Financial Crime World

Financial Crime Undercuts Africa’s Economic Growth Gains

Africa is at a critical juncture in its economic development. Despite being one of the most resource-rich continents in the world, it also harbors some of the poorest people on earth. The root cause of this paradox lies in financial crime, which has become a major obstacle to growth and development.

The Devastating Impact of Financial Crime

According to estimates by the African Union (AU), corruption alone costs Africa 25% of its GDP every year, amounting to US$148 billion. In addition, money laundering is estimated to cost between 2% and 5% of global GDP, or roughly US$1 trillion to US$2 trillion, with Africa being one of the worst-affected regions.

The Scale of Financial Crimes in Africa

  • Corruption: AU estimates that corruption costs Africa 25% of its GDP every year, amounting to US$148 billion.
  • Money Laundering: Estimated to cost between 2% and 5% of global GDP, or roughly US$1 trillion to US$2 trillion.
  • Illicit Flows: The Organisation for Economic Co-operation and Development (OECD) reports that Africa loses an average of US$50 billion a year through illicit flows.

The Sophistication of Financial Crimes in Africa

Financial crime in Africa involves some of the world’s most sophisticated groups and transnational syndicates. Tom Burgis’ book “The Looting Machine” highlights the role of corrupt multinational companies and politicians in fuelling this type of crime.

Technological Advancements Fueling Financial Crimes

  • Electronic Banking: Has made it easier for financial crimes to flourish.
  • Cryptocurrencies: Have led to a revolution in new financial crimes, which are complex, sophisticated, and rapidly evolving.

Challenges in Combating Financial Crimes in Africa

  • Disparities among states and regions: Africa’s various legal systems define financial crime differently, creating disparities among states and regions.
  • Impunity: Little cooperation among African countries on investigating and prosecuting these crimes, leading to impunity and undermining the effectiveness of the continent’s criminal justice system.

A Call for Action

To address this issue, there needs to be a clear understanding of what constitutes financial crime. A universally accepted definition would help in describing offences such as fraud, illicit financial flows, money laundering, counterfeiting, market abuse, bribery, corruption, and tax evasion.

Key Strategies to Combat Financial Crimes

  1. Capacity Building: Invest more in preventing, detecting, and disrupting financial crimes.
  2. Effective Monitoring and Compliance Regimes: Establish robust monitoring and compliance regimes to detect and prevent financial crimes.
  3. International Cooperation: Foster better international cooperation among African countries to combat financial crimes.

The Way Forward

A continent-wide convention or protocol is needed, along with a rule-of-law-based approach and better international cooperation. By investing in preventing, detecting, and disrupting financial crimes, Africa can reverse these trends and ensure a brighter future for its people.