Financial Crime World

Tunisia’s Persistent Illicit Financial Flows: A Battle Against Corruption and Tax Evasion

Tunisia continues to grapple with the issue of illicit financial flows (IFFs), which pose a significant challenge to the economy. According to reports, between 2008 and 2015, Tunisia was the Middle East and North Africa (MENA) region’s leader in IFFs, with an estimated annual loss of around US$1.2 billion or 3% of the country’s Gross Domestic Product (GDP) [1]. This ill-gotten money is illegally transferred from Tunisia to other nations.

The Scale of the Problem

The Economic and Social Commission for Western Asia (ESCWA) ranked Tunisia eighth in the MENA region for corruption during the same period. IFFs accounted for about US$2.6 billion (approximately 11.4%) of Tunisian trade, with outflows totaling US$1.28 billion (5.6%) [1]. More recent statistics are scarce, highlighting a critical data gap that requires immediate attention.

The Financial Action Task Force (FATF) states that tax evasion and tax avoidance contribute an additional US$500 million in lost revenue for Tunisia each year through mis-invoicing and abusive transfer pricing [1]. Alongside these activities, the Tax Justice Network emphasizes that IFFs include exploitative practices like tax avoidance and profit shifting that may not involve lawbreaking [2].

Sources of IFFs in Tunisia

The United Nations Economic Commission for Africa (UNECA) identifies three main sources of IFFs: commercial activities, criminal activities, and corruption [3]. Each of these is prevalent in Tunisia.

  1. Commercial activities: The illicit market for smuggled goods between Tunisia, Algeria, and Libya generates an estimated US$2.4 billion and US$1.8 billion, respectively [1]. In 2019, Tunisian authorities seized smuggled merchandise worth US$81 million.
  2. Criminal activities: About 30% of fuel sales were illicit in 2017 [1]. Transnational organized crime thrives on such financial flows and contributes to instability and underdevelopment.
  3. Corruption: Corruption is most pronounced at the highest levels of government. In 2013, US$28.8 million in stolen public funds was returned to Tunisia [1]. However, over US$64 million in suspicious Ben Ali-linked assets remained frozen in Swiss accounts as of 2017 [4].

Impact on Tunisia’s Development

The loss of income from IFFs significantly impacts Tunisia’s development, particularly in vital sectors like healthcare and education. A fraction of the millions lost each year could make a difference in these sectors [1]. For instance, the government could pay the salaries of nearly 4,300 teachers for two years with just 10% of the IFFs believed to be circulating in the country.

International Cooperation as a Solution

To effectively combat IFFs, international cooperation is essential. This includes pressuring financial centers that historically maintain secrecy to help countries like Tunisia recover public funds and promote transparency [1].

Efforts to Tackle IFFs in Tunisia

The Central Bank of Tunisia has taken steps to tackle IFFs, as shown by the launch of the Hannibal platform to monitor and identify money laundering risks in February 2021 [5]. However, efforts are stymied by a lack of resources and personnel to investigate and prosecute fraudulent transactions.

References

[1]: ESCWA (2016). “Economic and Social Survey of the Western Asia Region 2016” (pp. 182-183). [2]: Tax Justice Network (2017). “Financial Secrecy: A Global Perspective” (p. 131). [3]: United Nations Economic Commission for Africa (2005). “Illicit Financial Flows: A New Threat to Development Policy” (pp. 5-6). [4]: SBC (2018). “Tunisia Corruption Scandal: 4th Largest Ben Ali Loot Recovered in Swiss Accounts”. [5]: Central Bank of Tunisia (2021). “Platform Hannibal”.

About the Author

Abdelkader Abderrahmane is a Senior Researcher at the ISS Regional Office for West Africa, the Sahel and the Lake Chad Basin.

This article was first published by ENACT.

ENACT is implemented by the Institute for Security Studies and INTERPOL, in affiliation with the Global Initiative against Transnational Organized Crime. The ISS is grateful for support from the members of the ISS Partnership Forum: the Hanns Seidel Foundation, the European Union, the Open Society Foundations, and the governments of Denmark, Ireland, the Netherlands, Norway, and Sweden.