Combating illicit financial flows

Project description

Title: Combating illicit financial flows, project within the fund for cross-cutting political cooperation
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Global
Overall term: 2015 to 2018

Context

International efforts to promote sustainable development are increasingly being undermined by illicit financial flows (IFFs). IFFs are financial flows whose origin and/or transfer is illegal, for example due to tax evasion, fraud in international trade, corruption or other criminal activities such as drug, arms or human trafficking.

Developing countries are estimated to have lost more than a billion US dollars in 2013 as a result of IFFs. Any such estimates are presumably only the proverbial tip of the iceberg, however, as the real figure is likely to be much higher.

One of the reasons for the huge scale of IFFs is that the conditions for combating them across sectors, national borders and regions are still inadequate. The authorities responsible in developing countries and emerging economies lack the technical and specialist expertise and resources. Moreover, cooperation between the relevant national, regional and international authorities is still not effective. There is a general lack of knowledge about the volume, channels and criminal offences that lead to IFFs.

Objective

The conditions needed to combat IFFs to and from developing countries and emerging economies across sectors, national borders and regions are improved.

Approach

The project operates in three areas of activity:

  1. Advising relevant authorities in selected partner countries on new formats and methods to detect and trace IFFs, including anti-money laundering;
  2. Developing the capacity of these authorities for international cooperation in criminal matters and in confiscating and returning assets;
  3. Supporting national and international cooperation by the German federal ministries to combat IFFs.

Pilot measures in selected countries and regions are being implemented to initiate change processes, both in key areas for detecting and tracing IFFs and in international cooperation in criminal matters.

In addition to their impact in the partner countries, these pilot measures are also designed to generate empirical knowledge, new approaches to combating IFFs and new forms of cooperation. On the basis of the pilot measures, change processes are also being promoted at regional and international level.

Experience from the countries is harnessed such that it can be fed into national, regional and international discussions both by the partner institutions and by German development cooperation actors.

Results

In Peru, the project has teamed up with the project on Citizen-Oriented State Reform to support the analysis of money laundering risks in various sectors and to assist in updating and implementing the national plan to combat money laundering.

In collaboration with the project on Supporting Good Governance to Strengthen Integrity and Accountability in Kenya, the project is assisting partner institutions in Kenya in developing capacity to detect and recover stolen assets.

In cooperation with the regional programme on Good Financial Governance in Africa, the project is supporting the African Tax Administration Forum in combating IFFs.

In conjunction with the Asian Development Bank and the Organisation for Economic Co-operation and Development (OECD), the project has enabled the launch of a Law Enforcement Practicioners Network in Asia-Pacific and has promoted capacity development and regional networking of prosecution authorities.

The project has also joined forces with the projects on Regional Resource Governance in Fragile States of West Africa and Regional Cooperation for the Sustainable Management of Mining in the Andean Region to conduct analyses of IFFs in the resource sector, for example in connection with tax evasion and smuggling. On the basis of these analyses, solutions are developed in collaboration with the partners.