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Misinvoicing (illicit financial flows) - a very common practice in Africa, must be stopped

28 October 2015
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A recent study produced by Global Financial Integrity (GFI) estimates that $286 billion worth of capital was extracted out of Africa using this process over the past decade.

Between 2002 and 2011, due to illicit financial flows, sub-Saharan Africa lost nearly 6% of it's GDP. Of these illicit financial flows, 62% were due to misinvoicing. One thing is certain: while African countries have had to shoulder a heavy debt burden, a number of researchers have shown that sustained illicit outflows have turned the continent into a net creditor to the rest of the world.
At the last conference on Financing for Development in Addis Ababa the recognition of the role of illicit financial flows in undermining the economic growth of developing countries was fully recognized by the international community which embraced the idea that it must be addressed in a substantial way. Such an outcome could not have been predicted even two years ago and is a monumental shift in the conventional wisdom on development.
The challenge now, however, is to actually halt the practices that continue to rob African countries of hundreds of billions a year. While the Addis action agenda’s proposal to redouble efforts to “substantially reduce” illicit financial flows by 2030 includes strengthening national regulation and improving international cooperation, it fails to even mention the largest and perhaps most easily overlooked component of these losses: misinvoicing, which accounts for about 80 percent of the world’s illicit financial flows,
Over $5 trillion is estimated in misinvoicing losses. The concept of trade misinvoicing is simple: companies and their agents deliberately alter the prices of their exports and imports in order to justify moving money out of, or into, a country illicitly. Criminals misinvoice trade for four main reasons: to launder money, to directly evade taxes and customs duties, to claim tax incentives, and to dodge capital controls.
It’s high time to confront criminal entrepreneurs and illicit market actors that navigate between licit and illicit worlds, tainting supply chains and compromising the integrity of our markets and institutions. Legitimate business leaders worry their firms are being put at a competitive disadvantage by unscrupulous and corrupt business operators and public officials.
Let’s stop kidding ourselves, in a world where there is very little growth, we need every country to do its part to get rid of such malicious threats.

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The Pan African Chamber of Commerce and Industry was established in 2009 by 35 founding national business chambers to influence government policy and create a better operating environment for business.

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