In the case, which its ripples have yet to die, the Central Bank of Nigeria imposed heavy fines, totalling N5.87bn, on four banks under its regulatory purview for alleged illegal funds repatriation.
It also directed the managements of the banks and MTN Nigeria Communications Limited to immediately refund to the apex bank $8,134,312,397.63, which was alleged to have been illegally repatriated by the company.
A statement from the CBN said it asked the banks and MTN to refund the money for what it described as a “flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006”.
The four banks that came under the sledge hammer of the CBN for the alleged violations are Standard Chartered Bank, Stanbic IBTC, Citibank and Diamond Bank.
Setting the tone for the deliberations that spanned two days, the keynote speaker, the Deputy Executive Secretary and Chief Economist, United Nations Economic Commission for Africa, Dr Abdalla Hamdok, said latest estimates indicated that within the period of 2000 to 2015, Africa lost $73bn annually through illicit financial flows from commercial activities alone.
He said the $73bn added to losses through other channels, Africa could be losing about $100bn annually.
He said, “Indeed, the latest estimates from ECA indicate that over the period between 2000 and 2015, Africa lost $73bn annually through illicit financial flows from commercial activities alone.
“This is in addition to around $27bn estimated net annual losses through other channels.
“Taken together, this represents about $100bn annually, which represents around four per cent of the continent’s GDP. We know this to be a very conservative estimate.”
He said in addition to the financial drain it constituted, IFFs “weaken and undermine the integrity of state institutions, shifting resources from the licit to illicit economy and worsening income distribution”.
He added that “illicit financial also fuel conflict”.
He identified three components of illicit financial flows to comprise the commercial, the criminal and the corruption components.
According to him, the commercial component arises primarily from business-related activities, and manifests in the forms of abusive transfer pricing, wrong invoicing, including of services and intangibles and unequal contracts.
The criminal activities component, which he noted essentially kept transactions out of the purview of the law enforcement agencies or revenue authorities, included fraud in the financial sector, such as money laundering; and money involved in drug, human and arms trafficking and smuggling.
On the corruption component, he said, it cuts across all categories of illicit financial flows, adding that it “is often seen to be synonymous with public sector corruption, such as bribery and abuse of office, usually in public procurement.”
Hamdok stressed that IFF represents a substantial financial drain on the African continent, which, he noted, reduces the ability to make the investments needed in education, health, science, technology and infrastructure to achieve the goal of industrialisation.
He said illicit financial flows were driven by a number of “push” and “pull” factors, with the most obvious of the “push” factors being “the desire to hide illicit wealth”.
He also listed double taxation as another factor driving IFF.
The “pull” factors, according to him, include “the existence of financial secrecy jurisdictions and/or tax havens”.
As part of the solutions, Hamdok urged African states’ customs authorities to “proactively use available databases containing information on comparable pricing of world trade in goods to analyse imports and exports”.
He also called on African states to urgently establish or strengthen independent institutions and agencies of government charged with the responsibility of preventing illicit financial flows.
On his part, Vice-President Yemi Osinbajo, who was represented by the Special Adviser to the President on Economic Matters, Dr Yemi Dipeolu, said illicit financial flows ought to attract as much outrage as drug trafficking, human trafficking and terrorist financing.
He said, “We must recognise that progress in the fight against illicit financial flows requires that we focus on tackling cross-border flows of corrupt and criminal activities as well as the ways and means by which they are facilitated.
“This will require collaboration and exchange of information amongst countries.”
Calling on victim countries to develop domestic capacity to prevent and repatriate resources stolen through illicit financial flows, Osinbajo said the recoveries should be used to promote development and advance the interest and welfare of the people through achieving sustainable development goals.
He said, “Above all, we must remain committed to using the resources acquired from blocking illicit financial flows or data recovered therefrom for promoting development and advancing the interest and welfare of our people, including by achieving the sustainable development goals.”
He gave the assurance that the Federal Government was committed to ensuring transparency, financial probity and the upholding of due process in public procurement and working in collaboration with regional bodies like the African Union and other international partners.
Onyeama, Falana and others suggest solutions
Nigeria’s Minister of Foreign Affairs, Geoffrey Onyeama, expressed sadness that countries that refused to return stolen assets to their legitimate owners were as guilty as those who stole them.
He noted that the difficulties faced in the restitution and recovery of assets from foreign countries to developing countries, where the resources were stolen, was mind-boggling.
He said, “For developing countries as ourselves, it’s so much more difficult; the kind of hurdles that we have to overcome.
“Large sums of money have been found in Jersey, for instance, and other countries are laying claim to them, because in getting to Jersey, the money passed through different jurisdictions. We haven’t been able to get the money back.
“We got some money back from Switzerland, but – my God! – when you look at the details, I was shocked and extremely angry at the process of recovery. Percentages were paid out to all kinds of institutions.
“To me, this is daylight robbery that these countries are perpetrating, and of course playing on the fact that we’re not the United States.
“So, it’s something we keep harping on, that these countries have to do a lot more, because at the end of the day, they are condoning huge theft and are accessories after the fact, in fact.
“If you’re making it difficult for legitimate owners to recover those assets, and then you allow your institutions and others take huge chunks from that asset for your own benefit, then you’re just as guilty of theft as those that transferred the money in the first place. This is totally unacceptable and totally immoral.”
On his part, a human rights lawyer, Mr. Femi Falana (SAN), said anti-corruption agencies must be well funded and strengthened.
In his contribution, a member of PACAC, Prof Femi Odekunle, who represented the committee’s chairman, Prof Itse Sagay (SAN), urged governments to tackle illicit financial flows by addressing the issues of weak and compromised regulatory structures, poor governance structures and reckless tax incentives that encouraged illicit financial flows.
Advocating that government should not compromise on its regulatory standards even while seeking foreign investments, he said, “You cannot worship a cow because you want to eat meat”.
The immediate-past Inspector-General of Police, Solomon Arase, who chaired the session on combating cross-border flow of illicit assets, advocated the need for intelligence-based policing.
Jonathan Benton, who is formerly of the National Crime Agency, noted that it was difficult to combat cross-border flow of illicit assets through banks because some of them were complicit in the scheme.
But a representative of the Association of Compliance Officers of Banks, Opeyemi Adeojutelegan, said banks were contributing to the fight against IFF.
A partner at the auditing firm PriceWaterhouseCooper, Taiwo Oyedele, also noted that there must be consequences for the actions of intermediaries who facilitate IFF.
A former head of the Inter-Governmental Action Group against Money Laundering in West Africa, Prof Abdullahi Shehu, said it would take a collective action to successfully deal with IFF.
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