How can cross-border flow of illicit assets be tackled? How can asset recovery and return be enhanced? These and more were discussed at the second “International Conference on Combating Illicit Financial Flows (IFF) and Enhancing Asset Recovery (AR) for Sustainable Development.” It was organised by the Presidential Advisory Committee Against Corruption (PACAC), in collaboration with the Ministry of Foreign Affairs, the African Union (AU), the Federal Inland Revenue Service (FIRS) and the Federal Ministry of Justice. It featured speakers and participants from Africa, the diplomatic community and international organisations, among others. JOSEPH JIBUEZE was there.

Between 2000 and 2015, Africa is said to have lost $73billion yearly through illicit financial flows (IFF). Added to what is lost through other channels, the figure may be close to $100billion.

To tackle this problem, the Presidential Advisory Committee Against Corruption (PACAC), in collaboration with the Ministry of Foreign Affairs, African Union (AU), Federal Inland Revenue Service (FIRS) and the Federal Ministry of Justice, brought international experts to find solutions.

They organised the second International Conference on Combating Illicit Financial Flows (IFF) and Enhancing Asset Recovery (AR) for Sustainable Development (Second Abuja IFF/AR).

IFF, according to PACAC, refers to money illegally earned, transferred or used. It means any flow of money in violation of the laws in their origin or during their movement or use.

Money may become illicit due to the way it is created, transferred or used. For instance, money legally earned but transferred illegally, such as to avoid tax, becomes illicit.

Money legally earned and transferred may at point of utilisation change character and may become illicit, such as when not declared to regulators in accordance with legal requirements.

IFF has diverse origins, such as laundering of proceeds of crime, abuse of power by politically exposed persons (PEPs), market or regulatory abuse by multinational corporations, trade record falsification and tax evasion.

Others are mispricing of intangibles like foreign loans, overpricing of intellectual property, and use of secret companies, secret trusts or non-disclosure agreements.

Poor governance, weak regulatory structures, pressure for foreign investment, unbridled tax incentives that become counterproductive, and acceptance of financial secrecy jurisdictions and tax havens are some of the enablers of illicit financial flows.

Others are the ability to shift profits from source countries to tax havens, thus denying the source country of tax revenue; weak international cooperation and information sharing, such as on beneficial ownership and tax records of multinationals, and opacity of records and information on what companies pay to governments in extractive and natural resource industry.

The keynote speaker, United Nations Economic Commission for Africa (UN-ECA) Deputy Executive Secretary and Chief Economist Dr Abdalla Hamdok said illicit financial flows have perverse effects on African economies.

They represent a substantial financial drain on the continent, which reduces the ability to make the investments needed in education, health, science, technology and infrastructure to achieve the goal of industrialisation.

According to him, illicit financial flows are driven by a number of ‘push’ and ‘pull’ factors, the most obvious of which is the desire to hide illicit wealth. He also identified double taxation agreements as another driver.

On how much has been lost through IFF, Hamdok said: “Indeed, the latest estimates from ECA indicate that, over the period of 2000 to 2015, Africa lost $73 billion yearly through illicit financial flows from commercial activities alone.

“This is in addition to around $27 billion estimated net annual losses through other channels. Taken together, this represents about $100 billion annually, which represents around four per cent of the continent’s GDP. We know this to be a very conservative estimate.”

Vice President Yemi Osinbajo, represented by Special Adviser to the President on Economic Matters Dr Yemi Dipeolu, noted that emerging economies are the most vulnerable to IFF.

To him, athough the role of prevention cannot be overstated in the fight against corruption generally, it is important that those who engage in acts of corruption and IFF are adequately sanctioned.

“In my speech at last year’s (Abuja IFF/AR) conference, I stated that we must make it a national and international call and a call for other developed and developing countries to have the same outrage for drugs, terrorist financing for IFF.

“We must emphasise at every point and call out financial institutions that are not cooperating. They must be sanctioned,” Osinbajo said.

He underscored the fact that the transfer of assets cannot be successful without the collaboration between the countries that they are transferred from and the international financial institutions in the countries that receive them.

“Therefore, it is imperative that we continue to identify financial institutions that are involved in this sort of transactions and make them take responsibility for their actions in facilitating illicit financial flows and corruption in general.

“Taking advantage of financial secrecy legislations for corruption and other crimes must not be encouraged and in fact it must stop. All other facilitators must also be sanctioned,” the Vice President said.

According to him, the return of $321million  loot from Switzerland is an instance of the country’s political will and international cooperation in the return of looted public asset.

“What we can do is to make sure that as we succeed in recovering and repatriating these funds, we must use them for causes that advance the development of the victim country in particular and the continent in general.

“At the national level, we have to live up to local and international expectations of transparent, accountable and acceptable systems that ensure that the recovered assets are used for the growth and development of the nation. In this we must not fail,” Osinbajo said.

How Nigeria was robbed, by Onyeama

Foreign Affairs Minister Geoffrey Onyeama faulted Switzerland for its role in keeping the infamous Abacha loot and making the process of repatriation of the assets difficult.

He said he was shocked and angry by the chunk of the money retained by Swiss institutions and lawyers, describing it as “daylight robbery”.

The minister accused countries receiving looted funds of complicity, saying they are “accessories after the fact”.

Onyeama said political leaders must be held to account for the persistence of IFF despite all talks about tackling it.

According to him, enormous resources siphoned from the poorest region of the world has stifled Africa’s development.

“We must continue to strengthen basic legislation in asset recovery,” he said.

Onyeama described as mind-boggling the difficulties faced in the restitution and recovery of illicitly acquired assets from foreign countries to developing ones.

He said while powerful countries such as the United States, Germany and France were able to force Switzerland to review its banking secrecy provisions and help identify their citizens who were transferring money there, developing countries lack such clout.

“For developing countries as ourselves, it’s so much more difficult – the kind of hurdles that we have to overcome.

“Large sums of money have been found in Jersey, for instance, and other countries are laying claim to it, because in getting to Jersey, it passed through different jurisdictions. We haven’t been able to get the money back.

“We got some money back from Switzerland, but my God! When you look at the details, I was shocked and extremely angry at the process of recovery. Percentages were paid out to all kinds of institutions.

“To me, this is daylight robbery that these countries are perpetrating, and of course playing on the fact that we’re not the United States.

“So, it’s something we keep harping on, that these countries have to do a lot more, because at the end of the day, they are condoning huge theft and are accessories after the fact in fact.

“If you’re making it difficult for legitimate owners to recover those assets, and then you allow your institutions and others take huge chunks from that asset for your own benefit, then you’re just as guilty of theft as those that transferred the money in the first place. This is totally unacceptable and totally immoral,” Onyeama said

PACAC member Prof Femi Odekunle said the continent loses at least $50billion yearly to IFF. According to him, Africa cannot achieve its Sustainable Development Goals (SDGs) if it continues to lose money that way. Rather, its economic development will continue to be sabotaged.

He said there was the need enthrone transparency and accountability in governance, and to have the political will to tackle weak and compromised regulatory structures, poor governance structures and reckless tax incentives that encourage IFF.

He said the government must not compromise on regulatory standards even while seeking foreign investments, because, according to him, “you cannot worship a cow because you want to eat meat”.

“One ultimate goal of combating illicit financial flows is to help countries mobilise domestic resources to finance their development goals. We cannot hope to achieve sustainable development goals without addressing the problem of illicit financial flows,” Odekunle said.

For the professor of criminologist, there are enough resources for Africa to meet its developmental needs if they are well managed.

Odekunle said: “IFF creates a problem for developing countries. According to figures available, the scale is such that we lose a minimum of $50billion annually. This means that we cannot achieve our development goals if we continue to lose money that way from our economies to the already rich economies of the West.

“The political will is coming into play. If there is the political will, the regulatory agencies will follow suit. The most effective way to limit IFF is for both developed and African countries to increase financial transparency and be willing to enact and enforce policies that deter cross-border tax evasion, establishment of shell companies, strengthening of anti-money laundering laws and practices, and improving transparency of the operations of multi-national companies.

“It needs to be restated that while the financing for development goals or needs of the African countries are very high, there is availability of resources to meet such needs and challenges if the resources are not looted, stolen and if they are properly managed.

“Therefore, African countries must demand the highest standards of governance and disclosure from their governments. We, African countries, have the primary responsibility to fight corruption and the compromise of our regulatory institutions, so that the predicate condition that makes IFF possible is not easily available.”

FIRS Executive Chairman Dr Babatunde Fowler said budgets could not be funded if so much is stolen.

He said: “If a minimum of $50billion is lost by developing countries annually, especially on the African continent, if this money were to be made available to these countries, they would be in a better position to provide the much required infrastructure and amenities for their citizens.

“As a tax administrator, we believe that our function is to fund our respective governments and budgets. The donors of the developed nations will not carry the developing nations that long. It (IFF) is something that has to be addressed quite urgently.

“There is no way that we as a developing nation will be in a position to fund our budgets if this issue of IFF is not taken seriously.”

According to Fowler, tax evasion is corruption and must also be tackled.

“If any income is not adequately taxed from the area where it is generated, it is no longer tax planning; it is corruption. Corruption also applies to non-payment of taxes,” he said.

He believes tackling IFF and utilising the funds for the good of the citizens will help address Africa’s socio-economic challenges.

“Africa is said to have the highest rate of infant mortality. The question is: is that what we desire? Is it our desire for our nationals to try and cross the Sahara Desert to seek greener pastures?

“If one looks at the impact, I think it’s cheaper and morality right to ensure that these funds are kept where they’re generated,” Fowler said.

The sessions

There were seven sessions during the two day conference. They were designed to help understand the concept of IFF and how to combat it. The need to hold IFF facilitators and intermediaries accountable was also discussed, as well as enhancing asset recovery and return.

Best practices in managing returned assets for SDGs, improving intrernational cooperation and information exchange and the way forward were also explored during the sessions.

Former Inspector-General of Police Solomon Arase, who chaired the session on Combatting cross-border flow of illicit assets, harped on the need for intelligence-based policing.

“I have been a strong advocate of using intelligence to drive investigation and prosecution. Our investigation in this country should be knowledge-driven and professional,” Arase said.

Jonathan Benton, formerly of the National Crime Agency (UK), believes it is difficult to combat cross border flow of illicit assets through banks because some of them are complicit.

“Some of your banks are owned by former politicians or other relatives,” he said, adding that complex corruption cases can take decades to unravel, making assets tracing difficult.

But, Association of Compliance Officers of Banks, Opeyemi Adeojutelegan defended banks, saying they are “definitely” contributing their quota to tackling IFF.

However, Prof Odekunle believes that banks and lawyers are culpable.

“Some of our bankers and lawyers are unpatriotic,” he said, adding that such citizens must be dealt with.

He also reacted to a comment that increase in workers salaries will end IFF, saying: “The people committing this crime against us are not poor people.”

Falana: Anti-graft agencies must be sanctioned

Activist-lawyer Mr Femi Falana (SAN), who chaired a session, said anti-graft agencies must prosecute intermediaries.

“Our anti-graft agencies have not begun to sanction intermediaries. What is done in some other countries is to ensure that you deal with the intermediaries, because without dealing with the lawyer, the banker, the estate agent, the fight against corruption cannot be meaningfully fought.

“In the Ibori case, a lawyer was jailed for seven years for hiding documents which should have been turned over to the prosecution,” he said.

Falana said apart from the EFCC, the other anti-graft institutions must be better funded and strengthened.

A partner at Price Waterhouse Cooper Taiwo Oyedele agreed that there must consequences for the actions of intermediaries who facilitate IFF. He also spoke about indirect facilitators, such as those who award honourary degrees to corrupt persons and those who glorify looters.

Former Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) Head Prof Abdullahi Shehu said it will take a collective action to successfully deal with IFF.

According to him, Africa has sufficient legislation to deal with the problem; it about was effectively enforcing the laws.

“We need to strengthen our institutions and improve in areas we have not done well,” he said.

Enhancing asset recovery/return

Technical Unit on Governance & Anti-Corruption Reforms (TUGAR) Head Mrs Lilian Ekeanyanwu said there was need for a centralised data on how much has been recovered.

She advocated the urgent passage of the Proceed of Crime Bill, noting that with a robust legislation, tackling IFF can be more effective.

A partner at the firm of Aluko and Oyebo Dr Simeon Obidairo urged the government to utilise more of non-conviction based asset recovery, which he said would cater for a broad range of offences and can be retroactively applied.

Going the civil route, he said, allows for circumstantial evidence to establish such cases and is not limited by statute of limitation.

Obidairo said it also allows for the pursuit of actions outside jurisdiction, and can be used by many agencies.

A member of the High Level Panel on Illicit Financial Flows (Thabo Mbeki Panel), Ambassador Segun Apata, who chaired the session, called for better handling of returned assets. He regretted that there has been no transparency in how such assets are managed in some cases.

He suggested: “Immediately a proceed is traced, the money should be put in an escrow account in the African Development Bank.”

Best practices

The issue of how best to manage recovered proceeds of crime also arose. Mr David Ugolo of the Africa Network For Environment and Economic Justice (ANEEJ) pointed out that valuable assets are currently wasting away in the premises of anti-graft agencies such as the EFCC.

He decried the absence of an asset management agency to care for  them, urging the Federal Government to act.

He called for the strengthening of the asset recovery regime, and for citizens to be given access to information about what such recovered assets are used for.

“There can be no effective asset management without strong institutions,” he said, while endorsing the Federal Government’s cash transfer policy.

A PACAC member Prof Sadiq Radda said there was the need to “retain value and add value” to recovered assets.

For instance, he said a thriving hotel that is a proceed of crime could be better managed rather than closing it down and making the workers redundant.

“In attempting to solve problems, we should not be creating problems,” he said.

Improving international cooperation

Federal Ministry of Justice Central Authority Unit Head Tanko Ashang, whose office is in charge of mutual legal assistance and extradition related issues, identified some challenges they face.

They include common law/civil law distinctions, language differences that sometimes requires translations into Arabic, financial challenges and lack of capacity.

He urged the private sector to “stand up and be counted”, adding that the government cannot fight IFF alone. After all, he said banks, for instance, are also victims of cybercrimes, meaning that they need to join forces with the government.

“The private sector and government need to come to the table,” he said.

Abiodun Aina of FIRS said automatic exchange of information needs to be domesticated in Nigeria. He urged the National Assembly to set up committees on taxation and domestic asset generation.

He also wants tax administration to be modernised “to catch up with multinationals who are doing complicated layering”.

Aina called for the replacement of outdated laws, such as those regulating oil and gas operations.

Minister Plenipotentiary, Permanent Mission of Nigeria to the United Nations, New York, Akinremi Bolaji, said recommendations at last year’s Abuja IFF/AR “have found their way into international documents” and have been taken global notice of.

He, however, emphasised that tackling IFF requires “a lot of leadership and political will,” adding that tax avoidance must be included in IFF.

He called for a unified and accepted definition of IFF “that is all-encompassing,” while calling for the implementation of the Mbeki Panel report.

Finding solutions

According to Dr Hamdok, in addition to the financial drain on the continent, IFFs weaken and undermine the integrity of state institutions, shifting resources from the legit to the illicit economy and worsening income distribution.

He said it was crucial to break IFF in three components of commercial activities, criminal activities and corruption.

Hamdok believes the fundamental responsibility of eliminating IFF rests with African states.

“Therefore, they (African governments) must urgently take necessary measures to curtail and indeed eliminate all avenues for IFF. The primary source of IFF in Africa is the extractive sector.

“African countries and companies operating in extractive industries in the continent should join voluntary initiatives like the Extractive Industries Transparency Initiative (EITI).

“Africa should also push for mandatory country-by-country and project by-project reporting requirements across all sectors. African countries should establish transfer-pricing units as a matter of extreme urgency.

“These units should be appropriately situated in revenue authorities and be well equipped in accordance with global best practices.”

Hamdok added that customs authorities should proactively use available databases containing information on comparable pricing of world trade in goods to analyse imports and exports and identify transactions that require additional inquiry.

“States should also begin collecting trade transaction data and creating databases from that information, which can be searched and shared with other states so that a more robust data set on local and regional comparable is available.

“African states should as a matter of urgency establish or strengthen independent institutions and agencies of government charged with the responsibility for preventing IFF.

“These would include financial intelligence units, anti-fraud agencies, anti-corruption and financial crime agencies. All such agencies should render regular reports on their activities and findings to national legislatures,” Hamdok said.

African Capacity Building Foundation (ACBF) Executive Secretary Prof Emmanuel Nnadozie said there was limited awareness and poor understanding of the importance and impact of IFF, as well as what he called inhibiting mindsets.

He said there were poor positive social norms, values and practices conducive to combat IFFs, coupled with weak political leadership, weak operational capacities, limited adaptive capacities, and corruption.

With regards to institutional and regulatory capacity, he said there was an inability to design, implement, monitor and evaluate policies and regulations to curb IFFs, as well as inadequate institutional capacity of regulatory agencies and institutions.

Nnadozie also identified lack of coherence and weak coordination among regulatory institutions at national level, as well as weak operationalisation of appropriate legal, regulatory and/or prudential frameworks to curb IFFs, as other challenges.

Inability to collect data and statistical information, lack of transfer pricing units and weak managerial capacity to ensure the recruitment and retention of specialists are other factors fueling IFF, he said.

According to him, there is a human capacity aspect which manifests in insufficient number of skilled experts (lawyers, accountants, tax experts, law enforcement officers, customs officials, financial experts, etc.), as well as limited skills for assessment, formulation and implementation and monitoring of IFF-specific policies and measures, and poor contract negotiation skills.

He was of the view that Africa needs IFF/AR institute or centre, while there is need for institutional support to IFF-fighting institutions and agencies, enhanced coordination, capacity development, policy analysis, regulatory and legislative support, effective information sharing, and monitoring and evaluation.

Nnadozie said the ACBF could help with resource mobilisation, conduct capacity needs assessment or capacity audit of anti-corruption institutions and other national and regional organisations dealing with IFFs, formulate appropriate capacity development strategies, and design and implement capacity building projects/programs in order to address capacity gaps identified during the needs assessment exercise.

PACAC Executive Secretary Prof Bolaji Owasanoye said the conference was organised to create a platform to discuss issues affecting Africa.

“Oftentimes Africa depends on the international community to create the platforms to discuss things that affect her. If someone else was to create that platform and set the agenda, of course they would discuss and put on the agenda the things that are of paramount interest to them.

“So, we wanted to create a platform to discuss things that are of importance and interest to us in Africa, and from there, take the conversation forward,” he said.

He noted that the UN, as a consequence of last year’s conference, has noted in its resolutions the impact of IFF on Africa and the need to tackle it. Some of the resolutions were distributed at the conference.

“We also recognise that Africa is not an island. It cannot on its own achieve all it wants to achieve. So we also invite non-African countries to share their insights on what they expect and their experiences.

“We’ve been very dogged. I’ve spoken in about four UN meetings that Africa cannot get the money to develop except she retains what it is generating and is able to retrieve what has been illegally taken away. The conversation is gaining traction,” Owasanoye said.

PACAC’s recommendations

PACAC’s solutions to IFF include the need to:

• Introduce public registers of beneficial owners of companies and trusts.
• Make available country by country reports of multinationals.
• Introduce automatic exchange of information between tax authorities in developed and developing countries.
• Improve the integrity and capacity of regulatory and tax institutions in developing countries.
• Establish through the AU an institution to deal with taxation on the continent.
• Eliminate secret corporations, secret trusts and non-disclosure agreements that facilitate tax evasion
• Adopt open contracting systems, especially for extractive industry to enable citizens know those winning contracts and what they pay to the government.
• Design standards for the pricing of invisible goods and services like intellectual property and management contracts.
• Avoid tax treaties and incentives that promote IFF but do not bring sustainable investments.
• Improve African cooperation and information exchange.