Combating illicit financial flows worldwide

Project description

Title: Combating illicit financial flows
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Global
Overall term: 2019 to 2022

Context

Nowadays, it is easy for money to flow across borders. This connectivity between international financial systems promotes economic growth, but it also increasingly gives rise to a global problem, namely illicit financial flows.

The term illicit financial flows (IFF) refers to financial flows that are illicit either by virtue of their origin (e.g. stemming from organised crime), their utilisation (e.g. to finance terrorism) or the nature of the transfer itself (e.g. money laundering).

The effects of IFF are particularly devastating for developing countries and increasingly undermine international efforts to promote sustainable development. 

Criminal activities associated with IFF, such as human trafficking or the illegal trade in drugs, destabilise countries and regions and thus increase the risk of violent conflicts.

The think tank Global Financial Integrity estimates that developing countries and emerging economies lose more money through illicit financial outflows than they receive in foreign direct investment and official development aid combined. IFF therefore prevent urgently needed investments in health, education and other public services.

Not only do countries lose resources, but their success in preventing ‘dirty money’ from entering the financial system also determines their access to international finance. Preserving the integrity of their financial system and complying with international anti-money laundering standards is therefore a prerequisite for sustainable economic growth.

Objective

The systems for combating illicit financial flows at national, regional and international level are strengthened.

Combating illicit financial flows helps developing and emerging economies to mobilise their revenues, become safer and grow their economy.

Approach

The global programme entitled Combating Illicit Financial Flows focuses on the proceeds of crime. Illegal activities can only be stopped if criminals are no longer able to launder their illegally acquired assets and thus benefit from them. To this end, we support our partners in increasing their compliance with important international standards, such as those of the Financial Action Task Force (FATF) aimed at anti-money laundering and combating the financing of terrorism. 

The programme operates in three fields of action:

  • Prevention: To prevent IFF, the programme supports partner countries in strengthening their legislative framework in line with international standards. It systematically increases the traceability of the proceeds of crimes, for example by supporting the establishment of beneficial ownership registers.
  • Financial investigation: The programme assists national law enforcement agencies in adopting innovative investigation methods and improving inter-agency cooperation. We strive to overcome the challenges of cross-border investigations on a regional level.
  • Asset recovery: To ensure that crime ‘does not pay’, the programme supports the recovery of assets stolen in developing countries and emerging economies. It does so by fostering collaboration among relevant agencies at national, regional and global level.

The programme achieves a broad impact by expanding innovative national approaches at a regional level, fostering peer-to-peer learning between countries and regions and by feeding national and regional experiences into the international debate.

A uniform presence of German ministries in international forums is vital to combating IFF. The programme facilitates a six-monthly dialogue between the Federal Ministry for Economic Cooperation and Development (BMZ) and other relevant ministries, such as the Federal Ministry of Finance (BMF), the Federal Ministry of Justice and Consumer Protection (BMJV) and the Federal Foreign Office (AA), so as to enable them to coordinate their strategy. Additionally, the programme supports the German delegation in various plenaries and working group sessions of the United Nations Office on Drugs and Crime (UNODC), FATF and its regional bodies. 

Results

The programme has achieved considerable success in its partner countries and in the three priority regions of Africa, Latin America and the Western Balkans. 

In Kenya, the programme supported the introduction of multi-agency teams (MAT). Thanks to this new method of collaboration, the national Ethics and Anti-Corruption Commission increased its conviction rate by over 50 per cent from 2016 to 2017. Moreover, the agency recovered a record sum of over USD 27 million in stolen assets in the first four months of 2019 alone. Kenya has rolled out this successful approach through the regional Asset Recovery InterAgency Network for Eastern Africa (ARIN-EA). The programme currently supports several of the networks’ member states with regard to implementation.

The programme supported Peru in increasing its compliance with the international anti-money laundering standards of the FATF and in preparing for the mutual evaluation. For instance, it facilitated money-laundering risk analyses of the financial, mining, fisheries, and timber sectors and contributed to the development of the new national anti-money laundering strategy. After an exemplary performance in its FATF mutual evaluation, the programme helped Peru to share its experiences. This led to other Latin American countries requesting Peru’s support in helping them to prepare for their own mutual evaluations. 

The programme also provides support following an FATF mutual evaluation. In Mauritius, for instance, it is implementing the identified priority actions. Strengthening the national anti-money laundering system prevents imminent sanctions that restrict access to the capital market.

In the Western Balkans, the programme has assisted law enforcement agencies in strengthening their collaboration and in adopting innovative investigation methods. For instance, the programme procured sniffer dogs specialised in the detection of cash and trained law enforcement authorities in inter-agency investigations to tackle the regional problem of cash smuggling. The approach has already sparked interest in other countries.

At international level, the programme has organised an asset recovery dialogue between African and European countries. During the event, policy-makers and law enforcement agencies identified challenges and worked out joint solutions. The successful format was repeated in September 2019.

Downloads

Further Information