Illicit Financial Flows

The document examines illicit financial flows (IFFs) in Africa, estimating annual losses between US$50 billion and US$89 billion. It identifies commercial activities, such as Base Erosion and Profit Shifting (BEPS) and trade misinvoicing, as the primary drivers (65%), while criminal activity and corruption account for 35%. These outflows reduce spending on health and education and increase reliance on predatory borrowing. The paper discusses countermeasures including the African Tax Administration Forum (ATAF), the OECD/G20 Inclusive Framework on BEPS, and the Extractive Industries Transparency Initiative (EITI), while highlighting challenges such as the US's role as a "secrecy jurisdiction" and limited administrative capacity in African nations.

• Illicit financial flows (IFFs) from Africa are estimated to be between US$50 billion annually, according to a 2015 High-Level Panel report, and approximately US$89 billion annually according to a 2020 UNCTAD report, the latter representing 3.7% of Africa's GDP.
• The majority of IFFs (65%) stem from commercial activities of multinational companies, including transfer mispricing, trade misinvoicing, and tax treaty shopping. The remaining 35% are linked to criminal activity and government corruption, such as embezzlement and bribery.
• IFFs cause significant social and economic damage, with total annual tax losses estimated at US$17.1 billion. This results in countries with high IFFs spending an average of 25% less on health and 58% less on education than their peers, and forces nations to use predatory borrowing.
• The United States is identified as a "secrecy jurisdiction" that facilitates offshore tax evasion because it does not provide reciprocal financial information to the 113 governments participating in the Foreign Account Tax Compliance Act. Additionally, an executive order by President Donald Trump in early 2025 effectively stopped the enforcement of bribery-related offences under the Foreign Corrupt Practices Act.
• Illicit outflows are most concentrated in Africa's largest economies. Nigeria lost US$2.2 billion in 2014 (4% of government revenue), and South Africa lost an average of US$7.4 billion per year between 2010 and 2014.
• African nations argue that the OECD/G20 Inclusive Framework's proposed 15% global minimum corporate tax rate is too low, as their average corporate tax rates range from 25–35%; they advocate for a minimum rate of at least 20%.
• The Extractive Industries Transparency Initiative (EITI) has identified major revenue gaps in member countries, including US$2.4 billion in recovered tax payments in Nigeria, a US$55 million payment gap in Ghana, and over US$100 million in missing funds in the Democratic Republic of Congo.

APA

Yeboua, K., & Cilliers, J. (2026). Illicit Financial Flows. Institute for Security Studies. https://futures.issafrica.org/thematic/guide.pdf?thematic=10-financial-flows&topic=05-illicit-financial-flows

Chicago

Yeboua, Kouassi, and Jakkie Cilliers. Illicit Financial Flows. Institute for Security Studies, 2026. https://futures.issafrica.org/thematic/guide.pdf?thematic=10-financial-flows&topic=05-illicit-financial-flows.

Wikipedia

{{cite report |last1=Yeboua |first1=Kouassi |last2=Cilliers |first2=Jakkie |title=Illicit Financial Flows |publisher=Institute for Security Studies |date=28 May 2026 |url=https://futures.issafrica.org/thematic/guide.pdf?thematic=10-financial-flows&topic=05-illicit-financial-flows |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{yeboua2026illicit, author = {Yeboua, Kouassi and Cilliers, Jakkie}, title = {{Illicit Financial Flows}}, institution = {Institute for Security Studies}, year = {2026}, month = may, url = {https://futures.issafrica.org/thematic/guide.pdf?thematic=10-financial-flows&topic=05-illicit-financial-flows}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }