Moderator:

• Francis Kairu, Policy Officer, Tax Justice Network

Panelists:

• Layla Latif, International Taxation, Transactions & Corporate Law Specialist
• Patrick Olomo, Head of Economic Policy and Sustainable Development, African Union
• Chady El Khoury, Deputy Division Chief at International Monetary Fund
• Thulani Shongwe, International tax officer, African Tax Administration Forum

A recording of this session is available here. 

Francis: The policy tracker is a key initiative that is designed to monitor the progress of the implementation of anti IFF policies for now across Africa. The tool is going to be used to systematically collect data on how countries are implementing anti illicit financial flows (IFF) policies across the continent and that data would be used to inform how different countries shape their policy interventions on how to curb IFF. The tool has gone through an extensive process of validation together with representatives of different member states, different experts, representatives of civil society organisations and through a collaboration between the Africa tax administration, the Africa Union Commission and the Tax Justice Network Africa alongside various other partners. In this panel we will present the tracker and explain how it was developed, how it works and how it can help the African continent to reduce the illicit financial flows and improve its economic governance.

Layla: We designed this particular anti IFF policy tracker to be able to gauge at national level to what extent countries are able to protect their vulnerable to tax related illicit financial flows. We looked at 4 clusters: legal and regulatory framework, institutions and institutional capacity, data and information framework and inter agency cooperation. Each cluster has its own indicators with scoring criteria, and is weighted at 100%, which is apportioned across the indicators.

Francis: We will be conducting the piloting in a number of countries, starting with Namibia in November but we’ll also do Uganda, Ghana, Cote d’Ivoire Gabon and Capo Verde. We have a mix between countries, regions with different languages and different legal systems because we want the tool to undergo a rigorous testing on how it works on the ground. How has the development of this tool contributed to a better understanding of IFF in the region?

Thulani:  The development of the tool helped improve understanding in combating illicit financial flows. We brought together our experts under what’s called the joint technical committee and test the tool against their own understanding of capabilities in risk assessment when looking at or tracking IFF transactions. We looked broadly at the levels of information exchange around the continent which is really low, and we hope to use the tool as the instigator of countries to start exchanging information. The tool is not designed to be a stick for other countries or be used as a means of assessing whether ODA should be going to one country or other. Rather, it’s an internal measure for countries and support to implement the right tools that can combat IFFs.

Francis: What was the input of African member states in the development of the tool and also comment on how important this tool is for African member states especially in shaping their policy response on anti IFF missions?

Patrick: We estimate that losing about 90 billion US dollars every year as a result of IFFs and when we heard about a tool that the Tax Justice Network and others were developing, at the African Union we thought that it was an opportunity for us to embark our member states in that transformative thinking that would allow us to try to close the taps where we are losing our resources and continue on the path towards inclusive growth and sustainable development in Africa. This is a historic moment when the public sector, the private sector, the civil society and various other stakeholders are agreeing in supporting the process. This is a mindset shift process that has led us to what we are having today and we are absolutely convinced that everybody can play its part because when we are rolling out the policy tracker, the Africa Union will be a key ally.

Chady: At the IMF we don’t have a policy on illicit financial flows yet, we hope we will have one one day because its crucial to our mandate of promoting global economic stability and helping our members to have an inclusive sustainable growth. However, we do have an anti money laundering and combating terrorism financing policy which we have been implementing for the last two decades. In today’s world I’m seeing so many initiatives globally, everybody is asking countries in Africa with very scarce resources to do so much, so they have to prioritise to focus on the most impactful one. The tracker is a great initiative, but the question becomes about prioritisation, to select which indicator from this list has to be implemented first to prevent the money from leaving from the 1st place. At the IMF we have so many functions, of lending, surveillance, capacity development. The tracker is super useful for the IMF staff because it’s open transparent. It would allow us to better assess the needs of a country and put that into account in all IMF activities when it comes to lending.

Layla: The majority of the international tax norms were negotiated at the time that many African countries were under colonial rule and therefore did not have a say as to how they want their own trajectory around framing the narrative of the global financial architecture and their access to financial flows going forward. This particular tracker represents an inaugural moment for African countries to design for themselves their own legal institutional data and interagency cooperation methodology based on their own capacity. There is the Africa EU agenda 2063 and there’s the Addis Ababa action agenda. This tracker is one way in which the African countries have come together to say this is our approach this is what we want to do in terms of identifying the problems affecting our continent particularly in relation to tax and this is how we intend to curb it on our own terms.

Questions and answers:

• How is it different than the Africa Peer review Mechanism?
• Can the tracker be used to support the effort of returning the money that have already left the African continent?
• Given how critical the issue of IFF is, will IMF be prioritising this going forward? How do you see tax related illicit financial flows being part of that ?

Chady: the Fund has IFFs on its global program global agenda before the Covid, we are looking at tax avoidance, financial flows and corruption. On the question of money leaving the country, in my experience if money leaves, it never comes back even if you make spend a lot of resources trying to recover the assets and trace it. There is some hope with automatic exchange of info and mutual legal assistance and extradition but typically it’s very resource intensive to trace it back and recover.

Layla: The tracker is government lead because they hold the data and can asses how one indicator is being implemented. We’ll have the tax administrations in the room, people from the Ministry of Finance and other relevant government departments like central banks, so it’s going to be a multiple number of players in the next phase of the tracker. We did take a look at all the global standards that are out, we looked at what the OECD is proposing, what the UN is proposing and see whether we want to adopt their trackers as is or do we tailor them. We decided to tailor them with country perspective at the heart of the project. With our own tracker and data collection we can go to the international space and as a block, say, this tracker or those indicators don’t really work, and start a conversation about reforming the international financial architecture.

Thulani: When we sought to develop the tool, we were thinking about how to develop the methodology for a comprehensive analysis on IFF. Soon we realised that we could not have a comprehensive analysis that looks at all IFFs at the same time so we decided to focus on commercially related IFFs that are related to tax, but we know that the tool will evolve the tool will grow and it will cover you know broader IFFs as we go along.