As a reporter in Uganda, I often saw how access to quality health care and education was limited because of low government revenues and budget allocations. While Uganda and other African countries are certainly recipients of foreign aid from the West, and generate their own tax revenues, it is also clear that illicit financial flows are bleeding out of the African continent, enabled in part by the policies of the West. We now need new partnerships with Africa to “stop the bleeding”.
Africa imports many of the risks in illicit financial flows from outside the continent, losing, according to one UN estimate, US$88.6 billion, or 3.7 per cent of its gross domestic product (GDP), annually in illicit financial flows. It is not surprising given the relative importance of African countries’ economic relationships with countries outside the African continent compared to the intra-African intensity of economic relationships.
Choosing to contribute to society where it matters most remains a personal choice, and above the money or salaries received, a time came and my desire to advocate for good governance, upholding human rights and tax justice was too strong to ignore. Looking back over the years and now as a research and policy advocate, the January 2015 report by the African Union (AU)/United Nations Economic Commission for Africa (ECA) High-Level Panel on Illicit Financial Flows (IFFs) provided me – and many others – with a comprehensive analysis of the problem and a roadmap for reform. I’ve taken steps to play my part in this reform, first working at the Pan-African level and now with FACT in the U.S.
The problems of tax havens, financial Secrecy jurisdictions, and secrecy around the true, beneficial owners of companies, were among the most significant findings of this so-called “Mbeki Report”. Illicit financial flows impact African economies, societies, public budgets, and governance, as they do in all other countries.
While African governments can collectively address one side of these problems, outside governments like the U.S.and multilateral organizations, need to partner effectively with Africa and put their own house in order. That’s why I’m excited in my new role with the FACT Coalition to contribute to changing U.S. policies to stem illicit financial flows.
A fundamental principle emerging in African countries about tackling IFFs is exchanging tax information among countries as well as establishing registries of beneficial ownership. With the Biden Administration’s ambitious anti-corruption strategy in place, we hope to see 2022 as a ground-breaking year in terms of fighting corruption and the transgressions in the financial arena. With strong U.S. leadership, the rest of the world is encouraged to create the same or even better favorable environments in fighting corruption and upholding tax justice.
Meanwhile, several African countries are progressing in addressing corruption and curbing sources of Illicit financial flows. In contrast, others continue to contend with problems at the national and regional level, such as the lack of adequate regulatory frameworks, lack of information and telecommunication facilities, transportation, and relevant infrastructure, especially in the mining industries.
Lack of adequate funding and overreliance on unpredictable foreign assistance contribute to crippling government efforts toward financial self-sustainability. Governments face political, technical and human capacity challenges to tackle illicit financial flows, tax dodging, and the involvement of top government officials in corruption.
Targeting Where it Matters Most
The African continent has a growing number of influential players pushing for reforms, including the “Stop the Bleeding” campaign, an advocacy effort highlighting the key role civil society organizations are playing in using evidence to advocate for fair tax systems and reforms to stem illicit financial flows. Before joining FACT, I had the pleasure of working with the campaign to engage stakeholders, train journalists on tax transparency, and make sure campaign communications kept illicit financial flows as part of the conversation.
From the African context, IFFs contribute to political discontent, partly due to the reduced ability of governments to provide social services and the resentment of corruption associated with such crimes. These factors and more were evident during the Afro-Arab Spring. Advocacy efforts on the topic in North Africa remain particularly vocal in expressing their anger at the extent of their resources illicitly taken abroad and the cumbersome, lengthy, and costly repatriation of such funds.
The biggest cross-cutting challenge seen in comprehensive case studies is the lack of appropriate capacity to ensure that illicit outflows stop globally. In many cases, this does not entail acquiring additional resources but better using existing capacities. Uganda, for example, like many other African countries, has measures in place to counter money laundering, corruption, and other sources of IFFS, to the extent of having experts explain what rules mean to the general public, a move that shows that the capacity exists within the agencies. However, a lack of monitoring and enforcement has created or exacerbated loopholes in these regimes.
For collective measures, the Pan African Lawyers Union (PALU) published a substantial advocacy manual for lawyers pointing to the legal profession’s responsibility to help curb IFFs. Due to the nature of their duties and obligations, lawyers strategically facilitate and mediate economic and financial transactions, which gives them the “gatekeepers” role in the world of financial accountability and tax justice. I worked with PALU to make sure the tools were user friendly and reached the right audiences.
A New Partnership with Africa
In my new role with FACT, I’m excited to bring my experience, perspectives, and skills to help contribute to the fight against IFFs, this time from the U.S. side of the coin. This year will see important opportunities to forge a new U.S.-Africa partnership to fight IFFs. Later this year, President Biden will host the second US-Africa Leaders Summit. This will build from the 2014 US-Africa Leaders Summit event hosted by President Obama. Back then, some invited heads of state visiting the U.S. capital, such as Equatorial Guinea’s longtime authoritarian ruler, could have paid a visit to their multi-million dollar mansions in suburban Washington. Largely absent from the agenda was an honest conversation about illicit financial flows from Africa, including proceeds of corruption, and the U.S. role as a destination for political elites to park ill-gotten wealth.
With the new U.S. strategy to counter corruption, it’s time to reset the partnership with Africa. At the top of the agenda should be concrete commitments to “stop the bleeding” and end the U.S. role in facilitating the illicit financial flows from Africa that undermine development and democracy in both the U.S. and Africa. Working with the FACT Coalition, I plan to help make sure these issues are a top priority in U.S. engagement with Africa.