Thank you for being with us today.
Honk **** is launching it's annual report on the economic development in Africa entitled Tackling Illicit Financial Flows for Sustainable Development on the Continent.
We have two eminent speakers today to present this report.
I will give the floor to both of them before taking your question.
Please remind, please, Please remember that the document and the press release are on the embargo until 6:00 PM this afternoon.
With us today, His Excellency Professor Yami Ozimbajou is President of the Federal Republic of Nigeria and Doctor Kituyi Ontad, Secretary general of Wongtan.
I will give the floor to His Excellency Professor Yemi Osimbajo.
Your Excellency, you have the floor.
Ladies and gentlemen, it gives me great pleasure to participate in this press, the publication by the United Nations Conference on Trade on the impact of illicit financial finances on African Development and the imperative to address the scourge in the era of COVID-19 and beyond.
I commend the Secretary General of Huntat, Dr Mukisa Kittui for dedicating this year's Economic Development in Africa Report ADA to the menace of illicit financial flows which weakens the ability of countries on the African continent to mobilise and retain domestic resources for the achievement of their development priorities, especially those related to the goals and targets of the 2030 Agenda for Sustainable Development.
Certainly, there is no better movement to broaden the awareness of the scale, scope and the cost of illicit financial flows than now that the socio economic consequences of the COVID-19 pandemic threatens to reverse the progress made in achieving the 2030 Agenda.
The world over and especially on the African continent, many countries in Africa continue to make spirited efforts to recover from the impact of the pandemic even as they deal with multiple conditions, including vulnerabilities and their public health systems conflicts and climate change induced emergencies.
However, illicit financial flows continue to impede these efforts and undermine continental and global actions for the sustenance of SDG gains and the acceleration of the achievement of sustainable development in this decade of action and delivery.
They undermine the foundations of democracy and provide the financial incentives for terrorist activities and fuel conflicts on the continent.
Excellences, ladies and gentlemen.
The enormity of efforts required to tackle illicit financial flows is evident in the many dimensions the scourge presents itself.
It manifests through harmful tax policies and practises, abusive transfer pricing, trade mispricing and misinvoicing, illegal exploitation of natural resources as well as official corruption and organised crime.
These practises divert money from public priorities and reduce fiscal expenditure on public services where women and young people should be the major beneficiaries.
In the context of COVID-19, such lack of resources and limited fiscal space gives an impulse to austerity, which is the last thing our economies need at a time of deep recessions.
As several studies have shown, including the report of the **** Level Panel on Illicit Financial Flows from Africa, the commercial form of illicit financial flows, especially tax evasion and aggressive tax avoidance, accounts for up to 65% of illicit financial flows.
This means that we must pay particular attention to these issues, which are aided by by such things as tax treaties, tax havens and financial secrecy jurisdictions, and indeed tax competition, which leads to a race to the bottom in terms of tax rates amongst developing countries.
This means that we have to pay particular attention to efforts to reform the international tax system, including the G20 OECD Base Erosion and Profit Shifting Project, which has the stated purpose of closing gaps in existing international rules that allow corporate tax bases to be eroded or artificially shifted to low or no tax jurisdictions.
This is certainly a step in the right direction, but almost agreed that the reform effort still has a number of drawbacks.
To start with, while the Inclusive Framework, which was intended to bring developing countries into the BEPS process, it might disadvantage them because they're expected to sign up to all sorts of things agreed upon before the joint.
Equally important, if we want to enable taxation where economic activity is generated, then the ongoing work must bring about must bring about effective solutions to address the taxation of the digital economy.
Another important issue that we must pay attention to is the identification and return of proceeds of illicit financial flows back to countries of origin as an effective deterrent to the scourge of illicit financial flows.
Certainly, exposing those involved in practises that facilitate illicit financial flows and retrieving proceeds of illicit funds are efficacious in deterring perpetrators, rebuilding the confidence of the citizenry and compensating for the damage caused by such crimes.
It is in this regard that I encourage all leaders whose countries are considered absolute outliers for illicit financial flows to join forces and take the responsibility of combating the scourge by insisting on the repatriation of of illicit funds and their proceeds.
Let me also avail myself of this opportunity to call on leaders whose countries are the main destinations for illicit financial flows to take concrete steps to prevent and stop the receipt of illicit funds into their countries and to assist in freezing, seizing and returning such funds and it's proceeds already in their countries.
Excellences ladies and gentlemen.
Like many other countries, Nigeria has continued to lose so much to illicit financial flows.
However, we have continued to address loopholes and witnesses in our legal and regulatory regimes that made it easy for criminals to undercut our national efforts.
We have signed bilateral agreements and memoranda of understanding with a number of strategic partners as well as strengthened our ability to investigate, to track, to stop and to secure the return of stolen assets.
We've also reviewed instruments that established our financial intelligence and put in place policies to guide the management of recovered proceeds from illicit financial flows.
Our whistleblower policy and commitment to recover looted public funds and prosecute corrupt public officials are reflected at all levels and sectors.
So we call on the private sector, civil society, trade unions and professional groups to work with governments in tackling illicit financial flows.
The private sector must support our efforts by adhering to international best practises in their operations and by ensuring that their tax and trade practises comply with local laws.
While professional bodies, including those for lawyers, accountants, auditors and bankers, must observe ethical professional standards and hold their members to account if they abet tax evasion and aggressive tax avoidance.
While appreciating the immediate past presidents of the General Assembly and the Echosoc for taking the initiative to establish the first global financial Accountability, Transparency and integrity panel Factory, the Factory Panel I call on the United Nations system to facilitate the establishment of clear rules and enforcement mechanisms on all aspects of illicit financial flows.
These should address issues such as the elimination of secrecy jurisdictions that provide incentives for money laundering and official corruption, as well as allow confiscation and repatriation of stolen assets to countries of origin.
Let me conclude by underscoring that in order for the international community to live up to its pledge that no one and country would be left behind in the achievement of the 2030 Agenda we must place, we must pay closer attention so the Nexus between illicit financial flows and the inability of most developing countries to mobilise sufficient domestic resources to finance their development priorities.
Therefore, I am confident that tackling illicit financial flows would assist African countries with much needed development finance as well as prevent the exploitation and ***** of financial systems on the continent through criminal activities.
As the Economic Development in Africa report on Tackling Illicit Financial Flows for Sustainable Development in Africa is launched today, I am confident that we will be encouraged to assess the extent to which we have tackled the licit financial flows and further strengthen our resolve to defeat the scourge.
It is my desire to see us all encouraged to challenge policies that assist in harbouring proceeds of licit financial flows, letting state actors realise that their inactions in tackling the scourge affect the lives of millions of people in Africa and deprive governments of resources required to achieve the 2030 Agenda for Sustainable Development.
Thank you very much, Mr Vice President, for this important statement.
Doctor Kituyin, now the floor is yours.
Please, you have the floor.
Can we unmute Doctor Kitui?
I think you need to unmute yourself.
Can we unmute Doctor Kitui or can you unmute yourself from the laptop?
We have a small technical problem.
It's going to be solved soon.
You need to unmute yourself.
Your excellence, Mr Vice President of the Federal Republic of Nigeria, members of the the press.
Ladies and gentlemen, sorry for the talking of H First of all, may I on behalf of Antar, they express our appreciation to you, Mr Vice President, for joining us on this occasion.
As I do so, I want to also acknowledge and appreciate their leadership that Nigeria has been offering together with the Kingdom of Norway in the international community, particularly the UN and especially in the year of Nigeria's President of the General Assembly to focus global attention to the challenges of illicit financial flows and particularly how the impacts the challenging development issues of regions like Africa and the developing world in general.
At the start of this year, already Africa had substantial number of challenges financially.
First, there was a financing gap of $200 billion per annum on its SDG agenda.
Secondly, there was still a large hole of $2.4 trillion deficit in funding Sub-saharan Africa's credit that agendas response to climate change for adaptation and mitigation.
In addition to this, just the past half year we have seen the COVID pandemic bring an additional cost of about $154 billion to the continent.
Now these within an international context of stagnating or declining FDI flows to the continent, disruptions of global value chains because of rising economic nationalism and other forces towards the reassuring and steadily declining ODA flows to the continent and disease.
In this desperate situation, it has been more important than ever before that every country tries to maximise domestic mobilisation of development resources and create more fiscal space for treasurers.
This is one of the drivers that make it extremely necessary to look at some of the wastages that come with practises like the illicit financial flaws.
And I want to express the my opposition to my staff in the the the Division for LDCs and Africa for coming up with this topical theme for this year's report.
As we have been seen by some of you addressing the illicit financial flows out of Africa is projected to generate about eight $8.6 billion in a year.
But this about half of the the financing gap for SDGS on the continent.
Similarly, it's almost equal to the combined value of ODF flows and FDA's out of the continent in a year making an extremely important contribution if affected in dealing with Africa's challenges of financing its development.
As the Vice President has mentioned tackling the FDA, the Iffs in Africa requires action in three key challenge channels.
First, trade miss invoicing, which costs the tune of 30 to 50 billion U.S.
dollars and other African countries annually and particularly hurting the countries that are dependent on extractive resources, the mispricing of which has generated losses of upwards of 250 billion to U.S.
dollars just over the period 2008 to 2018.
And secondly, you cannot deal with illicit financial flows without directly dealing with the challenge of corruption.
This is an illicit flow that cost Africa nearly $150 billion in a year, more than the $93 billion that African needs usually annually for investment in infrastructure.
And thirdly is ***** of tactics, ***** of tax practises, as mentioned by the Vice President so elegantly.
This included transfer pricing, profit shifting, tax arbitraging and tax treaty shopping as the main mechanism for aviation.
Tax avoidance and money laundering are also part of this challenge.
I mean many of the approximately 500 bilateral tax treaties enforcing Africa are at risk of tax avoidance practises.
Our estimates are that up to 2420 to 26% of the corporate income tax for African countries through that go through the investment hubs is leaked out through this this *****.
Now the effect of Iffs on Africa's development are highly detrimental and need not be over emphasised.
First, countries with the **** illicit financial flows are demonstrably less productive in agriculture than the those with the with the with more control on illicit financial flows.
Countries with **** illicit financial flows invest about 25% less in health, 58% less in education than comparable countries on the continent.
And half of the countries, some Saharan Africa, do not have sufficiently developed domestic transfer pricing rules and regulations in the jurisprudence.
And therefore there is limited capacity of governments on their own to challenge multinational enterprises in their domestic courts on these floors.
But rather than just point out weaknesses and what could have been better, I think it is important that we build on what the Vice President has mentioned, on what can, what kind of actions can we collectively do take to deal with this.
Of course, at the core of it is political will, a determination by governments that they must expunge this crisis from the score of their governance.
We should pay close attention in trying to deal with this to the challenge of data trade statistics.
Flagging wide and persistent trade gaps are disguising how much ***** there is, particularly on commodity dependent countries and commodity extractive investors.
So trying to grow the ability to measure, to monitor what's happening is critically important in diagnosed and in prescribing solutions.
We also think it's important that African countries cooperate with one another to fight this challenge with our porous borders and as moved towards greater African integration.
It is not possible to deal with this issue within the jurisdiction of an individual country without the cooperation of its neighbours.
And it's also important, beyond continental cooperation, that African governments see the potential benefit of working closely with the international partners in tracking and arresting illicit financial flows and perpetrators.
Similarly, African countries should also share trade and tax data more closely and particularly share information on the critical sectors in initiatives that are already underway in some areas, for example in areas of extracting telecommunication and financial services, which are key sectors through which illicit financial flows are being flogged, it will be important to share best practises and join international efforts.
Africa should join transparency initiative that can also domesticate some of the efforts that have been carried out elsewhere.
Such initiatives as open budget initiatives, the Collaborative African Budget Reform Initiative and extractive industry transparency initiatives are important to domesticate.
And I think it's also important that we know that while there has been important international effort on base erosion work, it is primarily an OECD initiative which is inadequate in dealing with the African challenge because of Africa's inadequate participation and representation in OECD.
And therefore, it's perhaps time that this initiative be globalised, preferably under the Hospice of the United Nations, so that you can have a full member driven and international commitments and binding protocols on how to deal with the illicit flaws.
Particularly for these vulnerable countries, the international community has a role to play.
Stopping illegal financial flaws requires rekindling the trust in multilateralism that has been dissipating over the past decade and engaging multinational enterprises or their tax responsibilities.
We have seen how collective effort is grimming enterprise behaviour in environmental push globally.
A similar initiative can strengthen the responsibility and transparency on matters of IFFSI want to thank you, Mr Vice President, through you, the President and the Government of the Federal Republic of Nigeria for your continued partnership.
I want to thank the Afghan Union Commission, which has also started growing attention to this initiative and 1:00 to call on others to find way that you can build traction on this critical issues and see the important role that plugging this hole will contribute in strengthening Africa's recovery from this pandemic and approximation of its ambitions on Agenda 2030.
Thank you for your attention.
Now we are going to open the floor for questions.
You have a raise hand button on your screen.
I already see two hands that are raised.
Please identify yourself and let me know to whom your question is addressed.
Jimmy, you have the floor.
Thank you for taking my question.
The first is just sort of a general question about the responsibility of wealthier nations to participate in Secretary General.
You did sort of allude to that, but how much do European Western nations have a responsibility to help contribute to this crackdown on illicit financial flows?
And then my second question is a little bit more technical, if you don't mind.
I wanted to just ask about one paragraph that was in the in the report.
I'm talking about the largest positive outliers are Nigeria, Egypt and South Africa.
I just want to make sure that I'm understanding that those are the three countries most affected by that.
It seems to me that if I did my maths correctly, that those three countries alone amount for about 80% of the average outflows during the three-year.
So am I right about that?
Doctor Kituye, you want to answer this question over to you, You have to unmute yourself.
Can we unmute Doctor Kituye?
That's a technical problem.
We can't hear you, Doctor Gigui.
Can you try and unmute yourself?
I'll ask Paul, like you will be the director of the division to answer the second question.
But I will take that first question, which is the role of developed countries.
As you may know, some of the most important work that has been done globally in dealing with illicit financial flows has been work that has been driven by OECD countries.
Not for utilitarian purposes, but in dealing with the losses in their own economies because of financial hubs, offshore financial services centres and the the conduits that this can offer in finding terrorism and money laundering.
So that the main gains that have been realised up to this point have been through the efforts of developed countries.
And what you're saying is that if international cooperation can expand beyond dealing with ***** of offshore financial habits and dealing with the money laundering and terrorist financing, it is possible that the challenges that are confronted by vulnerable developing countries can be similarly assisted by such efforts.
And certainly many multinational enterprises which have offshore hubs as investment roots have their domicile primarily in developed countries.
And therefore disciplining the conduct of international organisations and particularly the way they have been disciplined increasingly on environmental and social responsibility, shows that collective collaborative work by developed country governments can be the best way to ensure compliance and more transparency in the developments of multinational enterprises.
Who are the major culprits in the illicit financial flows out of Africa.
We are now going to give the floor to Paula Kuomi who is sitting on the podium.
Paul, you have the floor.
Thank you very much for that question you.
You're absolutely correct.
What we did was that we focused on 13 of the most the top 13 extractive sectors and the the countries you mentioned, South Africa, Egypt and Nigeria, they have the majority share in those extractive sectors.
So that was the focus of on that issue.
So in, in, in you are correct that the focus is those are the three countries who have the larger share within the extractive sectors, the top 13 that we looked at.
We now have Peter Kinney.
Peter, you have the floor.
My question is to Vice President Bossy Banjo.
I'm a journalist covering for South and Southern African media and there is a great awareness in the country which I cover South Africa, of things like trade, misinvoicing and corruption and the leadership is aware of it and the leadership is trying to make attempts to crack down on it but seems to have difficulty doing this.
I'm just wondering if you have any ideas as to how you can use this strategy.
I mean, I, I know that we need to curb the activities of multinationals and use bodies like the OECD, but can you mobilise the African Union as a body which would have teeth to actually maybe implement pressure on governments to do things?
Your Excellency, you have the floor over to you.
I think you're absolutely right that the the larger portion of the listed financial flows, the commercial listed financial flows from tax evasion, trader services, mispricing, transfer pricing etcetera.
So there is a need, you know, for us to address that, you know, and to address those issues.
Now, one of the problems we've had with the G20 OECD proposals, of course, is that African countries in particular are not at the table or represented properly at the OECD level, as you can imagine.
So that even in fashioning the new rules, we were not able to, to express our own particular misgivings or our own particular or peculiar problems.
So there's a need for African countries to be at the table when these negotiations are taking place.
And I, I believe that you're also right that the EU, the African Union must, must step up to the plate.
I mean, there's a need for the African Union to, to do a lot more in terms of getting us a, a place at the table.
Because I think that no matter how we slice it, most of the, the large transnational enterprises that are involved in many of these commercial illicit financial flows are from OECD countries.
And so and so there is a need for us to work with them.
There's a need to work with them.
And if you recall, the Mbeki report, which was commissioned, the Mbeki report is actually commissioned by the Africa Union.
And I think that, you know, I, I think that the, the, the, the, if we continue to work on the Mbeki report, the recommendations of the Mbeki report to work on advocacy work on national capacities and laws at domestic levels, that might help.
There's a need for us also to tighten our laws at the domestic level, to tighten our laws at the municipal level, taking, taking advantage of some of the good ideas that that that have come out of the OECD process.
The Africa Union must do a lot more.
We, we, we can indeed, the African Union can indeed mobilise to pressurise countries to do much more, to do much more and we can do a lot more with our own domestic legislature.
Thank you very much, Excellency.
Yes, I have a question in the room.
John, you have the floor.
My question is to all the panellists.
I was wondering so as if you have any thoughts on whether some of the recurrent violators in money laundering, the top banks periodically get fined, but there's no prosecution.
There is impunity from criminal prosecution.
They just pay big fines and that is repeated every so often.
I was wondering if you think they should be put on a blacklist and have punitive sanctions by the UN Sanctions Committee.
Thank you very much, John.
Doctor Kitiyi, you, you start answering this question, you have the floor.
Yes, I, I cannot unilaterally call for action on specific lines, but but I, I, I share the sense that there should be growing collective position on what sanctions are necessary to correct this behaviour and stop this drainage and wastage, particularly for vulnerable countries in difficult circumstances as we've seen on the African continent.
I have nothing to say about specific banks and institutions as such.
Your Excellency, do you want to take the floor on this question?
And so, well, yes, I, I, I, I think as I agree, I think as much pressure as is possible ought to be put on financial institutions that encourage illicit financial flows.
But the, the obvious formula that works is 1, where for economic crimes, you know, the, there's an economic penalty, there's a penalty that, that, that, that impacts the pocket of the offender or the perpetrator.
So paying huge fines is important, but going a further step of ensuring a greater price is paid is, is useful.
I, I think that it, it, it, it will certainly act as a further deterrent.
We must also be mindful of, of the fact that this would also to a very large extent involve considerable effort on the part of on the part of victim countries and possibly even considerable expense, especially prosecuting some of these, in prosecuting some of these challenges against, against the banks.
I don't see any reason why the United Nations system cannot do something about ensuring that countries that sorry, that financial institutions that perpetrate these, these misconducts are held to account.
Whatever framework that would that would involve.
I think we should look at it, we should examine it, we should see whether what the possibilities are, but I think that the United Nations system should indeed seek to to penalise in, in whatever shape or form possible perpetrators of this, of this financial flows even where they are international financial institutions.
I don't see any and raised online and neither in the room.
I will give you 2 more minutes to raise your hands.
I would like to remind you that we have a whole team of economists behind this report.
They're all available to answer any questions you may have.
More technicalities in in this report.
The embargo is 6:00 PM GMT, 8:00 PM Geneva time.
And I think we are going to stop this press conference now.
I don't see any additional question.
I would like to thank you, Mr Vice President.
Thank you very much for for helping us promote this report.
Doctor Kituya, thank you for being in in this online press conference too.
We are now going to to stop here and we stay at your disposal for any further question.
