Illicit Financial Flows Joint Programme

Curbing Illicit Financial Flows:

Recovering Resources for Africa’s Development

 

The Thabo Mbeki Foundation (TMF) and Pan-African Investment and Research Services (PAIRS) are joining forces to launch a new national partnership to combat illicit financial flows in South Africa and the rest of the continent.

Introduction

It is estimated that every year the African continent loses nearly $100 billion through illicit financial flows (IFFs). This is a substantial amount of developmental resources which could otherwise be invested in Africa’s socio-economic development. A 2013 Report by the African Development Bank found that between 1980 and 2009 Africa lost between $1.2 trillion and $1.4 trillion, equal to the continent’s GDP, and double the foreign aid received during the same period. IFF’s are highest in commodity (i.e., oil, gas and precious minerals) rich countries (UNCTAD, 2020). In general, the more export-oriented an economy, the more it is exposed to the threats of IFFs.

In response to the growing concern over IFFs the African Union (AU) and the United Nations Economic Commission for Africa (UNECA) hosted a Conference of African Ministers which led to the establishment of an investigative panel chaired by President Thabo Mbeki. The panel’s report in 2015 found the main drivers of IFFs in Africa were poor governance, weak regulatory structures, capacity gaps in government institutions, lack of political will, abuse of tax incentives and double taxation agreements, and a general lack of transparency. The Mbeki Report made policy recommendations for national, regional and global stakeholders to ensure capital generated on the continent is retained and used for its development.

A Renewed Partnership

In support to the broader continental follow up to the 2015 AU/UNECA report, the Thabo Mbeki Foundation (TMF) is partnering with Pan-African Investment & Research Services (PAIRS) on interventions to address illicit financial flows in and out of South Africa.

TMF and PAIRS recognise the problem of IFFs to be complex, and that it can only be resolved through combined political, legal and technical interventions. Results can be achieved only through effective partnerships between public sector and private sector actors, both having the potential to be the cause as well as the solution to the problem.

In its efforts to curb IFFs, TMF and PAIRS will work with a diverse range of government agencies, corporate firms, media, academia, civil society organisations, regional institutions and international financiers active in Africa’s development arena.

Lines of Action

  1. Undertaking assessments, diagnostics, and analytical studies at country and sectoral level, that will help stakeholders better understand the nature, extent, impact, causes and threats of IFF. This may also include national evaluations of progress made by the different IFF initiatives on the continent. Reliable data and evidence-based research on the problem will provide the foundation and subsequent recommendations for specific solutions. PAIRS will complement and collaborate with regional and international think tanks currently undertaking policy research on IFFs.
  2. Facilitating multi-stakeholder public dialogues to discuss the problem of IFFs in each country. This will provide the opportunity to bring leaders from the public and private sector, as well as broader civil society, to unpack the challenge of IFFs in their national context, and build political and financial support for interventions. These dialogues will be organised in collaboration with prominent media houses and serve as the launching platform for national programmes to combat IFFs.
  3. Providing technical assistance and capacity building to national institutions to better manage challenges of international taxation (i.e. transfer pricing, trade mis-invoicing, double taxation agreements), money laundering and asset recovery, by providing technical inputs into legal and policy frameworks, guidelines and strengthening national capacities in the areas of revenue collection, financial intelligence, justice and financial law enforcement. PAIRS will support African governments with domestic adaptation and implementation of international frameworks such as BEPS, FATF, STAR, GF-EOI and will collaborate closely with the regional institutions coordinating these efforts.
  4. Bringing to bear the latest advances in fintech, such as cutting-edge digital technologies, data analytics, artificial intelligence, to support and enhance current systems managing customs, tax compliance and financial crime. By developing integrated and automated systems that link up, in real time, databases of national institutions (tax payers information, title deeds, banking transactions, police records, business registries, government tenders, etc.) with international databases (terrorist financing, money laundering, publicly exposed persons, etc.), the new financial intelligence systems will improve the detection of threats and potentially suspicious transactions linked to IFFs.
  5. Developing financial integrity indices for the private sector. With the recent international scandals by renown audit firms, a new standard of financial integrity needs to be established to demonstrate accounting transparency and contribution of corporations to the national fiscus of the developing countries they operate in. This project, similar to Extractive Industry Transparency Initiative and Publish What You Pay, will be aimed at promoting a positive culture of corporate citizenship, good governance and social responsibility. The index will be developed and published in collaboration with national stock exchanges, so to encourage corporations to vie with each other and pride themselves on their financial integrity and contribution they are making to sustainable development.

Research and Technical Team

To operationalise the activities outlined above, PAIRS is expanding its team to include African economists, tax policy experts, lawyers, auditors, fintech developers, development finance and other specialists from across the continent. The core PAIRS IFF programme team comprises of:

Dr Neissan Besharati, IFF Programme Director nbesharati@pan-africanresearch.co.za

Neissan has joined PAIRS as Director of Development Advisory. He holds a PhD (Public Policy & Development Management) from University of Witwatersrand (South Africa). He is a senior research associate at several prominent think-tanks and visiting professor at a number of international universities. Neissan has extensive experience as a development consultant working with multinational corporations (EY, PWC, Deloitte) and serving as a senior technical advisor to governments, philanthropies, bi-lateral and multi-lateral donors and regional organisations. He currently sits on various UN, World Bank, AU and OECD expert groups and committees. His areas of expertise include illicit financial flows, public and development finance, international development cooperation, monitoring and evaluation, emerging economies, public-private partnerships, South-South cooperation.

Kathy Nicolaou-Manias, IFF Technical Advisor

Kathy is an economist specialised in Illicit Financial Flows (IFFs) and Public Finance. She led the IFF Policy Research Unit at the SA Financial Intelligence Centre, advising National Treasury from 2011 to 2016. She chaired the inter-departmental working groups on IFFs, bitcoin and cryptocurrency and represented SA in the OECD’s task team on Curbing Illicit Trade. Since 2017 she has consulted to the UNECA on IFFs and advised the SDG Technical Task Force on measuring IFFs. In 2020, she was appointed IFF course director at the UN African Institute for Economic Development and Planning. Kathy has developed several risk assessment tools and served as advisor to the Gauteng MEC of Economic Development and the SA Social Security Agency. She holds a MCom (economics) from the University of Witatersrand (South Africa).

Dr Collen Lediga, International Tax Specialist

Collen is an economist and international taxation expert focussed on tax evasion and avoidance. He advises public and private institutions, including SARS and GIZ, on developing, implementing, managing and monitoring domestic revenue mobilisation reform programs in developing countries. He has authored numerous IFF studies and contributed to publications of international organisations such as the OECD, EU, the Addis Tax Initiative, the African Tax Administration Forum (ATAF), the Inter-American Centre of Tax Administrations and the World Customs Organisation. Collen lectures on domestic revenue mobilisation and taxation at numerous Germany universities. He holds a PhD in economics from Ruhr – Universität Bochum (Germany) and MSc Public Policy and Management from SOAS (United Kingdom).

James Karanja, International Tax Specialist

James is an international tax expert based in Kenya who led the secretariat of Tax Inspectors without Borders, an OECD-UNDP initiative to curb IFF’s in developing countries. Prior to that he worked on tax reforms at the Kenya Revenue Authority, including formulating a national tax enforcement strategy and managing Kenya’s tax transparency. He has represented Kenya at international meetings and addressed conferences. His extensive regional experience includes working with the Tax Justice Network Africa, OECD Development Centre, GIZ and the Global Forum on Transparency Africa Initiative – on initiatives around information exchange and double taxation treaties. He is a previous chair of the ATAF technical committee on BEPS and an assessor with the Global Forum on Transparency in Albania. He holds a Masters degree in Public Policy and Management from Strathmore University and an LLB (Hons) from the University of Nairobi.

Nsizwa Mutasa, International Tax Specialist

Nsizwa is a taxation specialist who has worked in academia, tax administration and corporate advisory. He is currently responsible for taxation at Ubombo Sugar Limited in eSwatini (an Illovo subsidiary). Prior to this he was a tax specialist at the eSwatini Revenue Authority responsible for developing and establishing technical training programmes. His regional work includes serving on the expert review panel of the ATAF’s Executive Master in Tax program for senior tax administrators, and contributing to the World Bank’s Ease of Doing Business Index. His particular interest is international taxation, tax policy and he has participated in international seminars and conferences in this field. He holds a Bachelor in Accounting from Rhodes University and a B Comm (hons) in Taxation from the University of Pretoria.

Sina Bahrami, Senior Data Scientist

Sina is a data specialist experienced in high-profile, forensic investigations with an MSc in Information Management from the London School of Economics (United Kingdom). He is a big-four alumni and has built data analytics teams and capabilities for Fidelity Investments, FTI Consulting and Deutsche Bank. He helped Swedbank investigate Sweden’s biggest money laundering scandal (€135bn funnelled through Swedbank’s Baltic subsidiaries), investigated the fraud which brought down Imperial Bank (Kenya) and the forex rigging scandal for which Barclays Bank was fined a record €1bn. He has built prediction modelling applications for the Federal Demographic Council of the UAE and is currently the co-founder of a KYC service for the South African SME market.

Siqhamo Mashologu, Data Architect

Siqhamo is a technology expert in the field of data warehousing design and business intelligence with a B. Comm (Economics & Information Systems) from Wits University (South Africa). He has implemented data and business intelligence solutions in a wide range of sectors including financial services, telecoms, retail and FCMG. Most of his career has been in consulting, having worked with major technology firms such as Accenture, ITB and Microsoft. He has extensive experience operating in SQL, PowerBI, Unix, Tableau, Sybase, Proclarity, IBM, Oracle and other cloud technologies. His career highlights include building data warehouses which have been in use for over 20 years.

Sankari Reddy, Legal Advisor

Sankari is a specialist commercial litigator in South Africa and Botswana. Her experience includes being lead counsel for a SETA during the Auditor-General’s audit, where she worked with forensic experts and instituted legal action against leaders, staff and service providers. She was also lead counsel for large contractors in the Independent Renewable Energy Producers Procurement Programme, dealing with government and DFI disputes, evaluating bid documents and dealing with BBBEE structuring issues. Her areas of expertise include public finance management, procurement legislation, King IV, administrative, company and property advisory law. Sankari is a member of and has published for the Institute of New Economic Thinking: Young Scholar Initiative. She is awaiting admission to the Chartered Governance Institute of Southern Africa and is currently completing a Master’s degree in Comparative Law, Economics and Finance at the International University College of Turin (Italy).