By Lyla Latif

Illicit financial flows (IFFs) cost Africa around US$88.6 billion per year. They have hamstrung progress and created poverty, insecurity and financial challenges which today impede implementing the 2030 UN Agenda for Sustainable Development and the AU Agenda 2063: The Africa We Want. IFFs have also driven the African continent towards indebtedness, in addition to eroding funds that could be used for services such as education, health care and infrastructure.

This study focuses on one form of IFF, namely corruption and the resultant money laundering. It describes and analyzes the symbiotic relationship between corruption and money laundering and how they mutually reinforce an IFF ecosystem inclined towards draining resources needed for development. It further proposes measures to enhance the effectiveness of the fight against corruption and money laundering.

This study is produced by the Office of the Special Adviser on Africa (OSAA) within its mandate to support analytical work in improving coherence and coordination of the UN System support to Africa and to facilitate intergovernmental deliberations on Africa\

United Nations, 2022. 46p.

By Dan Ngabirano

illicit financial flows pose a critical challenge to African countries, as IFFs deny countries the opportunity to generate the revenues required for them to meet their expenditure needs and to fund long-term development plans. UNCTAD has put the magnitude of IFFs in Africa at an average of $88.6 billion per year, which represents about 3.7% of the continent’s total Gross Domestic Product. Curbing IFFs can reduce the region’s financing gap by 33%. IFFs drain foreign exchange reserves, affect asset prices, distort competition, and undermine the capacity of countries to maintain economic and financial stability. Consequently, African countries are constrained in meeting commitments made under various regional and international frameworks, including the 2030 Agenda for Sustainable Development and Agenda 2063.

This report is focused on IFFs linked to aggressive tax planning and other illegal commercial practices in the context of Africa. Commercial practices constitute the largest source of IFFs from Africa (65%), followed by crime (30%) and corruption (5%). The report provides a broad overview of the scale and distribution of IFFs in Africa; discusses different forms of IFFs that arise from tax and illegal commercial practices; and reviews current initiatives for combating tax and commercial-related IFFs in Africa. The report provides the conclusion and policy recommendations for combating tax and commercial IFFs in Africa.

United Nations, Office of the Special Adviser on Africa, 2022. 42p.

By Olivia Allison David Lewis

Russia’s siege and destruction of the Ukrainian city of Mariupol from February to May 2022 turned the city into an international symbol of the brutality and destruction of Russia’s full-scale invasion of Ukraine. Now Russia is attempting to turn Mariupol into a showcase Russian city to legitimise its occupation of Ukrainian territory. A huge reconstruction programme is underway in the city and Russia plans to make Mariupol the centre of a new transport network, which will ensure the resupply of Russian forces on the frontline and in Crimea. This research paper investigates this Russian programme of investment in Mariupol, which has been accompanied by the illicit seizure of thousands of Ukrainian homes, businesses and assets. There have been widespread allegations of corruption, fraud and profiteering, and new Russian business networks are emerging that benefit from Russia’s wartime economy. These economic practices in many cases constitute criminal activities and may be potential war crimes. Key points • Business seizures: Russian political and corporate interests and their proxies have seized control of thousands of Ukrainian businesses, properties and assets without compensation. • Dispossession: Many Mariupol residents have lost their homes, not only in the war, but also through an illegal programme of nationalisation, and a reconstruction programme that favours local vested interests and Russian incomers. • Profiteering and corruption: Powerful Moscow-based networks are controlling much of the reconstruction programme. Well-connected companies are benefiting from Russian spending that involves the widespread use of illicit finance and corrupt practices. • International trade: Mariupol port is at the centre of an illicit international trade in Ukrainian grain, clay and other materials. • Strategic implications: The new transport networks around Mariupol have important strategic implications, consolidating Russian control. Major Russian corporations are involved in building rail, road and maritime links. Policy implications • Rethinking strategy towards the occupation: A renewed Ukrainian and international strategy could also use political, diplomatic and economic instruments, including targeted sanctions, to raise the cost of Russia’s occupation and to challenge its long-term hold on the territory. • Sanctions: Current sanctions policy by the EU, the UK, the US and other countries towards the occupied territories is often incomplete and poorly coordinated. A more coherent approach would be more effective, particularly one that seeks to raise costs on individuals and companies leading and benefitting from the Russian occupation. EU, UK, US and other sanctions authorities could consider better coordinating their sanctions towards the occupied territories to ensure maximum impact. • Restitution: Many people from the occupied territories have lost their businesses, homes and savings. The Ukrainian government and international donors could develop mechanisms to find ways to compensate them directly for losses of homes or businesses, potentially funded with the profits from frozen Russian assets.

SOC ACE Research Paper No 35.

Birmingham, UK: University of Birmingham. Serious Organised Crime & Anti-Corruption Evidence (SOC ACE), 2025. 64p.

By Marwa Alnasaa, Nikolay Gueorguiev, Jiro Honda, Eslem Imamoglu, Paolo Mauro, Keyra Primus, and Dmitriy Rozhkov 

  The emergence of crypto-assets (private digital assets that depend primarily on cryptography and distributed ledger technology for record keeping) has unleashed a plethora of financial innovation that will likely revolutionize the form of money and the ways it is used. These developments create opportunities as well as risks. As noted, for example, by a group of G-20 policymakers, “…technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system and the economy more broadly,” but “crypto-assets […] raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing.” The pseudonymity of crypto-assets (whereby transactions require only digital identities) makes them a potential vehicle for illicit flows, including flows of proceeds from corruption. This pseudonymity is not an intrinsic feature of the underlying technology, but rather a choice made in the design and practice of most currently existing crypto-assets. Whereas cash provides full anonymity and large denomination bills have long been considered an aid for crime and tax evasion (Rogoff 2017, Chodorow-Reich et al. 2020), crypto-assets in their current form make it possible to move even larger amounts speedily and with greater ease, including across national borders (Graf von Luckner et al., 2021). As crypto-assets rapidly gain macroeconomic relevance (International Monetary Fund 2021) and policymakers consider the optimal degree of regulation, it is urgent to bring empirical evidence to bear on the question of whether crypto-assets facilitate corruption. Likewise, it is helpful to explore the extent to which crypto-assets are used to circumvent capital controls, for countries where these are in place, and whether crypto-assets are more likely to gain traction in countries where the local currency has historically not been a secure store of value. There are also potential benefits of the technologies that crypto-assets are based on. In particular, prudently designed central bank digital currencies could offer additional resilience, safety and availability with lower costs. These technologies could also be used to improve transparency and record-keeping for procurement or other payments related to government projects, thereby increasing accountability, and reducing the scope for corruption. Likewise, property and registry systems could be enhanced, reducing red tape, and streamlining processes. However, these initiatives are currently less advanced or widespread than crypto-assets. Empirical investigation of the factors underlying the growing usage of crypto-assets is in its infancy, owing to data limitations. In this paper, we present a simple cross-country analysis drawing on recently released survey-based data. We explore the correlation of crypto-asset usage with indicators of corruption, capital  controls, a history of high inflation, and other factors. We find that crypto-asset usage is significantly and positively associated with corruption and capital controls. Whereas the small sample size and uncertain quality of the data on crypto-assets implies that our results must be interpreted with caution, it is also worth recalling that measurement error tends to reduce the likelihood of finding a significant empirical association; significant results with low-quality data are thus worth paying attention to. With these caveats in mind and considering the urgency of acting before it is too late, rather than waiting for conclusive evidence, we believe that, on balance, our results add to the case for regulating crypto-assets, including know-your-customer approaches, as opposed to taking a laissez-faire stance. 

Washington, DC: International Monetary Fund, 2022. 19p.

By Europol

These recommendations follow the 6th Global Conference on Criminal Finances and Cryptocurrencies on 1–2 September 2022. The conference was hosted by Europol at its headquarters in The Hague, the Netherlands, together with the Basel Institute on Governance through the Joint Working Group on Criminal Finances and Cryptocurrencies.

The Recommendations are intended to highlight broad approaches and best practices. They are designed to help public and private actors stay one step ahead of those seeking to abuse crypto assets (also known as virtual assets) and services to make, hide and launder illicit money.

The main message is that as the use of crypto assets expands into practically every country and sector, so does its abuse to commit new forms of crime and launder criminal proceeds. Yet with the right tools, capacity and cooperation, the unique characteristics of blockchain-based technologies offer an unprecedented opportunity to investigate organised crime and money laundering networks and to recover stolen funds.

The five recommendations cover:

1. Breaking down silos between “traditional” and “crypto”

2. Regulating broadly and make full use of existing laws 

3. Taking advantage of the blockchain to disrupt organised crime 

4. Raising crypto literacy through capacity building and clear communication 

5. Increasing public-private cooperation

Europol and Basel Institute on Governance, 2022.  6p.