Tunisia’s Billion-Dollar Leak: Uncovering the Financial Fraud Scandal
Amidst growing concerns over Tunisia’s staggering illicit financial flows (IFFs), anti-corruption measures become a priority to plug the economic drain.
Illicit Financial Flows in Tunisia: An Overview
Tunisia loses approximately US$1.2 billion annually to IFFs, representing about 3% of its gross domestic product. IFFs are the transfer of unlawfully earned money or capital from one country to another, threatening the nation’s economic stability.
From 2008 to 2015, the Economic and Social Commission for Western Asia (ESCWA) ranked Tunisia first for IFFs and eighth for corruption in the Middle East and North Africa. In 2015, illicit financial inflows amounted to US$2.6 billion (11.4%), while outflows constituted US$1.28 billion (5.6%) of Tunisian trade.
The contributors to Tunisia’s IFF issue
- Tax evasion and avoidance: include mis-invoicing and abusive transfer pricing, leading to substantial losses. Profit shifting further exacerbates the issue as multinational corporations exploit tax loopholes.
- Commercial activities: contribute significantly to IFFs, often involving mis-invoicing and under-invoicing of goods and services.
- Criminal activities: proceeds of crime, such as smuggling and illegal fuel sales, generate about US$4.2 billion.
The Role of Corruption in IFFs
Government corruption at the highest levels appears to be the primary source of IFFs in Tunisia. UNECA reports that:
- Tunisia loses over US$500 million annually due to tax evasion and avoidance.
- Proceeds of crime such as smuggling between Tunisia and its neighboring countries generate about US$2.4 billion from Algeria and US$1.8 billion from Libya.
The impact of IFFs on Tunisia’s economy
The losses from IFFs harm Tunisia’s economy and have a ripple effect on healthcare, education, and public services. The government could allocate resources to hire 4,300 teachers for two years with just 10% of the estimated IFFs circulating in Tunisia.
Current efforts to combat IFFs
Tunisian authorities are taking steps to address the issue, with the launch of the Hannibal platform in February 2021 to identify and monitor national money laundering and financing of terrorism risks.
International cooperation and support
International cooperation and shared responsibility of foreign financial centers in combating IFFs and recovering stolen public funds are essential. For example, Switzerland returned approximately US$5.6 million laundered by Swagg Man, a Franco-Tunisian rapper, to build a mosque and a center for orphans in Tunisia.
The way forward
Countries like Tunisia need support in implementing effective anti-corruption measures, but the onus lies on their authorities to fully commit and reform their approach to securing a future free from the crippling effects of illicit financial flows.
Abdelkader Abderrahmane, Senior Researcher, ENACT project, ISS Regional Office for West Africa, the Sahel, and the Lake Chad Basin.