Financial Crime World

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Illicit Financial Flows Estimated to Be Significant in North African Countries

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A recent study has estimated that illicit financial flows (IFFs) in Libya and other North African countries are significant, with potential trade misinvoicing contributing to these flows. According to the study published by Global Financial Integrity (GFI), total trade-related IFFs in focus countries for 2015 were estimated at over $7 billion.

Methods Used to Estimate Illicit Financial Flows

The study used two methods to estimate the scale of trade-related IFFs: the DOTS-based method and the UN Comtrade- based method. While estimates were available for Libya using the DOTS-based method, there was insufficient data available to produce estimates from the UN Comtrade-based method.

Estimated Illicit Financial Flows in Focus Countries

According to Table 1, which presents GFI’s estimated scale of trade-related IFFs in focus countries using the DOTS- based method, Libya had a total trade of $11.273 billion in 2015, with illicit financial flows inflows and outflows estimated at $3.107 billion and $2.337 billion respectively.

Criticism of GFI’s Methodology

However, not all experts are convinced by GFI’s methodology, which has been criticized for lacking evidence and being uncorroborated. Dr. Nitsch, a researcher, has argued that the estimates lack evidence and are uncorroborated.

Capital Flight Estimates from North African Countries

Meanwhile, researchers Ndikumana and Boyce have estimated capital flight from North African countries using a combination of World Bank residual model method and trade misinvoicing approach. According to their estimates:

  • Algeria lost over $267 billion through capital flight between 1970 and 2010.
  • Morocco lost $88 billion.
  • Egypt lost $60 billion.
  • Tunisia lost $39 billion.

Money Laundering Risk in North Africa

The risk of money laundering in North Africa is also a significant concern. International measurements have highlighted or ranked countries at risk of money laundering in the region.

References:

  • Saloman (2019)
  • GFI (2019)
  • Ndikumana and Boyce (2012, 2018)