The role of anti-corruption laws and institutions in curbing illicit financial flows from Kenya study

Abstract

The concept of the illicit movement of money aimed at concealing illegal activities and evading taxes is not new. However, the global community first used the term “illicit financial flows” (IFFs) in the 1990s and originally associated it with capital flight. The globalisation of financial markets and the increasing ease with which individuals and companies transact across borders have led to a substantial increase in IFFs. Despite their growing economic and political significance, academics and international institutions are yet to formulate an agreed definition of IFFs. One of the common definitions is that of Global Financial Integrity (GFI), which describes IFFs as the illegal movement of illegal or legal money meant for an illegal purpose. The Report of the High Level Panel (HLP) on IFFs from Africa estimates that the continent loses more than US$50 billion annually through IFFs. The HLP Report notes that abusive commercial practices, transnational criminal activities and corruption are the main causes of IFFs in Africa. It estimates that commercial activities account for 65 per cent of IFFs, criminal activities for 30 per cent and corruption for around 5 per cent. Kenya has lost substantial amounts of money to IFFs. In the period 2002-2006, the country lost an estimated US$686 million annually to IFFs.