Quantifying illicit financial flows from Africa through trade mis-pricing and assessing their incidence on African economies

Simon Mevel, Siope V. Ofa and Stephen Karingi

No 332372, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Capital flights from developing countries have increased tremendously in the last decade and a large portion of these flows occurs via illicit means. Illicit financial flows (IFF) can usually be broken down into three main components: 1) Corruption, which is the proceeds from theft and bribery by government officials; 2) Proceeds from criminal activities, including drug trading, racketeering, counterfeiting, contraband, and terrorist financing; 3) Proceeds from commercial tax evasion mainly through trade mis-pricing and laundered commercial transactions by multinational corporations (MNCs) (UNECA, 2012). This paper presents a revisited methodology to estimate IFF through trade mis-pricing from Africa at the sector level. Detailed results from the application of the methodology are also provided and discussed. These are complemented by a Computable General Equilibrium analysis aiming at assessing the economic impacts on African economies from a possible return of IFF losses into Africa. Results indicate that the massive amount of financial resources illegally lost by Africa are in fact highly concentrated in a few countries and sectors –essentially extractive and mining industries– and benefit to a handful of countries. Moreover, losses associated to IFF seem hardly reversible suggesting the adopting of effective frameworks to prevent them in the first place.

Keywords: Financial Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 35
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332372

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