Tunisia’s Illicit Financial Flows: A Threat to Economy and Security

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Introduction

Tunisia loses approximately $1.2 billion annually to illicit financial flows (IFFs), draining its economy and compromising its security, according to experts.

The Scale of the Problem

The country’s Economic and Social Commission for Western Asia ranked Tunisia first in the Middle East and North Africa for IFFs from 2008 to 2015, with corruption being a major factor. In 2015, illicit financial inflows made up $2.6 billion (11.4%) of Tunisian trade, while outflows constituted $1.28 billion (5.6%).

The Extent of the Problem

The Financial Action Task Force estimates that tax evasion and avoidance through mis-invoicing and abusive transfer pricing account for over $500 million in lost revenue every year.

Sources of Illicit Financial Flows

According to the United Nations Economic Commission for Africa, IFFs originate from three sources:

• Commercial activities (such as tax evasion)
• Criminal activities (such as trafficking in drugs, arms, and people, and fraud and money laundering)
• Corruption

Government corruption at the highest levels is the main source of IFFs in Tunisia.

The Impact on the Economy

The loss of income through IFFs has a profoundly negative impact on Tunisia’s economy, with key sectors such as healthcare and education suffering as a result. Governments and central banks from world financial centres must share some responsibility in combating IFFs and recovering public funds sent abroad.

The Need for Reform

Tunisia’s authorities need to fully reform their approach to implementing anti-corruption policy, with international cooperation being paramount due to the transnational nature of illicit financial flows.

Corruption and Smuggling

The smuggling of goods between Tunisia and its neighbours Algeria and Libya generates an estimated $2.4 billion and $1.8 billion, respectively, with millions of Tunisians relying on such activities to make a living. However, government corruption is the primary source of IFFs, leading to the decay of the economy, politics, and security.

The Ennahda Party

The Ennahda party, co-founded by former Speaker Rached Ghannouchi, is also accused of graft.

Conclusion

Illicit financial flows pose a significant threat to Tunisia’s economy and security. To combat this problem, it is essential for the authorities to reform their approach to implementing anti-corruption policy and seek international cooperation.