Implications of the African Union Special Declaration on Illicit Financial Flows for financial services infrastructure in Africa

Charles Goredema

Journal of Financial Compliance, 2019, vol. 3, issue 1, 76-92

Abstract: Regardless of whether they are part of the formal system or not, all sectors that provide financial services are obliged to take preventive measures to avoid being used to conceal or promote criminality. This is the outcome of sustained pressure emanating from initiatives to curb money laundering and the financing of terrorism. In the last few years, various international bodies, such as the African Union (AU), the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN) have begun to take the need to reduce illicit financial flows seriously. This has led to statements, of which the AU Declaration on Illicit Financial Flows (2015) is among the more recent, directed at governments and financial institutions. This paper discusses the implications of the AU Declaration on policy making by AU member states and institutional reform by all sectors within the financial infrastructure in Africa. It briefly surveys the record of formal financial institutions in preventing collusion in questionable transactions that could support illicit transfers, and finds that their record is generally not impressive. More will be required, in terms of redefining relationships with core customers, conducting due diligence, determining the activities to be reported as suspicious and preventing their abuse to perpetuate illicit transfers. The paper explores the contradictions that might impede the transition required by the AU Declaration, and suggests measures that may need to be taken to enforce compliance within the formal and informal financial sectors.

Keywords: AU Declaration on illicit financial flows; financial intermediaries; corruption; approaches to curb illicit financial flows (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jfc000:y:2019:v:3:i:1:p:76-92

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