By Rueben Lifuka
As the Republic of Zambia co-hosts the Summit for Democracy this week alongside the United States and other global partners, a crucial opportunity arises for collaboration in combating the illicit financial flows contributing to the erosion of democracy across Africa.
As an activist and leader within the global anti-corruption movement, I have seen firsthand how corrosive corruption and illicit financial flows can be to both economic development and democracy. That’s why I was so heartened to see President Biden’s commitment to tackle corruption and financial secrecy, including through the publication of the first-ever U.S. strategy to counter corruption more than a year ago.
While Africa is grappling with issues such as climate change, food shortages, and an emerging debt crisis, curbing illicit financial flows remains one of our biggest challenges. In total, Africa loses an estimated U.S. $88.6 billion every year to illicit financial flows and capital flight, according to the UN Conference on Trade and Development (UNCTAD).
Where does this money go? Much of this money finds its way into the U.S. and other G-7 countries. Without a collective response to this problem, how can Africa achieve its full economic potential, advance human rights, and attain Sustainable Development Goals?
As U.S. Treasury Secretary Yellen has said, the U.S. is perhaps the easiest country to hide ill-gotten wealth and is ranked at the top of the list of financial secrecy jurisdictions, beating out Switzerland and small Caribbean islands more commonly associated with tax havens and shady finances.
To protect democracy, improve economic development, and help combat corruption, the U.S. must be a credible partner with Africa to tackle illicit financial flows. What would such leadership look like?
First, the U.S. needs to fully implement the Corporate Transparency Act, the landmark anti-corruption and anti-money laundering legislation enacted in early 2021. This law requires entities to file a report with the U.S. government on who ultimately owns or controls a company. So-called anonymous shell companies have provided secret vehicles for criminals and kleptocrats to park their stolen assets in the U.S. With this law, U.S. and international law enforcement agencies have a real chance at following the flow of dirty money and stopping international criminals from endangering communities around the globe.
Unfortunately, implementation has been slow and a recent proposal from the U.S. Treasury would make it unnecessarily complicated for trusted law enforcement partners, including in those in Africa, to access this information.
Second, the United States must also address the dirty money flowing from Africa into the $50 trillion U.S. real estate sector. The U.S. remains the only G7 country not to impose anti-money laundering requirements on real estate professionals. According to the anti-corruption group Global Financial Integrity, more than $2.3 billion has been laundered through U.S. real estate from 2015 to 2020, including money laundered by politically-exposed persons from Africa.
The U.S. Treasury Department has committed to stopping international criminals from laundering money through U.S. real estate by creating strong anti-money laundering requirements for real estate professionals. By creating strong requirements, the U.S. Treasury Department would show the world that the U.S. is serious about tackling its dirty money problem, preventing illicit financial flows from Africa, and finally preventing criminals and representatives of authoritarian regimes from hiding their money in U.S. real estate.
The Biden administration appears committed to elevating its engagement with Africa’s leaders, as shown by the recent U.S.-Africa Leaders Summit, U.S. Treasury Secretary Yellen’s visit last month, and Vice President Harris’ arrival in Zambia later this week. While aid, trade, and economic investment are a big part of the agenda, tackling illicit financial flows must also be at the center of any new partnership with Africa, both its rulers and its people. Strangely, the U.S. Strategy toward Sub-Saharan Africa is largely silent on these issues.
Make no doubt, Africa’s leaders must play their part in accelerating the fight against financial secrecy and illicit financial flows. This includes fully implementing the recommendations of the Report of the High-Level Panel on Illicit Financial Flows from Africa (“Mbeki Panel Report”) and the African Union Assembly Declaration following the report. Rather than creating new financial secrecy jurisdictions of their own, African leaders can accelerate the implementation of the Nouakchott Declaration on the African Anti-Corruption Year in which AU member states committed to abolish financial secrecy jurisdictions and tax havens on the continent and to establish public beneficial ownership registers.
To be a credible leader and partner, the U.S. must take quick action to clean up its own financial secrecy. I urge leaders in the U.S. and in Africa to seize the moment presented by the Summit for Democracy to take concrete steps to stop the illicit financial flows eroding democracy in Africa and around the world. The time is now. We cannot wait any longer.
Rueben Lifuka is Vice Chair of Transparency International and a past president of Transparency International Zambia. He previously served as Chairperson of the National Governing Council for the Africa Peer Review Mechanism for Zambia.
It’s understandable to look at the issue wholistically. The export of the so called democracy is a hoax to attract the feeble at heart. Sadly our leaders have no spine to stand up against. Democracy is beautiful in itself but the drivers of the idealogy have knife under the mat. Democracy is a vehicle for America and other rich countries to impose maneuvers to economic slavery of African countries. Further It’s a route to siphon African resources for their continued enrichment.
There’s need to rise and stand for our conviction