New UNCTAD Study on Illegal Transfers of Resources from Africa

According to the Economic Development in Africa Report 2020, the consequences of illicit financial flows (IFFs) from Africa are severe. Measuring illicit activities is difficult and only little data is available, so researchers have to measure the channels, such as trade or financial transactions that are used to transfer funds abroad. There are 3 main channels: (i) the physical smuggling of goods (particularly gold bullion) or currency, (ii) financial and (iii) trade transactions. The first 2 channels leave no trace in trade records. The report estimates that in 2015, $40 billion left the continent clandestinely, an estimate that only covers trade-related IFFs and includes some elements other than IFFs. UNCTAD defines IFFs as “cross-border financial flows that are illicit in origin, transfer or use.” They can be generated by many activities, “including criminal ones like illegal markets, corruption or smuggling, and commercial ones like tax evasion or aggressive tax avoidance through trade misinvoicing or profit-shifting to lower tax-jurisdictions.” If these practices were curtailed resources would be available for greater investment in Africa.