Financial Crime World

Tunisia’s Shadow Economy: Money Laundering Detection Methods Under Scrutiny

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Tunisia faces a significant challenge in tackling its shadow economy, which drains an estimated $1.2 billion annually from its gross domestic product. Corruption at the highest levels of government, tax evasion, criminal activities, and smuggling of goods are all contributing to this economic issue.

The Scale of the Problem

  • In 2019 alone, the Tunisian Customs Agency seized smuggled merchandise worth $81 million.
  • Fuel sales from Algeria make up a significant portion of the illicit market.
  • Proceeds of crime are estimated to be a substantial source of illegal income and financial outflows in the country.

Efforts to Address the Issue

Despite efforts by authorities, including the Central Bank’s Financial Analysis Committee (CTAF), money laundering detection methods in Tunisia remain inadequate. The CTAF has frozen approximately $70 million linked to suspected money laundering transactions, but lacks personnel to investigate and handle fraudulent transactions on a large scale.

Recommendations for Reform

  • More attention should be paid to multinationals that use loopholes in tax codes to move money out of the country.
  • Profit shifting, which involves corporations attributing their net profit or loss before tax to tax havens, is a particular concern.
  • Governments and central banks from world financial centers must also share some responsibility in combating illicit financial flows (IFFs).

The Role of International Cooperation

  • Developed countries have historically overlooked the role they play in facilitating tax evasion.
  • A good practice example is Switzerland’s repatriation of $5.6 million laundered by Franco-Tunisian rapper Swagg Man to build a mosque and center for orphans in Tunisia.

Conclusion

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Curbing illicit financial flows (IFFs) is crucial to stabilizing Tunisia’s economy, politics, and security. International cooperation is paramount in addressing this transnational issue, and governments from world financial centers have a significant role to play in facilitating recovery of public funds sent abroad.