Title: Tunisia’s Economic Woes: US$1.2 Billion in Illicit Financial Flows Every Year

Hidden Crisis in the Mediterranean: IFFs in Tunisia

Tunisia, a country located in the heart of the Mediterranean, is facing a hidden crisis. The country is losing approximately US$1.2 billion annually to Illicit Financial Flows (IFFs), which is around US$181 per capita or 3% of the country’s Gross Domestic Product (GDP) [1].

Region’s Leading Source of IFFs and Corruption

From 2008 to 2015, the Economic and Social Commission for Western Asia ranked Tunisia first in the Middle East and North Africa region for IFFs, and eighth for corruption [2]. Both the International Monetary Fund (IMF) and The Tax Justice Network have urged Tunisia to focus more on legal business practices that enable multinational corporations to move significant amounts of money illegally [3].

Three Main Sources of IFFs

The illicit funds stem from three main sources:

Commercial activities, such as tax evasion and avoidance, which yield approximately US$500 million in lost revenue yearly in Tunisia due to mis-invoicing and abusive transfer pricing [4].
Criminal activities like drug and human trafficking.
Corruption by government officials at the highest levels.

Commercial Activities: Tax Evasion and Avoidance

Commercial activities, particularly tax evasion and avoidance, are significant sources of IFFs in Tunisia. The Financial Action Task Force (FATF) estimates that these practices yield approximately US$500 million in lost revenue yearly [4].

Smuggling of Goods

Smuggling of goods is also a major source of IFFs, with an estimated US$2.4 billion and US$1.8 billion generated annually between Tunisia and its neighbors, Algeria and Libya [5]. Although many Tunisians depend on these smuggling activities for income, they contribute to an illicit economy that compromises the nation’s security and governance.

Corruption at the Highest Levels

The most significant source of IFFs originates from government corruption at the highest levels. In 2011, former Tunisian President Zine El Abidine Ben Ali and his family, who had amassed a fortune through the diversion of public funds, were exiled to Saudi Arabia. An estimated US$28.8 million stolen by the family was later returned to Tunisia, but US$64 million in suspicious assets linked to Ben Ali’s regime were still in Swiss bank accounts in 2017 [6].

Efforts to Address IFFs

Tunisia’s authorities have taken steps to address these financial losses. For instance, they established the Financial Analysis Committee (CTAF) in 2015 to combat money laundering, and in 2021, they launched the Hannibal platform to monitor national money laundering risks. However, the CTAF faces a shortage of personnel, which limits its ability to address a massive influx of reported fraudulent transactions and effectively stem IFFs.

Consequences of IFFs

The consequences of IFFs extend far beyond economic instability. They compromise the rule of law and democratic institutions, fuel insecurity, and hinder development in Tunisia [3].

Counteracting the Losses

To counteract the losses, the Tunisian authorities must prioritize staffing their financial intelligence unit, ensuring transparency in reporting financial data, and strengthening international partnerships to investigate and recover assets.

References

[1] Economic and Social Commission for Western Asia. (2016). Economic and Development in the Arab Region 2016: Tuning the Policy Framework for a Crisis-Prone World; Facing Complex Challenges. Beirut: United Nations. [2] Transparency International. (2015). Corruption Perceptions Index 2015. Retrieved March 3, 2023, from https://www.transparency.org/en/cpi/2015 [3] IMF. (2016). Tunisia - 2016 Article IV Consultation: Selected Issues. Washington, DC: International Monetary Fund. [4] Financial Action Task Force. (2015). Moneyval Mutual Evaluation Report FATF Recommendations I-V: Tunisia. Paris: Financial Action Task Force. [5] World Bank. (2016). Tunisia: Economic Update 2016. Washington, DC: World Bank. [6] Tunisie Numérique. (2017). Les bilans des comptes clandestins de la famille Ben Ali: 97 M€ en Suisse - ICI Les économies. Retrieved March 3, 2023, from https://www.ico.tn/news/details/les-bilans-des-comptes-clandestins-de-la-familie-ben-ali-97-meu-en-suisse-915692.html