High Level Panel (HLP) on Illicit Financial Flows from Africa

By Abdalla Hamdok, UNECA I. Introduction

Illicit flows from Africa are estimated at US $50 billion per annum. This is approximately double what ODA allocated to Africa, and the estimates may well be short of reality as accurate data does not exist for all African countries. Illicit financial outflows through several channels increasingly constitute hidden resources for development in African countries. These outflows drain hard currency reserves, heighten inflation, reduce tax collection, undermine trade and investment, worsen poverty, and widen income gaps. Curtailing illicit financial outflows from Africa can produce the largest source of new funds for poverty alleviation and economic growth in the near future. African policy makers and leading experts of economy and finance gathered in Lilongwe (Malawi) in late March, 2010 to tackle the above noted issues of financial integrity in a panel discussion organized as a side event to the African Ministers of Finance Conference. The findings of the panel discussion along with its recommendations that called for AUC and UNECA to coordinate and lead the continental efforts to combat illicit financial flows from Africa was unanimously adopted. The details of the above recommendations were further discussed by a group of experts composed of policy makers, civil society organizations, and representatives of various UN and other multi-lateral institutions - in a meeting organized by UNECA in Addis Ababa, in September, 2010. The participants deliberated on the various negative aspects of illicit financial flows and agreed on the need to establish a High Level Panel that would be responsible for the coordination of efforts to combat illicit financial. A Resolution by the 4th Annual Conference of African Ministers of Finance, Planning and Economic Development held in Addis Ababa, Ethiopia in March 2011 has establish the High Level Panel (HLP) on Illicit Financial flows to be hosted by ECA. II. The case for the establishment of a High Panel

The primary role of the Panel will be to complement and support the work on illicit financial flows currently undertaken by African and non-African institutions particularly in the areas of: commercial tax evasion; criminal activities; and corruption. Specifically, the Panel in partnership with AUC and ECA external partners will promote national and multilateral policies (safeguards and agreements) aimed at curtailing cross-border flow of illegal money. In addition, it will put forward solutions, facilitate strategic partnerships and commission research on various aspects of the subject.

The panel will in particular focus on sensitizing African governments, citizens and international development partners on the scale, and effect of financial outflows on development and also mobilize political will in support of putting in place rules and regulations which are necessary to combat illicit financial outflows. The Panel will make its findings public. II1. Purpose and functions of the High Level Panel (HLP)

The principal functions of the panel are as follows: Lead the process of production of research papers and studies on the nature and pattern, magnitude and effects of illicit financial flows from Africa. Outreach and advocacy; and Capacity building activities at regional, sub regional and national levels

The long-term aim of the a High Level Panel is to address factors underlying illicit outflows and also impress upon the G-20 of the need for better transparency and tighter oversight of international banks and offshore financial centers that absorb these flows. Furthermore, the Panel seeks to mobilize political will amongst African governments, regional and international organizations, civil society, business and other stakeholders in support of adopting the necessary policies to curtail illicit financial flows. IV. Institutional Framework

The panel is composed of eminent and distinguished personalities from the continent as well as from partner countries. The panel will seek the support of various institutions. In order to produce the above mentioned outputs and implement the related activities, the following inputs will be required: African Countries Contribution: Member states are expected to provide support by making available data concerning financial flow originating in their territory. Member states are also expected to create conducive environment for research to be conducted by national institutions. Partners Contribution: Partner organizations involved in research on the prevalence of illicit financial outflows from Africa will be involved in the Panel activities through further research and advocacy related work. Civil Society Contribution: Anti-corruption groups and other civil society organizations will be actively involved in various activities of the High Level Panel. Private Sector: Private Banks, chambers of commerce and other private sector institutions will participate in various relevant Panel activities. ECA Contribution: UNECA will act as a secretariat to the High Level Panel and will ensure the provision of all necessary administrative and logistical needs for its smooth operation.