What are illicit financial flows?

2018-01-17

What are illicit financial flows?

  • Although there is no universal agreement on a definition for illicit financial flows (IFFs), these are generally viewed as the financial side of criminal activity.
  • IFFs are often referred to as cross-border transactions of money illegally earned, transferred or used. They are commonly classified within the categories of commerce, crime or corruption.
  • IFFs are widely recognised as a threat to sustainable development.

How does 'illicit' differ from 'illegal'?

  • Though many definitions of IFFs are limited to transactions that are illegal, determining whether a flow is illicit should go beyond assessing its legality.
  • IFFs can include activities that are illegitimate, while not strictly illegal, as well as activities that go against established rules and norms.
  • To determine if a flow is illicit, it is important to identify the relevant national legal framework(s), the degree of local enforcement and the ability of citizens to comply with the law.

How are IFFs measured?

  • There is currently no single tool or process that can effectively measure IFFs at the global or country level. This is especially true for IFFs linked to organised crime.
  • Obstacles range from agreeing on what should be measured to the very nature of IFFs, which are inherently hidden and difficult to track.
  • Current, prominent estimates are based on balance of payments and trade data. However, these estimates tend to neglect and underestimate the scale and value of IFFs linked to organised crime.

ENACT's approach

  • IFFs must be accurately defined and measured and responses must be generated based on local legal frameworks and their implementation, and a holistic understanding of the factors that shape IFFs.
    • If Africa is to ensure that priority is placed on flows with the most adverse impact on sustainable development, the continent must have a voice in international financial institutions to ensure that regulations, policies and responses reflect African priorities.

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    ENACT is funded by the European Union
    ENACT is implemented by the Institute for Security Studies and INTERPOL, in
    affiliation with the Global Initiative against Transnational Organised Crime
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