Nigeria leads advocacy on recovery, return of proceeds of IFFs to countries of origin

▪︎Most effective deterrent to scourge, say African Heads of States

The Nigerian Government is leading the advocacy by African Heads of States for the recovery and return of proceeds of illicit financial flows (IFFs) to countries of origin as the most effective deterrent in combating the scourge.

This was contained in Nigeria’s presentation at the High-Level Africa Regional consultation co-hosted by the high-level panel on International Financial Accountability, Transparency and Integrity (FACTI) for achieving the 2030 Agenda and the Economic Commission for Africa, which held virtually on Wednesday.

Advertisement

Minister of State for Budget and National Planning, Prince Clem Ikanade Agba, who led Nigeria’s delegation at the meeting, said the delegation was pleased that the FACTI interim report acknowledged that the current international mechanisms for asset recovery were not good enough.

The interim report also “berated the lack of co-operation in asset recovery and return and expressed the desire to find innovative solutions to make the global asset recovery processes speedier, more transparent and easier to increase the amount of assets recovered and returned to countries of origin.”

Agba said: “It is in this connection that we are convinced that the emphasis of the Common African Position on Asset Recovery (CAPAR) on mechanisms for inter alia (i) detection and identification of assets of illicit origin; (ii) recovery and return of such assets; (iii) management of such assets; (iv) cooperation and partnership; and (v) cross cutting issues; is a good model for the FACTI Panel to explore, in seeking best practices that could decisively address the end-to-end process.”

He stated further that, “Given the efficacy of assets recovery and return in deterring perpetrators, rebuilding the confidence of the citizenry, and compensating for the damage caused by such crimes, we also expect the FACTI Panel’s final report to recommend the establishment of a robust mechanism, under the United Nations, for the speedy return of stolen assets to countries of origin.”

He added: “As the issues the Panel was established to address are highly technical, it is necessary that the final report makes concrete recommendations to address capacity deficiency in developing countries.”

Agba stated that “it is our expectation that the final report would be forward-looking as well as contain recommendations that would help to mobilize relevant stakeholders to strengthen their resolve to curtail the menace of illicit financial flows.

“We therefore encourage the Panel to consider how best to ensure the buy-in of Trade Unions, Civil Society Organisations, Non-Governmental Organisations, the media into the report.

“It must also be concrete enough to persuade professional bodies, including those for lawyers, accountants, auditors and bankers, to see reasons to enforce its recommendations as ethical professional standards that would enable them to hold their members accountable for abetting the development and implementation of tax avoidance and evasion schemes.”

Meanwhile, he placed on record Nigeria’s appreciation to the immediate past Presidents of the United Nations General Assembly and the Economic and Social Council for their foresight in setting up the FACTI.

He said: “For most developing countries, the FACTI Panel is the most important ongoing process within the United Nations system in the context of mobilizing resources for financing for development in the era of the COVID-19 pandemic and beyond.

“As has become evident, the COVID-19 pandemic is not only a crisis of public health; it is also a crisis of public finance. Its impact has disproportionately affected the resource base of most developing countries thus, narrowing their chances of achieving the 2030 Agenda for sustainable development.

“It is for this reason that Nigeria wishes to underscore that, for the global aspiration to recover better from the impact of the pandemic to yield any inclusive result, the final report of the FACTI Panel must make precise, concrete and implementable recommendations that will enable the international community to comprehensively address existing structures that make it impossible for countries to generate and retain a sizeable chunk of their resources.

“My delegation welcomes the Panel’s forward-looking interim report, particularly its analysis of the gaps and weaknesses in existing initiatives and instruments for accountability, transparency, and integrity in the international financial system.

“Nonetheless, the success of the Panel will not be measured by the richness of the interim report, despite its emphasis on the scale of the global loss of resources through illicit financial flows, but by the clarity of its recommendations for addressing each of the concerns already enumerated in the interim report.

“An analysis of the interim report indicates that the contemporary international tax system is not fit for purpose, as it makes combating tax abuses, especially by multinational corporations, difficult for most developing countries.

“Although the Organisation for Economic Cooperation and Development (OECD) has taken it upon itself to address the noticeable deficits of the current international tax system which has lasted for approximately a century, nearly all reputable global institutions and experts that have examined the OECD-led discussion on the reform of international tax system concluded that it is politically biased against developing countries and could potentially affect their domestic resource mobilization in the negative.”

He continued: “Despite referring to its process as inclusive, the reality is that an organization that represents a small group of developed countries is practically exclusive and cannot change the status quo as is evident in its two-pillar proposal.

“It is, therefore, our expectation that the final report of the FACTI Panel would dive deeper into this discussion and do a thorough analysis of its implications for developing countries, and stress the need for the voice of developing countries to be heard and prioritized in all tax norm setting processes.

“As the United Nations was created to solve global problems, and given the clear necessity to have tax-related discussions under a truly multilateral platform within the United Nations system, we expect the final report of the FACTI Panel to recommend the creation of a UN oversight body that would harmonize existing instruments and ensure that all countries are equitably represented in this important exercise.

“Profit shifting, harmful tax competition (the so called “race to the bottom”), and the taxation of the digital economy, should also receive some attention and focus in the final report of the Panel.

“We also hope that the final report would contain proposals that would address the continuing advocacy for country-by-country reporting, open disclosure and automatic exchange of national and international information on beneficial ownership, as well as eliminate financial secrecy jurisdictions and tax havens that facilitate base erosion and profit shifting.

“Indeed, automatic exchange of information is necessary, not only between developed countries but also between developed and developing countries.

“It is also necessary that the final report addresses the concerns of commodity-dependent countries as well as countries whose primary source of revenue comes from the extractive industries.

“We expect the FACTI Panel to make concrete recommendations that would prevent multinational companies from hiding under the Arm’s Length principle to shift profits away from countries, where their economic activities occur, and profits generated.”