Illicit Financial Flows: A Financial Integrity Perspective

Illicit financial flows (IFFs) are understood to have a negative impact on the growth and development of countries as they drain them of resources that could have been utilised for social spending and other important functions. Moreover, they destabilise the development trajectory of countries by engendering corruption and incentivising unsustainable economic activity. Given the need for sustainable, long-term development in sub-Saharan Africa, IFFs are a major concern. [This] research finds that the definition of IFFs is not broadly agreed upon. In particular, there is disagreement on whether illicit flows refer specifically to illegal flows or whether they include flows which are legal but contravene with the spirit of the law. For example, tax avoidance activities by multinational corporations which are legal but only possible through exploitation of legal loopholes would be considered illicit flows under the latter definition but wouldn’t be considered illicit flows under the former. In addition, illicit flows are difficult to measure and quantify. The current methodologies for quantifying IFFs are prone to over-estimation as well as under-estimation errors.