Stemming the tide of Tunisia’s illicit financial flows


Tunisia loses about US$1.2 billion a year to illicit financial flows (IFFs) – around US$181 per capita or 3% of the country’s gross domestic product. IFFs are the movement of money or capital unlawfully earned and illegally transferred from one country to another.

From 2008 to 2015, the Economic and Social Commission for Western Asia ranked Tunisia first for IFFs and eighth for corruption in the Middle East and North Africa region. In 2015, out of a total of US$22 863 million in Tunisian trade (the sum of exports and imports), illicit financial inflows accounted for US$2 612 million (11.4%) and outflows for US$1 280 million (5.6%). Figures more recent than 2015 are not available – stressing the need for Tunisia to urgently tackle the problem.

The Tax Justice Network argues that IFFs should also include abusive activities that may not necessarily involve lawbreaking, such as tax avoidance, as many business practices to lower tax liabilities are legal. The International Monetary Fund says more attention should be paid to multinational companies that take advantage of loopholes in tax codes to move money – profit shifting, for example, where corporations attribute their net profit or loss before tax to tax havens.

The United Nations Economic Commission for Africa says IFFs on the continent originate from three sources: commercial activities (such as tax evasion); criminal activities (such as drug, human and arms trafficking, fraud and money laundering); and corruption by government officials. Each of these sources is present in Tunisia.

According to the Financial Action Task Force (FATF), tax evasion and avoidance through mis-invoicing and abusive transfer pricing accounts for over US$500 million in lost revenue in Tunisia every year.

Tunisia loses about US$1.2 billion a year to illicit financial flows

The proceeds of criminal activities are also a substantial source of illegal income and illicit financial outflows in the country. It’s estimated that the smuggling of goods – ranging from fuel and electronics to cooking oil and textiles – between Tunisia and its Algerian and Libyan neighbours generates US$2.4 billion and US$1.8 billion respectively.

In 2019, the Tunisian Customs Agency seized smuggled merchandise to the value of US$81 million. It’s estimated that in 2017, 30% of fuel sales in Tunisia were from the illicit fuel market, from fuel that originated in Algeria. Millions of Tunisians rely on such smuggling activities to make a living. However, the main source of IFFs in Tunisia is government corruption at the highest levels.

In 2013, Lebanese banks returned US$28.8 million to Tunisia that had been stolen by the family of former president Zine El Abidine Ben Ali. Ben Ali fled to Saudi Arabia with his family in January 2011 after protests ended his 23-year rule. The family enriched themselves through diverting public funds for their own benefit. In 2017 it was estimated that US$64 million in suspicious assets linked to Ben Ali and his entourage were still frozen in Swiss bank accounts.

During his time as president, Ben Ali and his clique eventually controlled over 21% of the profits generated by Tunisia’s private sector, accounting for over 87% of the country’s cumulative capital flight from 1970 to 2010.

Corruption and IFFs certainly didn’t stop after the fall of Ben Ali. Other actors are now engaged in corruption but with smaller financial gains. This widespread corruption is perceived to be endemic, affecting different strata of Tunisian society and compromising essential government institutions such as the judiciary and legislative departments, police force and customs.

The loss of income through IFFs has a profoundly negative impact on Tunisia’s economy

The political party Ennahda (the Renaissance Party), co-founded by Rached Ghannouchi, the former Speaker of Tunisia’s Parliament, is also accused of graft. Corruption has become a destabilising force that’s leading to the decay of the economy, politics and Tunisia’s security as a whole.

The loss of income through IFFs has a profoundly negative impact on Tunisia’s economy. Key sectors such as healthcare and education could be more efficient if they benefited from just a fraction of the millions lost annually to IFFs. Government could pay the salaries of 4 300 teachers for 24 months with just 10% of the IFFs suspected to be circulating in Tunisia.

Authorities are aware of the threat IFFs pose to Tunisia’s economic development. The Financial Analysis Committee (CTAF), which operates under the auspices of the Central Bank as a financial intelligence unit, was established in 2015. In 2018, the CTAF announced it had frozen approximately US$70 million linked to suspected money-laundering transactions.

In February 2021, the CTAF launched the Hannibal platform aimed at identifying and monitoring national money laundering and financing of terrorism risks. However, despite its efforts, the CTAF remains short of personnel to address the large number of reported fraudulent transactions in Tunisia.

Overcoming these shortcomings at the CTAF by recruiting and training more officials to investigate and address IFFs, and providing regularly updated figures related to IFFs has to be a key drive to stem illicit flows.

Tunisia’s authorities need to fully reform its anti-corruption policy

Due to their transnational nature, international cooperation is paramount in addressing IFFs. Foreign financial centres that have historically traded on secrecy and advised corrupt leaders on how to invest their illegal gains should help countries like Tunisia combat IFFs and recover the money that has been sent abroad.

Governments and central banks from world financial centres, such as London and Swiss banks, should also share some responsibility. Jurisdictions in developed countries have historically been overlooked in their role in facilitating tax evasion.

A good practice example of this is the case of Swagg Man, a Franco-Tunisian rapper who was convicted of money laundering and jailed in Tunisia in 2021. The US$5.6 million he laundered was sent from Switzerland to Tunisia to build a mosque and a centre for orphans. Swagg Man extorted around €1.5 million in 2019 and 2020, including from fans. He was freed in January this year, but sentenced again in May to another three years for extortion amounting to over €2 million.

Tunisia has a comprehensive institutional framework to ensure accountability, integrity and transparency in theory, but little is done in practice. Tunisia’s authorities actions are needed to fully reform its anti-corruption policy.

Abdelkader Abderrahmane, Senior Researcher, ENACT West Africa Regional Organised Crime Observatory, ISS Regional Office for West Africa, the Sahel and the Lake Chad Basin

EU Flag
ENACT is funded by the European Union
ENACT is implemented by the Institute for Security Studies in partnership with
INTERPOL and the Global Initiative against Transnational Organized Crime.
ISS Donors
feature-5Page 1