What are the solutions to illicit financial flows?
Countermeasures include institution building strategies, international cooperation and information exchange, and fiscal transparency. Development practitioners need to understand the nature of the problem of illicit financial flows as an obstacle to development, and be aware of interventions that can reduce such flows.
How does illicit financial flows affect a country?
Most illicit activities represent a net loss for the region: countries and companies lose revenue, investment, markets and legitimacy; and citizens are disenfranchised, exposed to violence and health risks, and deprived of financial gains.
What is IFFs?
“Money illegally earned, transferred, or used that crosses borders” is the most common definition of illicit financial flows (IFFs).
What is the meaning of illicit financial flows?
Illicit financial flows refer to the movement of money across borders that is illegal in its source (e.g. corruption, smuggling), its transfer (e.g. tax evasion), or its use (e.g. terrorist financing).
What is the impact of illicit financial flows in Zimbabwe?
Zimbabwe has lost a cumulative US$12 billion in the last three decades through illicit financial flows ranging from secret financial deals, tax avoidance and illegal commercial activities (African Development Bank and Global Financial Integrity, 2013).
What is meant by illicit financial flows?
What is the meaning of illicit financial flow?
Illicit Financial Flows (IFFs) are illegal movements of money or capital from one country to another for various reasons. IFFs can be defined as funds illegally earned, transferred or utilised within a country and across international borders. It could be money legally earned but moved wrongfully.
What are illicit funds?
Illicit financial flows, in economics, are a form of illegal capital flight that occurs when money is illegally earned, transferred, or spent.
How does illegal trade affect economic development?
Beyond the numbers, illicit trade and organised crime have also been identified as significant barriers to economic growth, individual prosperity and corporate profitability; they stifle legitimate markets, sabotage global supply chains, deplete natural resources and endanger market security.
Why is curbing illicit financial flows important?
Illicit financial flows significantly erode the tax base of resource-rich developing countries, which do not have the means to invest in public health, education, and sustainable development.
What are the social impact of illicit financial flows?
The most immediate impact of illicit financial flows (IFFs) is a reduction in domestic expenditure and investment, both public and private. This means fewer hospitals and schools, fewer police officers on the street, fewer roads and bridges. It also means fewer jobs.
How much does Africa lose to illicit financial flows?
about US$88.6 billion
According to the Economic Development in Africa Report 2020 by the UN Conference on Trade and Development (UNCTAD), Africa loses about US$88.6 billion, 3.7 per cent of its gross domestic product (GDP), annually in illicit financial flows.
Is tax avoidance an example of an illicit financial flow?
However, there is an ongoing global discussion on whether and what commercial activities – such as tax avoidance – should be considered part of IFFs, considering that many business practices to lower tax liabilities are legal. So, while the term “illicit financial flows” is increasingly used, there is still no agreement on the precise definition.
What are illicit financial flows and how do they affect development?
“Money illegally earned, transferred, or used that crosses borders” is the most common definition of illicit financial flows (IFFs). FFs reduce domestic resources and tax revenue needed to fund poverty-reducing programs and infrastructure in developing countries; accordingly, they are receiving growing attention as a key development challenge.
Should tax avoidance be considered part of Iffs?
The funds are used for illegal purposes (e.g., financing of organized crime). However, there is an ongoing global discussion on whether and what commercial activities – such as tax avoidance – should be considered part of IFFs, considering that many business practices to lower tax liabilities are legal.
How are we responding to international financial flows (Iffs)?
We are currently developing new tools to monitor and measure IFFs at the country and regional level. The critical first step in responding to IFFs is to make the flows visible. We are continuing our work to help countries identify and respond to risks relating to money laundering.