AU to launch multi-donor action to stem illicit financial flows

The African Union Commission, through the Department of Economic Affairs, is set to launch a multi-donor action to add to existing mechanisms established to stem illicit outflows.

Scheduled for launch by Dec 4, the multi-donor action aims to strengthen the capacities of the AU Commission to play a pivotal role in coordinating anti-illicit financial flows policies on the continent.

Illicit financial flows are movements of money and assets across borders which are illegal in source, transfer or use.

The multi-donor action focuses on the implementation of country pilot measures via pan-African networks African Tax Administration Forum, Collaborative Africa Budget Reform Initiative, African Organization of Public Accounts Committees and the African Organization of Supreme Audit Institutions.

The action is embedded in wider international initiatives. Among them are the Addis Tax Initiative, the Resolution on the Impact of Illicit Financial Flows on Development Finance and the AU special Declaration on Illicit Financial Flows.

The project is co-financed by the European Union and the German Federal Ministry of Economic Development and Cooperation, and will be implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit through the Good Financial Governance in Africa Programme.

Illicit financial flows have robbed Africa of its prospects, undermining transparency and accountability and eroding trust in African institutions.

These flows represent a major drain on capital and revenues in the continent, undermining productive capacity and Africa's prospects for achieving sustainable development goals.

According to the United Nations Conference on Trade and Development, Africa could save $89 billion, equivalent to 3.7 percent of the continent's gross domestic product, every year by curbing illicit financial flows.

The amount of Official Development Aid of $48 billion and foreign direct investment of $54 billion received on average annually between 2013 and 2015 amounts to nearly the same amount lost in illicit financial outflows, the UN Conference on Trade and Development said.

Illicit financial flows are often associated with the extractive sector as extractive industries are particularly vulnerable to the flows due to the complex and elaborate global value chains associated with the sector, the AU commission said.

Additionally, lack of financial transparency in the extractive sector frequently allows for sector-wide corruption and prevents governments from collecting needed revenue.

The AU commission said the Extractive Industries Transparency Initiative and the International Council on Mining and Metals, along with international donors, have provided a wealth of lessons learned and best practices.

However, the initiatives have primarily remained fragmented and have yet to be scaled up and fully integrated into broader sustainable development strategies.

To address the existing and emerging gaps, several initiatives are being undertaken to curb illicit financial flows on the continent.

The establishment of the High-Level Panel on Illicit Financial Flows led by Thabo Mbeki, the former president of South Africa, was a stepping stone to ensure Africa's accelerated and sustained development, relying as much as possible on its own resources.

The African Union is also in strategic partnerships for closer collaboration in addressing the existing and emerging challenges and gaps in the fight against the outflows.

Such partnership includes the African Tax Administration Forum partnership, the Global Forum where the AU Commission sits as an associate member or observer, the illicit financial flows and oil commodity trading, a joint project of AU commission and the Organization for Economic Cooperation and Development.