Illicit Financial Flows and Development

3 Marys show how to improve GFI’s latest flagship report on illicit financial flows

It’s not often one needs to call on an English Queen, a tidiness guru and a spooky sailing ship to help determine what is wrong with the latest update on illicit financial flows from Global Financial Integrity and how it can be improved. But now is the time. Seeing GFI’s report on illicit financial flows in 2006-2015 though three Marys’ eyes does just that.

Mary Contrary would say what GFI needs in future is more Marie Kondo and less Mary Celeste. That way, GFI can constructively contribute to the illicit financial flows research agenda.

Illicit Financial Flows and Development

Review of “South Africa: Potential Revenue Losses Associated with Trade Misinvoicing”, Global Financial Integrity, November 2018

This little review seeks to explain the evolution in the methods Global Financial Integrity (GFI) uses to make trade misinvoicing estimates, and its new focus on “potential revenue losses”. GFI has taken a very one-sided approach to potential revenue losses, only counting the taxes it implies are not paid as a result of its estimates of trade misinvoicing behaviours but ignoring the extra taxes that would be paid were its estimates of trade misinvoicing accurate. The net revenue outcome would be much more balanced.

Illicit Financial Flows and Development

3-part series on Illicit Financial Flows: Making Sense of Confusion

My 3-part series on Illicit Financial Flows is now complete. Hopefully it adds to the prospects of making real progress towards curbing illicit financial flows. Part III runs through the ways existing economic policies tend to increase – rather than reduce – illicit financial flows and suggests several ways policies could be made more coherent, so that countries can achieve development and still curb illicit financial flows. It also advocates that the IMF should step up to a leadership role in this search for coherence.

Part I.    Search for Meaning. 13 March 2018.

Part II.   Count the Devils. 27 July 2018.

Part III. Tackle the Drivers. 12 October 2018.

Illicit Financial Flows and Development, Tanzania

Tanzania country study of illicit financial flows

The project was commissioned by the Bank of Tanzania and funded by the Government of Norway. It involved 5 one-month visits to Tanzania, four months of research off-site (at least!), copious fact-finding and research (including into how others have estimated illicit financial flows), and many meetings in Tanzania with government, agencies and the private sector. Dr Ameth Soloum Ndiaye was the International Technical Adviser and hails from from University of Dakar, Senegal. I was International Project Manager. The report was submitted to Bank of Tanzania in early 2016, after presentation to the project’s Advisory Board in December 2015. The report is not being published.

I learned a lot about how such illicit financial flow country studies might best be undertaken in future. The UN Sustainable Development Goals (especially Goal 16, target 4) are likely to drive the need for a common research approach. In my view, it would be best if this approach focused on crime-based activities that lead to net cross-border resource losses and can be seen (and thus resonate) in-country. I am keen to discuss how this might be done, as well as why approaches deployed in multinational and country studies to date have been inadequate or misleading.

Illicit Financial Flows and Development, Tanzania

Dar es Salaam inception visit

I have been appointed International Project Manager for a very interesting exercise, an 18-month study of illicit financial flows, by the Bank of Tanzania, the central bank. The project is funded by the Norwegian government. The inception report visit is in October 2014. Dr Ameth Saloun Ndiaye from the University of Dakar, Senegal, is International Technical Advisor. More to follow.