1. Illicit financial flows out of Africa have become a matter of major concern because of the scale and negative impact of such flows on Africa’s development and governance agenda. By some estimates, illicit flows from Africa could be as much as US $50 billion per annum. This is approximately double the official development assistance (ODA) that Africa receives and, indeed, the estimate may well be short of reality as accurate data does not exist for all transactions and for all African countries.
2. Some of the effects of illicit financial outflows are the draining of foreign exchange reserves, reduced tax collection, cancelling out of investment inflows and a worsening of poverty. Such outflows which also undermine the rule of law, stifle trade and worsen macroeconomic conditions are facilitated by some 60 international tax havens and secrecy jurisdictions that enable the creating and operating of millions of disguised corporations, shell companies, anonymous trust accounts, and fake charitable foundations. Other techniques used include money laundering and transfer pricing.
3. Preliminary evidence shows that taking prompt action to curtail illicit financial outflows from Africa will provide a major source of funds for development programmes in the continent in the near future. One of the keys to achieving success is the adoption of laws, regulations and policies that encourage transparent financial transactions. Moreover, African countries must reach out to the G-20 to call for greater transparency and tighter oversight of international banks and offshore financial centres that facilitate such flows.
4. It was in this context that a Panel discussion to sensitize policymakers about the matter was organized at the 3rd Joint Annual Meetings of the AU/ECA Conference of Ministers of Finance, Planning and Economic Development which took place in Lilongwe, Malawi in March 2011. After examining the issues at stake, participants called upon ECA and the AUC to lead the effort to combat illicit financial flows from Africa.
5. It was against this background that the 4th Joint Annual Meetings of the AU/ECA Conference of Ministers of Finance, Planning and Economic Development adopted Resolution L8 mandating the establishment of a High Level Panel (HLP) on illicit financial flows.