Illicit Financial Flows are generally defined as “money that is illegally earned, transferred or
used”. This definition was adopted by the AU/ECA High-Level Panel on Illicit Financial Flows (the High Level Panel). Based on the definition, estimates are that Africa each year loses as much as $60 billion dollars through IFFs deriving mostly from three components – commercial activities, criminal activities and corruption with commercial activities by far accounting for the largest part.
The main mechanism of illicit financial flows related to commercial activity has been identified
as trade mis-invoicing. This is the rampant practice of misrepresenting the price, quantity and or quality of imports or exports in order to hide or accumulate money in other jurisdictions. This way, companies, especially multinationals evade and avoid taxes, dodge customs duties, transfer kickbacks and launder money. To date, Africa has lost trillions of dollars that could have been invested in the continent’s development.