IllIcIt FInancIal Flows

The research focuses on commercial tax evasion within IFFs, clarifying the distinctions between abusive transfer pricing, trade mispricing, and TBML. Using the IMF DOTS methodology and a developed TBML model, the authors estimate flows for Nigeria, South Africa, Morocco, Egypt, and Zambia. The findings indicate that while some countries show declining trade mispricing, the TBML model suggests increasing financial outflows for all five. The paper highlights significant data anomalies in UNCOMTRADE and IMF datasets, particularly regarding South Africa's extractive exports, and advocates for the implementation of the Unique Consignment Reference (UCR) and improved inter-agency cooperation to curb these flows and support socio-economic development.

• The authors distinguish between transfer pricing, which is not inherently illegal, and abusive transfer pricing (or transfer mispricing), which involves using artificial prices to shift profits to low-tax jurisdictions to evade tax.
• Trade mispricing is identified as a primary vehicle for IFFs, involving the deliberate over-invoicing of imports or under-invoicing of exports to avoid taxes or levies.
• Analysis of trade mispricing for the period 2013–2015 shows declining trends in South Africa and Zambia, and for 2013–2014 in Nigeria, while Morocco and Egypt showed increases during 2013–2014.
• The developed TBML model, which incorporates an attractiveness index to account for flows between developing countries, indicates that all five studied African countries are experiencing increasing financial outflows.
• Significant data discrepancies exist between IMF and UNCOMTRADE datasets, with variances as high as 44% in 2011 for South Africa, largely due to exchange rates and estimation methods.
• South Africa's trade mispricing figures are considered outliers partly due to the misclassification of gold, platinum, and diamond exports in the UNCOMTRADE database.
• China is a primary destination for outflows from South Africa and Zambia, with some mispricing in the 'miscellaneous goods' category believed to be related to illicit or second-hand gold.
• The authors argue that curbing IFFs has a negative relationship with the Poverty Index and Gender Index, suggesting that reducing these flows would positively impact women and the poor by freeing up fiscal resources for social infrastructure.
• The paper recommends the global implementation of the Unique Consignment Reference (UCR) to resolve data anomalies regarding source and destination reporting for goods in transit.

APA

Nicolaou-Manias, K., & Wu, Y. (2016). IllIcIt FInancIal Flows. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2016/10/GA_Th2_DP2_nicolaou-wu_20161123.pdf

Chicago

Nicolaou-Manias, Kathy, and Yuchen Wu. IllIcIt FInancIal Flows. South African Institute of International Affairs, 2016. https://saiia.org.za/wp-content/uploads/2016/10/GA_Th2_DP2_nicolaou-wu_20161123.pdf.

Wikipedia

{{cite report |last1=Nicolaou-Manias |first1=Kathy |last2=Wu |first2=Yuchen |title=IllIcIt FInancIal Flows |publisher=South African Institute of International Affairs |date=October 2016 |url=https://saiia.org.za/wp-content/uploads/2016/10/GA_Th2_DP2_nicolaou-wu_20161123.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nicolaoumanias2016illicit, author = {Nicolaou-Manias, Kathy and Wu, Yuchen}, title = {{IllIcIt FInancIal Flows}}, institution = {South African Institute of International Affairs}, year = {2016}, month = oct, url = {https://saiia.org.za/wp-content/uploads/2016/10/GA_Th2_DP2_nicolaou-wu_20161123.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }