Trade misinvoicing constitutes $35.4bn illicit outflows from Africa

A total of $35.4 billion (N5.6trillion) of the US$55.6 billion (N8.8trillion) leaving the continent each year to US as illicit outflow are through the trade misinvoicing, the GFI’s Reseach shown.
GFI noted in a May 2014 study that trade misinvoicing was undermining billions of dollars of investment and domestic resource mobilisation in many African countries.
The organisation emphasised the importance of ensuring that the new U.S.-Africa partnership prioritises the curtailment of trade misinvoicing.
“The misinvoicing of ordinary trade transactions was the most widely used method for transferring dirty money across international borders, and it accounts for the vast majority of illicit financial flows from Africa,” said Heather Lowe, GFI’s legal counsel and director of government affairs.
“While it is easy to place the blame for this on corrupt officials or transnational crime networks, the truth of the matter is that the bulk of these fraudulent trade transactions are conducted by normal companies, many of them major U.S. and European companies.”
The Group welcomed the announcement from the White House and African leaders on Wednesday regarding the establishment of a bilateral U.S.-Africa Partnership to Combat Illicit Finance, but cautioned that any effective partnership must be sure to address deficiencies in both the U.S. and in Africa that facilitate the hemorrhage of illicit capital from Africa.
“We welcome the move by President Obama and certain African leaders to form this partnership on curbing illicit financial flows from African economies,” said GFI President Raymond Baker, who also serves on the UN High Level Panel on Illicit Financial Flows from Africa.
“Illicit financial flows are by far the most damaging economic problem facing Africa. By announcing the creation of the U.S.-Africa Partnership to Combat Illicit Finance, President Obama and African leaders have taken the first step towards tackling the most pernicious global development challenge of our time.”
GFI emphasised the need to address the role of the U.S. financial system as a major facilitator of such outflows.