“Tackling Illicit Financial Flows together - An African Approach to a Global Phenomenon”
Eli De Friend, CAPRESE
The Deutsche Gesellschaft für internationale Zusammenarbeit (GIZ) GmbH regional programme, "Good Financial Governance in Africa" ("GFG in Africa") provides technical support to four pan-African networks, AFROPAC (African Organisation of Public Accounts Committees), AFROSAI (African Organisation of Supreme Audit Institutions), ATAF (African Tax Administration Forum), CABRI (Collaborative Africa Budget Reform Initiative). Within the context of this partnership, GIZ supported the 4 GFG partner networks in their organisation of an international conference on Illicit Financial Flows (IFF) entitled “Tackling Illicit Financial Flows together - An African Approach to a Global Phenomenon” that took place on 24-26th May 2017, in Yaoundé, Cameroon.
During three days of presentations, discussions, workshops, representatives of Supreme Audit institutions , senior tax officials, parliamentarians, budget specialists from finance ministries and technical experts from international organisations, non-governmental organisations and civil society came together to come to a common understanding of the extent, complexity and negative impact of Illicit Financial Flows, debate on measures to fight the problem and to show their commitment to the ongoing effort by signing a Conference Declaration, entitled Declaration on Curbing Illicit Financial Flows Through Good Financial Governance “United Against Illicit Financial Flows”.
Given the significant support for the initiative shown by the 214 delegates from 42 countries of which 33 were African, an African Union (AU) official highlighted the potential for exploring collaboration between the AU and the four partner networks.
Background and Context
The GFG in Africa programme is implemented by the Deutsche Gesellschaft für internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development and the European Union and promotes transparency, accountability and domestic resource mobilisation in Africa.
Its objective is to foster Good Financial Governance in Africa by equipping decision-makers in African public finance with the necessary skills and competencies to improve Good Financial Governance, cooperating with pan-African networks:
the African Organisation for Public Accounts Committees (AFROPAC), in the area of parliamentary oversight,
the African Organisation for Supreme Audit Institutions (AFROSAI), in the area of external financial control and auditing,
the African Tax Administration Forum (ATAF), in the area of tax policy and administration,
the Collaborative Africa Budget Reform Initiative (CABRI), in the area of budget planning and implementation.
The programme has addressed the cross-cutting topic of Illicit Financial Flows (IFFs) since early 2016 and has launched a coordinated approach to curb IFFs with the four pan-African partner networks.
In this context, the pan-African networks organized the high level conference on IFFs in Yaoundé, Cameroon during 24-26 May 2017, of which this document is the Moderator’s report.
Introduction and conference objectives
The objectives, as defined by the networks, of this conference were as follows:
Attendees to develop a shared and more nuanced understanding of IFFs’ challenges including the different pillars & levels.
Attendees to re-affirm their commitment to the Good Financial Governance Declaration (with new focus on IFFs and concrete strategy), underscoring the importance of cooperation (GFG approach), and ensuring the sustainability of the network.
Networks present their approaches to tackle IFFs.
While co-organised by all four networks, the conference was hosted by AFROSAI and Cameroon’s Contrôle Supérieur de l’Etat. High level dignitaries, including Heads of Supreme Audit Institutions, Parliamentarians, Commissioner Generals and Ministers of Finance attended the conference.
Design
The first day was designed to focus on establishing a common understanding of Illicit Financial Flows, including an introduction about what constitutes IFFs, what forms they take, and in which ways they need to be tackled (policy, legislation, implementation and enforcement, information exchange etc). This first day was anchored around a draft Declaration On Curbing Illicit Financial Flows Through Good Financial Governance - “United Against Illicit Financial Flows” , which had been drafted collaboratively by the four networks.
Following the high level commitment day, the second day would provide an opportunity to engage on a technical level. One of the fundamental challenges when discussing IFFs remains bridging the gap between political processes and the implementation of those processes at both national and international level. Hence a logical point of departure would be to visualise both the key stakeholders involved in the ongoing activities of partner networks, as well as the merits of inter-agency cooperation.
Break-away sessions would serve not only to invigorate discussion and debate among the attendees, but they would allow for country showcases to demonstrate what happens in practice, discussions surrounding the concept of inter-agency cooperation, good practices such as models of (cooperation) agreements, model legislation, assessment tools, as well as technical assistance.
Three themes were chosen for the breakout sessions were as follows: Inter-Agency Cooperation to Fight Illicit Financial Flows stemming from
Breakout 1: Commercial activities
Breakout 2: Corruption
Breakout 3: Criminal activities
Each session was open to all participants, irrespective of their institutional background and furthermore there was a hope that participants would attend individual sessions from different themes.
It was agreed that ATAF would prepare and moderate the session on commercial activities, CABRI would handle the session on corruption and AFROSAI would run the session relating to criminal activities. While the content of each theme was in the hands of the organizing network, the co-organisers developed a concept of structuring individual sessions which would each respect strict coherence in timing in order to allow participants to switch from one theme to another at the coffee and lunch breaks.
On the basis of the first two days, with the hope that some concrete measures and actions would be consolidated from the breakout sessions, day three would serve to chart the way forward. Given the importance of communicating for results, AFROPAC offered to take responsibility for a session on Communication for the third day.
In order to take the discussion of the conference beyond the four walls of the conference venue, it was decided to use the Twitter hashtag #ConferenceIFFYaounde, allowing conference delegates to share their experience with colleagues and those unable to attend the conference to contribute through this social media.
Participants
Invitations to the conference were extended to experts and professionals of the Good Governance network in Africa, notably:
Supreme Audit Institutions (SAIs) members of AFROSAI;
Senators, Parliamentarians and Clerks of the Budget and Finance Committees, as well as Parliamentary Account Committees in African Parliaments and other members of AFROPAC;
Revenue Authorities, ;
Ministries of Finance, Institutions and Agencies in African countries in charge of Budget and other members of CABRI
Experts and officials of the African Union
Experts from the High-Level Panel on Illicit Financial Flows from Africa;
Technical and financial partners (African Development Bank, World Bank, GIZ, European Union, OECDError! Bookmark not defined.) and Diplomatic Corps represented in Yaoundé;
Institutions and NGOs involved in the management of Public finance (GFI,…);
Others experts, representatives of non-governmental organisations and civil society organisations.
While more than 250 people attended the opening ceremony, including the Prime Minister and other dignitaries, as well as journalists from Cameroon, 214 participants from 42 countries remained for the full three days of the conference duration.
A list of registered participants is included in Appendix 4 – List of participants.
Figure 1. Mme Françoise Collet, Ambassador of the Delegation of the European Union to the Republic of Cameroon
Conference proceedings
Day 1 – Opening ceremony and Plenary Sessions
Plenary 1:- Opening ceremony
The Conference was opened under the auspices of the Prime Minister of the Republic of Cameroon, Mr Philemon YANG after keynote speeches from distinguished representatives of the various institutions. The objective of these introductory comments was to set the stage for an informed discussion on the topic, establish clear relationships between the concept of Good Financial Governance and Illicit Financial Flows, and the need to develop a general awareness on the topic and a strong political and policy response.
In her capacity as head of AFROSAI and host of the conference, Madame MBAH ACHA Rose FOMUNDAM, Minister Delegate at the Presidency of Cameroon in charge of the Supreme State Control, gave an opening speech in which she explained the importance of having a common vision of Good Financial Governance throughout the budget cycle is necessary in order to combat Illicit Financial Flows.
Her Excellency, Mme Françoise COLLET, Ambassador of the European Union Delegation to Cameroon, then spoke about the European Unions’ motivation in collaboration with Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) to finance and support the Good Financial Governance in Africa programme, mentioning the negative impact of losing approximately 50 billion dollars per year. Specifically, she mentioned three critical areas to focus on:
Reinforce national institutions
Strengthen international cooperation
Close legal loopholes.
In the absence of his Excellency, Dr. Hans-Dieter Stell, the Ambassador of the Federal Republic of Germany in Yaoundé, the Chargé d’Affaires, Mr Axel SAURER, spoke about Germany’s broader partnership with Cameroon in the area of democracy and human rights and how these have a direct impact on Illicit Financial Flows.
Figure 2. "Family Photo" with Cameroon Dignitaries and Distinguished Guests
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Plenary 2: Social & Economic Impacts of Illicit Financial Flows in African Countries
The purpose of this session was to introduce the complexity of IFFs, introducing a shared definition, thereby setting the context for two days of discussions, and to underscore the repercussions of leaving this phenomenon unchecked. The panellists for this session were:
Her Excellency, Mme Françoise COLLET, Ambassador of the EU Delegation in Cameroon His Excellency, Ambassador Olusegun APATA, member of the UN High Level Panel on Illicit Financial Flows Mrs. Estherine FOTABONG, Director of Programme Implementation and Coordination at the NEPAD Planning and Coordinating Agency (NEPAD Agency) Ms. Heather LOWE, Legal Counsel and Director of Government Affairs, Global Financial Integrity (GFI) Mr. David NGUYEN-THANH, Head of Unit Public Finance, Administration, and Anti-Corruption, GIZ
Mme Collet, spoke about how Illicit Financial Flows are not just an African problem, but also touch countries within the European Union. EU countries are not just destinations or recipients of illicit funds flowing out of Africa. Multinationals also exploit inequalities in tax regimes within Europe, which facilitate base erosion and profit-shifting. Mechanisms, tools and international agreements have been established to reduce IFFs at all levels. She reiterated the EU’s commitment to fighting IFFs from Africa, of which the GFG in Africa programme is just one project. Specific recommendations included using tools developed by ATAF to close legal loopholes to mitigate tax avoidance, International Centre for Asset Recovery (ICAR) to recuperate lost revenue, as well as the OECD to improve visibility of tax reporting of multi-nationals. She also made a personal comment about her commitment regarding this subject, informing the assembly that before joining the European Union, she was a tax administrator in the French Ministry of Finance, and so understood challenges faced by conference delegates.
Mr Apata, started his intervention by explaining the difficult context in which the High Level Panel had to work and the extent and severity of the problems related to IFFs. He highlighted the findings and recommendations made by the Panel report, encouraging the assembled representatives of national governments to implement the recommendations of the report of the High Level Panel. In answer to the question what had changed since the High Level Panel published its main report in 2014, Mr Apata mentioned a case uncovered by the CBS network in which law firms accepted to indulge IFFs, the leaks of the Panama papers as well as the Nigerian renegotiation of oil production sharing contracts. All of these events were significant examples of how IFFs can be tackled, i.e. investigative journalism, whistle-blowers and political will power.
Mrs. Fotabong, echoed the words of previous speakers of the extent and severity of IFFs citing the figure of $50 billion, before introducing the work of the NEPAD Planning and Coordinating Agency and encouraging national and international institutions to develop the capacity of African law enforcement authorities and to put pressure on governments regarding IFFs. She specifically drew attention to Agenda 2063 of the African Union.
Ms Lowe, explained how she and her colleagues in GFI work with governments around the world to raise awareness and lobby for policies and legislation to combat IFFs. In particular, she mentioned she was hired to drive the effort to encourage OECD-based organisation to “own up”, making the recommendation for multi-nationals to be more transparent and publish reports regarding their operations and for governments to introduce systematic financial information exchange. She raised participants’ attention to the fact that on May 13, 2017, the G7 issued the Bari Declaration on Fighting Tax Crimes and Other Illicit Financial Flows.
Mr Nguyen-Thanh made a brief presentation summarising the policy of Germany’s BMZ and how GIZ implements this, both at global and country level, mentioning the Polifund
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programme on IFFs and gave examples both from Africa (Kenya and Sierra Leone) and Latin America. He congratulated, in particular, the work of the GFG in Africa programme.
Figure 3. Illicit Financial Flows out of Africa and Development Aid1
Plenary 3: Presenting the GFG-IFF Draft Declaration
The third plenary session, built on the previous one, with Dr. Barbara DUTZLER, head of GIZ’s GFG in Africa programme, explaining how the programme works with regional networks, and that with regard to the subject of IFFs, it is all the more critical for these networks to collaborate. In this light, the networks had drafted the GFG IFF Declaration, building upon the networks’ GFG declaration adopted in 2012 in Arusha by Ministers of Finance and Governors at the occasion of the 47th Annual Meeting of the African Development Bank. Dr Dutzler explained that the declaration is a living document and that it would certainly benefit from the comments and suggestions of the distinguished guests in the room.
The Honourable Senator Edward DAGOSEH of the Liberian parliament, member of the Joint Public Accounts Committee and Chairman of AFROPAC presented the principles conveyed in the declaration, namely transparency, efficiency and accountability. He
1 Source: Illicit Financial Flows Report of the High Level Panel on Illicit Financial Flows from Africa, 2015, commissioned by the AU/ECA Conference of Ministers of Finance, Planning and Economic Development; African Economic Outlook, 2014
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continued his remarks by stressing the need for international coordination to effectively curb Illicit Financial Flows. Therefore, the declaration should express the commitment of the participants to more specific actions to be taken in the fight against illicit capital movements and to win the support of all the stakeholders concerned by this issue.
Representatives of the other GFG networks were invited to add their own sentiment or comments on the declaration.
Mr. Logan WORT, Executive Secretary of ATAF touched on the need to chase down the assets leaving Africa and then asked the question “Can we get the money back?”.
Mr Neil COLE, Executive Secretary of CABRI added that other mechanisms would be needed beyond the current version of the declaration in order to tackle the inherent complexity of the IFF issue.
Representing AFROSAI in this session, M. El Haj HASSAN mentioned the leadership role that AFROSAI could offer in the fight against IFFs and the need to develop processes that would anchor the noble ideals of the declaration.
Finally, Mr Jean-Denis GABIKINI, Head of Economic Integration and Regional Affairs, African Union Commission was asked to convey the extent to which he felt that the work of the networks and the GFG in Africa programme, through their commitment to the declaration, could support the work of the African Union. Mr Gabikini prefaced his comments with an affirmation that the AU has more charters, agreements, than any other organisation in the world. He went on to reiterate how much work still remains to be done in the fight against IFFs and that the conference declaration certainly is coherent with the AU’s policy on the subject of IFFs. Amongst other points, he recommended liaising more intensely with AFRIPOL, designating a head of state as a champion of the fight against IFFs and organising an African against IFFs year.
Senator DAGOSEH then symbolically handed a paper copy of the Declaration to the Honourable James Klutse AVEDZI, Chairman, Public Accounts Committee (PAC), Parliament of Ghana.
Conference delegates were invited to submit their suggestions to strengthen the declaration by:
leaving a written note in one of the suggestion boxes provided,
posting it on Twitter hashtag #ConferenceIFFYaounde or
sending an email to Ms Rosa DUBE, who could collate all the proposals in preparation for Plenary Session 7 on Day 3.
Plenary 4: Presentation of existing approaches and tools of GFG networks regarding IFF
Following directly on from Plenary Session 3, the fourth session was a platform for each partner network to present key initiatives they are currently undertaking in the fight against IFFs, including results of any country pilots and capacity development initiatives or products/services.
Representing AFROPAC in this session was the Honourable Mr. Aleke MENYANI of the Malawi parliament and Deputy Secretary General of AFROPAC. He recommended more intense collaboration between nations and a concrete action plan to cement the commitment behind the declaration. To this effect, he mentioned the example of the Lomé action plan, which requires and ensures tight collaboration between AFROPAC members when it comes to reforms of public finances of the relevant countries.
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AFROSAI was introduced by Mrs MBAH ACHA Rose FOMUNDAM speaking about how AFROSAI is structured with specific regional organisations for the three principle language groups in Africa (English, French and Arabic). She then introduced Mr. Wynand WENTZEL of AFROSAI-E and M. Alfred ENOH of the PASIE project commissioned by CREFIAF, who gave examples of how their regional networks are working in concrete terms to fight IFFs.
Mr. Logan WORT then illustrated how ATAF is fighting Illicit Financial Flows, including the various approaches being taken to address specific types of IFFs and the tools and products ATAF has developed. He recommended that, domestically, each nation needs to define their own mechanisms to reduce the risk of Illicit Financial Flows, but at the same time multilateral instruments should be developed to tackle the issues stemming from inconsistencies across different fiscal regimes. The final slide of ATAF’s presentation showed the following list of recommendations.
Continue partnership across the continent with other partner networks
Provide technical data and case studies to Civil Society Organisations (CSOs) for activism
Report to the GFG partners the ATAF success and challenges in addressing IFFs,
Continue the ATAF Country Programmes as these improve legislation and yield revenue
Increase measures to strengthen capacities in tax administrations and customs
Provide training to law makers on the effects on IFFs and solutions provided
Bring together members of the Public Finance Family together (tax, treasury, financial intelligence, customs, reserve bank).
CABRI’s presentation was given by Mr Neil Cole. He used the case of South Africa to demonstrate that transparency, which has been embraced in the country, which now places 3rd in the world in the Open Budget Index, on its own is insufficient. Transparency must go hand in hand with accountability to be effective in preventing corruption, mispricing and other Illicit Financial Flows. He recommended strengthening institutional capabilities, using the extractives sector as an example, suggesting that countries need to be able to measure:
how much minerals they have,
how much they can extract,
how much can they collect.
Amongst the comments and questions from the floor, Hon. Nicholas GUMBO from Kenya and Secretary General of AFROPAC highlighted the need to work on both sides of IFF.
Plenary 5: Creating a Level Playing Field: Initiatives Aimed at fighting Illicit Financial Flows
The final session of the day was designed to look at a broader scope beyond the GFG in Africa networks and take stock of ongoing initiatives and commitments networks mainly on the receiving end of the outflows. This session aimed at highlighting the importance of enforcing the conventions already in place. The panel was chaired and moderated by Mrs Estherine Fotabong who introduced her fellow panellists:
Mrs Dorcas ODOUR, Deputy Director of Public Prosecution in Kenya, Mrs Caroline MALCOLM, Advisor in the International Cooperation and Tax Administration Division, OECD, Mr Fitzroy DRAYTON, Adviser Asset Forfeiture/AML/Proceeds of Crime, ARINSA, M Jean MBALLA MBALLA, CRADEC/TJN
The session started with a video recorded by Mr Andres KNOBEL of Tax Justice Network in which he presented the financial secrecy index.
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Mr Jean Mballa Mballa highlighted the link between funding of terrorism or armed conflict and the funding of sustainable development, insofar as Illicit Financial Flows, even those taking advantage of tax inconsistencies in tax legislation, can be directed towards the funding of the former instead of the latter. CRADEC along with the Tax Justice Network have made the following recommendations to African nations:
Regulate in depth economic activities to reduce the informal nature conducive to more illegality in financial matters including in mineral resource exploitation;
Control effectively the fair use of tax incentives mechanism and the range of economic activities which can be used to generate illicit outflows in order to optimize the share of revenue accruing from mineral resource extraction by multinational companies (MNC)s;
Implement and harmonize policies in regional economic communities with respect to the strategic action plan of the Africa Mining Vision (AMV).
Fight against aggressive tax optimization (transfer pricing abuse, mis-invoicing, under-capitalization, etc.) by MNCs conducting to tax fraud and evasion;
Promote transparency and accountability in the management of mineral revenue;
Reinforce means and power to Financial Intelligence Units for effective financial investigation at up-stream and down-stream of economic activities;
Close the gap between State Control and Audit Institutions and the judiciary system;
Raise awareness, engage and empower the public including youth and women in the fight against Illicit Financial Flows.
Mrs Dorcas Odour spoke from her perspective as a prosecutor about the need for inter-agency and international cooperation and the need for African countries to enforce the laws and international agreements to which they are committed. She also mentioned the need for more institutional and individual capacity building and raised awareness. First and foremost, however, laws needed to be updated to be in line with international agreements and model legislations. A prosecutor could only prosecute against the legal framework of her country; what was not regulated could not be prosecuted.
Ms Caroline Malcolm briefly built on what other speakers had mentioned regarding measures that have been developed to combat IFFs in the OECD countries, recognising that some of these tools may need to be adapted to the African context. She mentioned a network of 17 African countries currently piloting measures to fight against tax fraud. She also recommended increased cooperation between partners and a more appropriate framework for capacity building and training.
Mr Fitzroy Drayton introduced participants to the work of Asset Recovery Informal Network Southern Africa (ARINSA) whose 13 members exchange information informally in order to facilitate the identification, tracing, freezing, seizure, confiscation and recovery of proceeds and instrumentalities of crime. In particular he mentioned the case of rhinoceros horns sold in Asia, where states knew how many rhino horns had been taken and they knew the retail price of the illicit material in receiving countries. They were thus able to calculate the value of this specific illicit outflow. Another example he mentioned to illustrate the necessity for international cooperation was the successful repatriation of assets by Mauritius. Even in the absence of formal cooperation mechanisms, by knowing their respective counterparts in other countries, people involved in the investigations could gather information internationally and successfully conclude the cases.
After each panellist had spoken, Mrs Fotabong invited members of the audience to submit questions to the panel.
Mrs Odour answered a question from a Ghanaian delegate regarding the protection of whistle-blowers and key witnesses, suggesting that because of insufficient funds for such protection, it would be wiser to base investigations on hard evidence rather than verbal testimony. Answering questions from delegates from Uganda and Cameroon, Mr Mballa
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Mballa underlined the need to change attitudes and mindsets and greater sense of the common good in order to strengthen the governance structures already in place and generally be more rigorous in the application of law.
Day 2 - Breakout Sessions
Introduction
The second day of the conference was organised into three parallel breakout sessions. As previously mentioned, the breakout sessions were prepared by ATAF, CABRI and AFROSAI, respectively on the themes of
Breakout 1: Inter-Agency Cooperation to Fight Illicit Financial Flows stemming from Commercial Activities
Breakout 2: Inter-Agency Cooperation to Fight Illicit Financial Flows stemming from Corruption
Breakout 3: Inter-Agency Cooperation to Fight Illicit Financial Flows stemming from Criminal Activities. Commercial Activities ATAF Corruption CABRI Criminal Activities AFROSAI IFFs in the mining sector: Case study from Zambia; Expert discussion on the role of the different institutions to tackle IFFs Expert Panel & facilitated discussion on Anti-corruption lessons & experiences Overview of Illicit Financial Flows from criminal activities Coffee Break (delegates have possibility of switching themes) Exchange of information World Café Style Corruption Case Studies Case Studies on Money Laundering, Smuggling/Financial Fraud, Cybercrime Lunch Break (delegates have possibility of switching themes) Tools for tax and customs collaboration; suggestions for a joint action plan Master-class on tackling Corruption Identification of inter-agency cooperation models in combating IFF from criminal activities & development of action plan
Figure 4. Structure of Breakout Sessions
Breakout Session Reporting Framework
During these breakout sessions, “rapporteurs” took notes as input to the presentation of results in subsequent plenary session, using the following framework
What are the challenges on a country / regional / continental level?
What are good practices?
What are the gaps between good practices and what is actually happening?
What should be done and what is the way forward?
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Breakout 1: Commercial Activities
The aim of the breakout session on commercial activities was to identify and address the most demanding challenges with respect to IFFs, develop participants’ capacity to raise awareness of the IFF issue in their own country, thereby strengthening the ability of countries to address the issue of transfer pricing, to reduce the trade mispricing component of IFFs, and thus enhance their domestic resource mobilization. Concretely, ATAF hoped to use this opportunity to inform participants about the Agreement on Mutual Assistance on Tax Matters (AMATM)
The morning session started with a case study from the Mining Sector. Martin CHILESHE, an expert from the Zambia Revenue Authority (ZRA) presented the ZRA’s collaboration with other Zambian government agencies to counter Illicit Financial Flows (IFFs) through the under-valuation of copper and cobalt exports. This was followed by a presentation by Célestin AKAMTSENE and Daniel DUMAS on the PASIE programme, recently launched by CREFIAF. Finally, the Honourable Eric KOMBA of the Mines and Mineral Resources Committee of Sierra Leone, spoke briefly about the challenges facing authorities, when international borders are insufficiently monitored. Other crises, such as the Ebola epidemic, can be an additional obstacle to international investment. Amongst the questions and comments from the floor, Mr Fidelius NICHOLS from Botswana suggested that with regard to tax incentives, it might be more appropriate to consider tax reduction rather than tax exception.
Later in the day, the focus turned to the training of auditors with regard to the exchange of information. Joseph TANYI MBIANYOR, Head International Information Exchange Unit at the Directorate General of Taxes of Cameroon explained how the AMATAM and the OECD’s Convention on Mutual Administrative Assistance in Tax Matters offer legal platforms for countries to exchange information and execute simultaneous audits. Cameroon has recently aligned itself with OECD countries and G20 with respect to legislation and infrastructure to facilitate information exchange. As an example he mentioned a recent protocol signed between the tax and customs administrations. Participants raised questions on subjects as diverse as the repatriation of funds, which frequently requires the authorization of those responsible for the IFF in the first place and the exchange of information between tax authorities and supreme audit institutions.
This case was used by Ms. Eva KIRCH to illustrate effective interagency cooperation in the final session of the day. The last speaker of the day was Ms Caroline MALCOLM of the OECD, who presented a variety of tools to support administrations in their fight against IFFs.
In accordance with the Breakout Session Reporting Framework, participants in the breakout session on commercial activities identified the following key points.
Challenges
Trade mispricing: undervaluation of minerals
Identification of final customer & destination of exports
Tax administrations rarely exchange information
Tax administrations suffer from inconsistent data
Insufficient capacity & specialized knowledge in government institutions, on complex mining industry
Government agencies are working in silos
Antiquated legislation facilitates abusive transfer pricing, and is an obstacle to double taxation agreements and exchange of information.
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Figure 5. French-speaking table in World Café on Corruption
Good practice
Use a model double taxation agreement
Use ATAF’s Agreement on mutual assistance in tax matters
Review domestic legislation, regulations and risk assessment processes
Provide on-the-job training
Establish advanced pricing agreements to prevent abusive transfer pricing in extractive industries
Gaps
Lack of understanding of what constitutes IFFs
Poor access to information
Good legislation isn’t enforced due to weak institutions
Insufficient transparency regarding procedures, or TP negotiations
Way forward
Raising awareness in revenue authorities on multilateral Exchange of Information instruments, i.e. the Multilateral Agreement on Mutual Assistance in Tax Matters (AMATAM)
Creating a nexus between tax administrations and Ministries of Finance
Establishment of a central beneficial ownership registry
Sharing of expertise between revenue authorities
Establishment of independent laboratory facilities for verification of mineral qualities
Tax and Customs authorities should collaborate in joint risk assessments, sharing of information, organization of joint expert meetings and training activities
Auditors need to perform audits on government approach, compliance with international standards, audit administrative processes of revenue authorities and inform parliament.
Breakout 2: Corruption
The session on corruption, prepared by CABRI, was designed to illustrate the complexity of the fight against corruption. The morning started with a panel session on anti-corruption lessons and experiences. Mr Savior MWAMBWA explained how corruption is the major enabler of Illicit Financial Flows. The judicial system suffers through non-application of the law and exploitation of legal loopholes. He recommended increased inter-institutional cooperation facilitating improved monitoring. In responding to a question from the floor about what measures could be used to tackle IFFs, he recommended the separation of powers and better compensation of officials. One participant suggested anchoring a definition and illustration of “Illicit Financial Flows” in a formal text.
This was followed by a World Café-inspired interactive session, in which participants discussed 3 case studies of corruption. Sitting in groups of approximately 10 people at each table, the objective was to examine real life situations concerning corruption and determine how the problem might be addressed.
The final part of this session was the presentation of a threat and risk assessment tool tackling IFFs given by Ms Kathy NICOLAOU. Having previously worked in South Africa’s Financial Intelligence Centre (FIC) she was able to give this institutional perspective.
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In accordance with the Breakout Session Reporting Framework, participants in the breakout session on corruption identified the following key points.
Challenges
Corrupt practices taking advantage of systemic government weaknesses
Vested interests undermine regulatory structures
Government administrations understaffed, underfunded, no dialogue
Complexity of corruption is changing
Not just economic issue, it’s a political issue
Good practice
Political pressure, when applied at the right place, works
Keeping it simple: pay your tax authorities and civil servants well
Gaps
Lack of awareness (underlines role of MPs)
Accountability gap between government and civil society
Inter-agency cooperation is important, but in the absence of political will it is useless
No independent judiciary and prosecuting authorities
Need to have the end game in mind
Way forward
Strengthen institutional leadership to break silos
Apply political pressure with leadership by example
Strengthen international cooperation by developing models of cooperation and putting pressure on free-riding jurisdictions.
Breakout 3: Criminal Activities
After an introductory speech by Mme MBAH ACHA Rose FOMUNDAM, in which she explained that the breakout session on criminal activities would be anchored around three core themes, starting with presentations and then moving on to discussions and brainstorming. The three topics to be addressed were:
Money laundering;
Cybercrime;
Smuggling and related offences;
Mr Fitzroy DRAYTON of ARINSA gave a talk on the trafficking of animals and animal parts. This activity is estimated at representing a billion dollars in 3 years from now. From 2010-2012, 100,000 elephants were killed for their tusks. A similar number of living animals were illegally exported. ARINSA systematically fights poaching at an international level.
Mr. Alain Symphorien NDZIE from the Cameroon General Directorate of Customs talked about the different categories of smuggling from carbonated drinks to ivory and rhinoceros horn.
The presentations were followed by discussions on case studies on the same topics, aimed at identifying the major challenges related to IFFs stemming from criminal activity.
In accordance with the Breakout Session Reporting Framework, participants in the breakout session on criminal activities identified the following key points.
Challenges
The key challenges raised were:
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Figure 6. Dr. Barbara Dutzler of GIZ, presenting possible actions to combat IFFs stemming from cyber crime
Identification of criminal networks
Harmonisation and updating of legal texts and frameworks
Repatriation of funds arising from criminal activities
Reinvestment of the confiscated funds into infrastructure aimed at fighting IFFs
Way forward
The final activity of the day was a brainstorming on potential measures to address the various challenges.
Need for political commitment
Domestication of international legal
instruments
Enforcement and improvement of laws
and regulations
Develop the capacities of all actors
involved and in all areas (technical,
organisational, financial and
technological)
Strengthening of institutional
cooperation at both national and
international levels
Raise public and institutional
awareness on the subject of IFFs stemming from criminal activities.
Figure 7. Mr.Freddy NDJEMBA presenting the results of discussions on money laundering and other types of financial crime
Plenary 6: Presentation of Results of Break Away Sessions
In Plenary Session 6, the representatives of AFROSAI, ATAF and CABRI presented the output, results or conclusions from their respective sessions. Many of these elements were common to all three breakaway session themes.
Challenges
Poor communication/ exchange of information between institutions and nations
IFF is not just an economic issue, but also political
Government agencies and other institutions are working in silos
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Weak institutions, systems and leadership prevent reliable law enforcement, partially because they are significant facilitators of corruption, which is itself a challenge to the reduction of IFFs stemming from commercial and criminal activities.
Good practice
Ensure legislative texts are harmonised and up-to-date
Reinvest confiscated funds to further strengthen the institutions fighting IFFs
Commitment to ensure implementation of international standards
Integrated IT systems with real time access for all government agencies involved
Develop and deliver appropriate capacity building and training of all actors at all levels.
Gaps
Lack of appropriate up-to-date legislation
Insufficient domestic legislation to implement bi-/multilateral instruments facilitating Exchange of Information
Poor access to information
Lack of harmonised and reliable data
Lack of sufficient capacity & specialized knowledge in government institutions
Good legislation isn’t enforced due to weak institutions
Way forward
Domestication of international legal instruments
Enforcement and improvement of laws and regulations
Strengthen institutional cooperation nationally and internationally
Political commitment must be ensured, secured and developed
Organise joint expert meetings to reduce silo mentality
Organise joint training or secondments to reduce silo mentality and facilitate exchange of information, while developing capacity
The session closed with an interactive question and answer session, with questions on free trade zones and instruments at the disposal of governments. One question relating to immunity for heads of state and members of parliament was addressed by all the panellists, suggesting that the approach must depend on the specific cultural and political context of each nation.
In the evening, conference participants were invited to a Gala Dinner at the invitation of Madame Mbah Acha FOMUNDAM, Secretary General of AFROSAI.
Day 3 – Closing ceremony and Plenary Sessions
Plenary 7: Adoption of the Conference Declaration
To introduce the final day, it was announced that a significant number of suggestions to enhance the GFG IFF Declaration (see
Delegates and networks adopted the GFG IFF Declaration as the “Conference Declaration”, formally entitled Declaration on Curbing Illicit Financial Flows Through Good Financial Governance “United Against Illicit Financial Flows”. The conference declaration is based on and refers to the GFG IFF Declaration that was presented by Senator Dagoseh on the first day of the conference.
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Dr Barbara Dutzler invited the representatives of the four partner networks to sign a book as a symbol of their adoption of the Conference Declaration.
AFROPAC: Honourable Nicolas GUMBO, Secretary General, AFROPAC
AFROSAI: Madame MBAH ACHA Rose FOMUNDAM, Secretary General, AFROSAI.
ATAF: Ms Oluanke AKANNI, Group Head, Cross Border Transfer Pricing at Federal Inland Revenue Service of Nigeria, Council Chairman of ATAF.
CABRI: Mr Samuel KIIRU, Chief Economist, National Treasury, Kenya, Management Committee of CABRI
Figure 8. Signatures of the representatives of the four partner networks in the GFG in Africa program on the first
After the signing by the four networks, the book was laid out in front of the conference delegates, who were invited to sign the document and leave a comment if they so wished.
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Figure 9. Delegates signing the Conference Declaration
Plenary 8: If you can’t communicate it, then you can’t manage it
The final plenary theme was “Communications” and had been prepared by the AFROPAC General Secretariat. The Honourable Nicolas GUMBO talked about the importance, but also the sensitivity and complexity of effective communication, using anecdotes from his professional and private life. The other panellists were Ms Heather Lowe of GFI, Ms Kathy NICOLAU, a freelance consultant on IFFs, and Mr. Savior MWAMBWA of ActionAid.
Through an interactive session with questions from the Moderator and members of the audience, the panellists made a number of recommendations, including the following:
It is important to communicate what the effects of IFFs are to the general population, but also to favour politicians who speak out and act against IFFs.
It could be useful to bring some of the technical language associated with Illicit Financial Flows into the mainstream, so that call citizens come to understand the problem and why their governments are fighting it.
The panellists agreed that the use of slogans helps to drive the message home.
It is necessary to be aware of the politics of language, e.g. the term “tax haven” may not be as tactful as “jurisdiction offering an attractive fiscal policy”
It is necessary to be aware of the risks of over simplifying one’s language, e.g. “transfer pricing” which refers to necessary and legitimate activities by Multi-National Entities. What we are trying to fight against is “abusive transfer pricing” or “trade mis-pricing
At the same time, it is useful to coin phrases that convey the meaning clearly rather than sticking with the correct technical term, e.g. speak of the need to fight “shadow companies” instead of the need to get “beneficial ownership information”
Use traditional and innovative marketing techniques
It was suggested that rather than developing a communication and then trying to disseminate that communication, it might be more effective to find the right messenger, then a way of how to get the message across.
Closing ceremony
The formal closing of the conference was introduced by the Master of Ceremonies. He first asked Mr Segun APATA, as a representative of the High Level Panel, to say a few words on behalf of all the participants. Mr Apata applauded the diversity of the conference speakers and the quality of their presentations. In addition, he insisted that the conference was just the beginning. He then thanked the government of Cameroon, represented by Madame MBAH ACHA Rose FOMUNDAM, Minister Delegate at the Presidency of Cameroon in charge of the Supreme State Control, for the hospitality shown to all delegates and then thanked the Minister personally for her implication and involvement in the conference.
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Eli De Friend was then invited to read the bi-lingual conference summary report (see Appendix 3 – Conference Summary Report), before formally presenting the report to the Minister.
Finally, on behalf of the Prime Minister of Cameroon, the Minister congratulated the delegates for the quality of the discussions and pertinence of the recommendations made, reiterating the need for continued and strengthened cooperation in order to combat Illicit Financial Flows effectively. She then wished everyone a safe journey home.
Observations
During three days of presentations, panel discussions and workshops, several speakers drew attention to the fact that Africa, both as a continent and as a community of individual nations, has a lot of work to do at both national and international levels to curb the problem. While there are already many tools, instruments, models, agreements and frameworks to support countries in the battle against IFFs, there are still $50 billion leaving the continent every year. In this respect, several common themes emerged.
Common Challenges and Gaps
A number of challenges came to light as a result of the deliberations throughout the conference.
The inadequacy of national legislations to address abusive transfer pricing, to investigate corruption within public institutions at all levels, to protect whistle-blowers, to prosecute illicit activities more generally.
The lack of political will at the highest level combined with poor compensation and capacity at the lowest levels facilitate corruption and prevent effective investigation of possible IFFs.
Inconsistencies between different national legislations facilitate the exploitation of tax loopholes, base erosion, profit shifting and impede the effective collaboration of authorities trying to put a stop to the activities on either side of the border.
Lack of transparency in administrative procedures allows for legal and illegal abusive practices to go unchecked.
Officials and professionals working in the various institutions involved in public financial management, (notably the tax administrators in revenue authorities, budget planners within ministries of finance, parliamentarians and clerks from public accounts committees, auditors general in the supreme audit institutions) frequently are unaware of the problem of Illicit Financial Flows and lack the technical expertise to understand how multinationals and criminal organisations exploit weaknesses, gaps and loopholes for their illicit and/or illegal gain.
Inconsistent or inadequate communication on the subject of Illicit Financial Flows contributes to many of the previous points.
Common Good Practice and Way Forward
To avoid or abate Illicit Financial Flows and to recover lost assets by pursuing the assets and perpetrators (“track it, stop it and get it”), several common ideas were brought forward.
Bring domestic legislation into line with international treaties, standards, models, etc.
Where harmonisation and standardisation of legislation, or pricing of assets, in compliance with international standards is technically or culturally unacceptable, establish bilateral agreements.
Cooperation should be strengthened between institutions within the same country and between counterparts in different countries and jurisdictions.
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Use effective communication to build political will, muster the support of the general public and facilitate the cooperation between officials, administrators, experts, etc.
Continue and strengthen awareness, capacity building and training for all those engaged in public financial management, as well as legal and judicial authorities.
Strengthen institutional and personal leadership to serve as role models for others.
As many people commented independently, the conference was a success and to a large extent met the aspirations of various stakeholders involved in the organisation and preparation of the event.
More concretely, it seems evident from the general participant feedback and enthusiasm for signing the Conference Declaration that the three objectives set for the conference by the partner networks were at least partially achieved, namely:
Attendees to develop a shared and more nuanced understanding of IFF’s challenges including the different pillars & levels.
Attendees to re-affirm their commitment to the Good Financial Governance Declaration (with new focus on IFF and concrete strategy), underscoring the importance of cooperation (GFG approach), and ensuring the sustainability of the networks.
Networks present their approaches to tackle IFFs.
An positive outcome of the conference was the interest of AU representative Mr Jean-Denis GABIKINI in the IFF Declaration. Mr. GABIKINI expressed his hope to present the work of the four partner networks to the Specialized Technical Committee Finance, monetary affairs, economic planning and integration of the African Union.
Innovations such as the use of Twitter were embraced - as can be seen from the screenshot below, the Twitter hashtag #ConferenceIFFYaounde were still being used 3 weeks after the event.
Figure 10. Twitter handle #IFFConferenceYaounde in use 3 weeks after conference
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Conclusions
The three day conference reiterated the fact that IFFs pose a huge challenge for economic and social development as well as political security on the African continent, particularly in resource-rich countries and in fragile and conflict-affected states. The leakage of wealth from poor countries through tax evasion, money laundering, corruption and other misdeeds is becoming an ever bigger worry for Africa. The HLP estimates of IFFs in Africa amount to a staggering $50 billion outflows per annum, which has been increasing steadily. The magnitude of IFFs affecting Africa exceeds total Overseas Development Assistance to the continent.
Weak governance is regarded an enabler and a consequence of IFFs. The lack of collaborative and coherent strategies to curb IFFs further reinforces an environment which allows IFFs to continue to thrive. The break-away sessions on day two of the conference underlined that the fight against IFFs requires the development of appropriate tax, budgetary, fiscal and auditing policies that are effectively implemented, regulated, and subjected to efficient oversight. Moreover, Africa needs to develop the relevant legislative policies, procedural frameworks, technical expertise, capacity, as well as ethical conduct to curb IFFs.
Good Financial Governance remains at the heart to achieve these objectives. Effective activities aimed at curbing IFFs in Africa require a concerted multi-sectorial and cooperative governance approach. In this endeavor, everyone needs to do their part: governments, the private sector, civil society, and international institutions.
The four organizing networks (AFROSAI, ATAF, CABRI, AFROPAC) are doing their part: they promote transparency and accountability in public finance in order to ensure public revenues are effectively spent and accounted for. In doing so, decision makers in African public finance need to be supported in driving development-oriented solutions to IFF via budget processes, through political engagements and past vested-interests.
This conference was a first step in a long and difficult fight against illicit financing. But it is a step in the right direction and provided momentum for going forward. By adopting the Conference Declaration, the four networks have shown their commitment to their fight against Illicit Financial Flows and in so doing are making a significant step on the path to the UN’s Sustainable Development Goals (SDGs) of its Agenda 2030 and the AU’s Agenda 2063.
See full report attached