Illicit Financial Flows (IFFs)

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.  

Major sources of these funds are proceeds of corruption, theft, bribery, criminal activities such as drug trafficking, smuggling and commercial activities such as tax evasion, trade mis-invoicing, etc.

The African Union Illicit Financial Flows Report estimates that Africa is losing nearly 50 billion dollars annually through profit shifting by multinational corporations and about 20 percent of this figure is from Nigeria alone.  

IFFs are a major threat to the achievement of the Sustainable Development Goals or Agenda 2030. The huge resources lost to IFFs are enough to fund public services and initiatives, and other critical investments, revamp the economy, create job opportunities, and alleviate poverty.

IFFs have affected Nigeria in various ways – through loss of revenue, underdevelopment, poor infrastructure and health care, among others. The drain on resources and tax revenues caused by IFFs blocks the expansion of basic social services and infrastructure programmes that are targeted at improving the wellbeing and capacities of all citizens, particularly the very poor. In Nigeria and other developing countries, IFFs mean fewer hospitals, schools, police, roads, and job opportunities.

IFFs and ICPC’s Quest to Finding Solution

In its quest to find a lasting solution to this unpleasant phenomenon, the Independent Corrupt Practices and Other Related Offences Commission (ICPC), is beaming its search light on areas that are prone to IFFs such as tax avoidance, tax evasion, base erosion and profit shifting.

The Commission has initiated a System Study and Review of the IFFs in the Oil and Gas, and as well as Tax sectors. It has also constituted an IFFs/Tax Fraud Group to address the menace. 

ICPC has hosted four international conferences to sensitise Nigerians, Africans and the world on the ills of IFFs and how to collectively work together to stop/combat the menace.  

The Commission has also scaled up its operations in profiling all companies mentioned in petitions to the Commission to ensure that they are not in any way short-changing the nation.

Leveraging on two aspects of its three-pronged mandate of prevention and public education, ICPC is re-awakening the consciousness of Nigerians by stimulating dialogues and conversations among critical stakeholders, because public awareness is a key tool in fighting against evolving illicit financial operations.

Inter-Agency Committee on Stopping IFFs

As part of its efforts to block the loopholes through which funds are ferried out of the country, the Nigerian government in 2019, set up an Inter-Agency Committee on Stopping IFFs with ICPC as the secretariat.

The committee is chaired by the Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, and the members include ICPC, EFCC, Central Bank of Nigeria (CBN), NFIU, FIRS, NCS, NDLEA, NEITI, FMF and SEC. The committee is tasked with the mission of promoting financial integrity and transparency in consonance with the far-reaching recommendation of the Thabo Mbeki High Panel Report on IFFs.

In recognition of the critical role of technology, a home-grown technology to calm the rising waves of IFFs in Nigeria is being developed in collaboration with NITDA and the Federal Ministry of Communication and Digital Economy. 

International Conference on IFFs

Recently, the Commission hosted an international conference in collaboration with the Inter-Agency Committee on stopping IFFs from Nigeria, the African Union Advisory Board on Corruption (AU-ABC) and Coalition for Dialogue in Africa (CoDA), to discuss issues surrounding IFFs.  

Speaking during one of sessions devoted to building the capacity of key government officials drawn from all the states in Nigeria on IFFs, ICPC Chairman, Professor Bolaji Owasanoye, declared that for the country to make any meaningful progress, relevant government agencies must block monies that were going out via different means such as tax evasion, and under-handed business practices by multinational corporations.

He bemoaned the fact that a substantial amount of money meant for development was lost to IFFs thereby leaving the country where the business took place to “bear the brunt, and the consequences of environmental degradation and other challenges.”

The ICPC boss explained that the continent could actually generate much revenue through its economy to meet up with its obligations and development needs if the resources that were shipped out of African shores to other jurisdictions were prevented.

Guidelines for Private Sector Response to IFFs

Revised Guidelines on Negotiation & Drafting of Contracts & Agreements by Government Parties to Prevent Corruption, Illicit Financial Flows & Ensure Sustainable Development