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Governance lies at the heart of addressing development challenges on the continent. While the story of the past decade has been one of steady progress throughout Africa, issues of governance, including lack of transparency and accountability remain pervasive concerns, undermining social, economic and political progress at many levels. Illicit financial flows (IFF) and corruption are a serious consequence of these governance shortcomings. They are a drain on Africa’s foreign exchange reserves, reduce efforts to enhance domestic resource mobilization, cancel out of investment inflows and contribute to low social development indicators including poverty and inequality. IFFs have been proven to be a key driver of state fragility and human insecurity, resourcing brutal and protracted conflicts. The situation is worse in fragile and post conflict countries which run a risk of recurrence of conflict. While these issues are not unique to Africa, it is the continent where the phenomena has arguably the largest impact due to the small size of its economies, and the fragility of their financial systems.
Studies have shown that the continent loses billions of dollars each year in IFFs. While there are different estimates and methodologies for estimating illicit financial flows, their impact on the continent cannot be understated. The African Development Bank Group (AfDB) President Akinwumi Adesina has pointed out the importance of addressing corruption and tackling IFFs for economic transformation and the realization of the various development aspirations of the continent including the Sustainable Development Goals (SDGs) and Agenda 2063. Enhancing public and private sector integrity is central towards ensuring faster private sector growth, increased job creation, better public service delivery, including safe and affordable modern energy, and stronger regional integration, all of which are central to the Bank’s Ten Year Strategy and High 5 agenda.
The Bank’s work over time on transparency and accountability has spanned both internal and external initiatives. Looking within, the Bank has taken steps to tighten its fiduciary safeguards and internal controls to ensure that its lending is used only for intended purposes The Bank assists in building the capacity of Financial Intelligence Units and of personnel charged with upholding Anti-money Laundering and Combating Financial Terrorism AML/CFT laws (e.g. investigators, prosecutors, judges); providing the infrastructure necessary to track and report cash movements across borders etc. Recognizing that successful reforms in the area of transparency hold great potential for successful learning and duplication, the Bank leverages its work in countries with support to regional bodies and sub-regional bodies engaged in anti-corruption and anti-money laundering efforts such as the African Union (AU), the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). The Bank also supports the Extractive Industries Transparency Initiative (EITI) and other transparency and good governance initiatives in natural resources. Through research and economic sector work on the nature, origin, development and impact of IFFs on African societies the Bank continues to deepen policy analysis and advisory support.
Externally, the AfDB has increased its collaboration with partners on issues of anti-corruption and IFFs. Key among these is the partnership with the Organisation for Economic Cooperation and Development (OECD) and the US-Africa Partnership on Illicit Finance (PIF). In 2008, the Bank and the OECD launched the Joint Initiative to Support Business Integrity and Anti-Bribery Efforts in Africa. The Joint Initiative has been working since then to increase the capacity for effective anti-bribery enforcement, reinforce global anti-bribery efforts, enhance public sector integrity and contribute to transparent and accountable business in Africa. A first output of this initiative was the publication in 2012 of a Stocktaking Report on Business Integrity and Anti-Bribery Legislation, Policies, and Practices in Twenty African Countries. This has now been followed up with an Anti-Bribery Policy and Compliance Guidance for African Companies to strengthen private sector transparency and promoting integrity in business operations. Over the past year the Bank has also been collaborating with the OECD and other partners such as the World Bank and GIABA to produce a report on the economy of illicit financial activity in West Africa. Regarding PIF, a side event was organized at the last Bank Annual General Meetings held in Lusaka in May 2016 whose objective was to review the progress so far by PIF member countries in the development of action plans to combat illicit finance stemming from corruption and other criminal activities, and to launch the national action plans of the United States and Senegal.
To give a better response to the various needs so far identified, AfDB recently embarked on a review of its working documents on IFFs. A new policy has been developed and the Bank is embarked on the revision and update of its 2007 Strategy on Anti-Money Laundering and Combating Financial Terrorism.
The 2007 AML/CFT Strategy did not cover all forms of IFFs and lacked both an action plan for its implementation and a results measurement framework to articulate key priorities and define the necessary actions to deliver on objectives. The revised strategy therefore: (i) has expanded the scope of the Banks AML/CFT strategy to include all forms of IFFs and recovery of stolen assets; (ii) incorporated an action plan and a results measurement framework and (iii) recommended an organizational framework for the coordination of the implementation of the strategy in the Bank. With these changes, the revised strategy which responds to the realities on the ground and draws on best practices from other multilateral development banks is designed to strengthen the Bank’s capacity, activities and practices to pre-empt and respond to money laundering, financing of terrorism, bribery and corruption and other forms of illicit financial flows. It is also intended to enhance the Bank’s support to regional member countries (RMCs), Financial Reporting Standards Boards and other stakeholders in Africa.
Sub-Saharan Africa has become a commercially significant market. However bribery and corruption risks are deterring higher rates of investment and the ability of companies doing business in Africa to conduct business fairly on a level playing field. The Bank estimates that USD 148 billion is still lost to corruption in Africa every year. While the legal framework is changing in many African countries with the enactment of anti-corruption laws, the setting up of dedicated anti-corruption authorities and greater scrutiny from civil society and the media, it is time for the business to make its case against bribery. This is why the Joint Initiative developed this Anti-Bribery Policy and Compliance Guidance to help companies of all sizes to set up measures to stop the supply side of bribes to public officials in business transactions and support member countries’ public and private sectors in their efforts to prevent bribery and improve the quality of corporate compliance and bribery prevention measures. The publication will be launched during the event.
A two day event is being organized for consultation with stakeholders on the new IFFs strategy prior to its finalization. The meeting will also provide an opportunity for the Bank to update stakeholders on the progress on some of the initiatives and partnerships such as PIF and to disseminate and share information on recently developed knowledge products by the Bank and its partners on relevant subject matter. Of particular interest will be an upcoming publication the Anti-Bribery Policy and Compliance for African Companies.
The main objective of the two day event is to carry forward the Bank’s work on transparency and accountability, in particular as regards tackling IFFs and combating corruption. The specific objectives are the following:
i) To present the AfDB’s new strategy on IFFs to external stakeholders for comments and suggestions to ensure it adequately addresses the needs and priorities of key stakeholders towards addressing challenges around IFF;
ii) To share experiences on the PIF partnership including presentation of implementation progress by some countries
iii) Information sharing and launch of key knowledge products developed by the Bank and its partners, notably, the Study on “Addressing Illicit Trade in Natural Resources by the Bank’s African Natural Resources Center, the AfDB-OECD Study of Illicit Financial Flows in West Africa and the Anti-Bribery Policy and Compliance Guidance for African Companies developed jointly by the Bank and the OECD.
The expected outcomes of the consultation include: (i) widespread awareness among stakeholders on the strategic directions of AfDB’s new IFF approach; (ii) clarity on RMCs’ expectations on the Bank’s future IFF interventions; (iii) sensitization on the PIF and update on the progress made since May 2016; iv) dissemination of knowledge products such as the Anti-Bribery Policy and Compliance for African Companies; iv) generation of ideas on how to deepen coordination and synergies with other development partners on anti-corruption and IFFs.
The event will draw participants from RMCs and Regional Organizations who are central to the Bank work on anti-corruption and IFFs. These include:
– Akinwumi Adesina, AfDB President
October 27 and 28, 2016
Immeuble CCIA, Plateau - Abidjan, Côte d'Ivoire