Tunisia’s Battle Against Illicit Financial Flows: A Call for Comprehensive Anti-Corruption Reforms
Amid growing concerns, Tunisia grapples with the crippling impact of illicit financial flows (IFFs), which drain around 3% of the country’s Gross Domestic Product (GDP) annually. IFFs, involving the illegal transfer of unlawfully earned money or capital, pose a significant threat to Tunisia’s economic and political stability.
Extent of Illicit Financial Flows in Tunisia
According to data compiled from 2008 to 2015, Tunisia ranked first for IFFs and eighth for corruption in the Middle East and North Africa (The Economist, 2016). During this period, illicit financial inflows amounted to US$2.6 billion (11.4%), while outflows constituted US$1.28 billion (5.6%) of Tunisian trade (Global Financial Integrity, 2017). More recent figures, unfortunately, remain elusive, highlighting a major gap that warrants urgent attention.
Origins of Illicit Financial Flows
Illicit financial flows in Tunisia primarily originate from:
- Government corruption
- Tax evasion
- Mis-invoicing
- Abuse of transfer pricing
According to the Financial Action Task Force (FATF), over US$500 million is lost annually due to these practices (FATF, 2020). Additionally, proceeds from crime, such as smuggling activities and fuel sales, serve as substantial sources of illegal income and financial outflows.
Corruption Beyond the Highest Echelons
Corruption is an alarming issue that extends beyond the highest echelons of power. For instance, the United Nations Economic Commission for Africa reported that former president Zine El Abidine Ben Ali and his family had stolen US$28.8 million from the public coffers (UNECA, 2011). Despite his fall from power in 2011, US$64 million in suspicious assets are still frozen in Swiss bank accounts.
Consequences of Illicit Financial Flows
The loss of income through IFFs significantly hinders Tunisia’s economic development. Essential sectors like healthcare and education could be better served if just a fraction of the suspected IFFs circulating in the country were allocated. Moreover, the government could pay the salaries of 4,300 teachers for two years with just 10% of the suspected IFFs.
Struggling to Combat Illicit Financial Flows
Despite authorities’ awareness of the challenges, they lack the personnel to effectively tackle the large number of reported fraudulent transactions. The Central Bank’s Financial Analysis Committee (CTAF) has announced the discovery and freezing of approximately US$70 million linked to suspected money laundering transactions. In an attempt to bolster the fight against money laundering and financing of terrorism, the CTAF launched the Hannibal platform in 2021. However, without additional resources dedicated to investigating and handling IFFs, the CTAF is struggling to keep up.
Cooperation in the Fight Against Illicit Financial Flows
In the face of the transnational nature of IFFs, international cooperation is essential. World financial centers, such as London and Switzerland, which have historically welcomed corrupt leaders and their ill-gotten gains, must assume responsibility in helping countries like Tunisia combat IFFs and recover public funds sent abroad.
Tunisia’s Anti-Corruption Efforts
As Tunisia seeks to strengthen its anti-corruption efforts, it is crucial for the government to address the root causes of IFFs and reform its approach to implementing anti-corruption policies. The first step is to implement comprehensive anti-corruption reforms and bolster the capacity of institutions responsible for combating illicit financial flows.
Global Cooperation and Best Practices
Engaging the international community and sharing best practices from successful initiatives will be key to Tunisia’s progress. Global cooperation is vital to ensuring the economic and political stability of Tunisia.