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Assessing The Impacts of Financial Crime

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Africa Development Trade Agenda

By Prof. Paul Allieu Kamara

By Prof. Paul Allieu Kamara

THE NEED FOR EFFECTIVE LEADERSHIP IN COMBATING FINANCIAL CRIME IN THE AFRICAN CONTINENTAL FREE TRADE ZONE AREA

Assessing The Impacts of Financial Crime

To

FOREWORD

            The Need for Effective Leadership is to Promote the fight against Financial Crime  in  Africa and help to advance  Africa Trade Development Agenda

Usually write about books:

• Our history,                                                                                                                                                                                                                                                                                 what is at stake in the African Continental Free Trade Zone Area?                                                                                      Africa is considered as the second fastest-growing economy after East Asia, and yet the continent is filled with people living in abject poverty and has been referred to as a continent with poor foundations for human development due illicit activities of criminal agencies or persons. Every year, an estimated amount approximated as $88.6 billion, equivalent to 3.7% of Africa's GDP, through Financial Crime and Illicit Capital Flight, (according to UNCTAD Report 2020). Africa is discovered as a net exporter of criminal capital income through Financial Crime which is far more exceeds inflows of assistance, valued at $48bn, and the yearly foreign direct investment, and amounted to $54bn. But   It is also discovered  that  $1.2 trillion and $1.4 trillion has left Africa through Financial Crime  between 1980 and 2009—roughly equal to Africa’s current gross domestic product, that surpassing  money received from outside over the same period. Financial Crime is said to be dirty money earned illegally and transferred for use elsewhere.  Such monies are usually generated from criminal activities, like corruption, tax evasion or tax avoidance, Mis-invoicing, Mispricing, bribes and transactions from cross-border smuggling etc.

•                                                               The effective of Financial Crime on sanitation

  The African Continental Free Trade Area (AfCFTA)designed a flagship project of Agenda 2063 aimed at creating a single African market for goods and services facilitated by free movement of persons, capital, investment to deepen economic integration, promote and attain sustainable and inclusive socio-economic development, gender equality, industrialization, agricultural development, food security, and structural transformation.

  The AfCFTA is the world’s largest free trade area bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs). The overall mandate of the AfCFTA is to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion.

  As part of its mandate, the AfCFTA is to eliminate trade barriers and boost intra-Africa trade. In particular, it is to advance trade in value-added production across all service sectors of the African Economy. The AfCFTA will contribute to establishing regional value chains in Africa, enabling investment and job creation. The practical implementation of the AfCFTA has the potential to foster industrialization, job creation, and investment, thus enhancing the competitiveness of Africa in the medium to long term.

  In March 2018, the 10th Extraordinary Session of the African Union Summit held in Kigali, Rwanda, adopted the Agreement Establishing the African Continental Free Trade Area (AfCFTA). The AfCFTA Agreement came into force in May 2019. As of March 2023, 46 countries had ratified and deposited the instruments of ratifications with the African Union Commission. Mozambique has ratified the Agreement but is yet to deposit the instruments of ratification with the AU Commission. The following countries were yet to ratify the Agreement, Somalia, South Sudan, Sudan, Eritrea, Madagascar, Benin, Liberia, and Libya. Eritrea donot to sign the Agreement of  that time.

  Trading under the Africa Continental Free Trade Area Agreement began on 1 January 2021. As at February 2022, eight countries representing the five regions of the continent - Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia – participated in the AfCFTA’s Guided Trade Initiative, which seeks to facilitate trade among interested AfCFTA state parties that have met the minimum requirements for trade, under the Agreement. This initiative supports matchmaking businesses and products for export and import between State Parties. The products earmarked to trade under the Initiative include: ceramic tiles; batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fibre, amongst others, in line with the AfCFTA focus on value chain development.

  In the year 2023, the AfCFTA Guided Trade shall also focus on Trade in Services in the five priority areas, i.e. Tourism, transport, Business Services; Communication Services; Financial Services; Transport Services, and Tourism and Travel-related Services. The ultimate objective is to ensure that AfCFTA is truly operational and the gains from the initiative are improved implementation in order to achieve increased inter-regional and intra-Africa trade that would yield economic development for the betterment of the continent at large.

  If not curtailed this efforts will soon be hampered by criminal organizations engaging in Financial Crime, the number tells only part of the story. It is a story that exposes how highly complex and deeply entrenched the practices have flourished over the past decades with devastating impact, but barely made it into the news headlines. “The illicit haemorrhage of resources from Africa is about four times Africa’s current external debt,” says a joint report by the African Development Bank (AfDB) and Global Financial Integrity, a US research and advocacy group.

  The Financial Crime Problem of Net Resource Transfers from Africa: 1980–2009, found that cumulative illicit outflows from the continent over the 30-years period ranged from $1.2 trillion to $1.4 trillion. The Guardian, a British daily, notes that even these estimates—large as they are—are likely to understate the problem, as they do not capture money lost through drug trafficking and smuggling.

  Nonetheless, research and advocacy groups who have worked on Financial Crime or illicit outflows see a direct link between these outflows and Africa’s attempts to mobilize internal resources. Despite annual economic growth averaging 5% over the past decade—boosted in part by improved governance and sound national policies—Africa is still struggling to mobilize domestic resources for investments. If anything, the boost in economic growth has caused a spike in the Financial Crime or illicit outflow.

  About three-fifths of global trade is conducted within multinationals.

  “Many developing countries have weak or incomplete transfer pricing regimes,” according to the Guardian, citing an issue paper authored by the Paris-based Organization for Economic Cooperation and Development (OECD), a group of high-income economies. The paper says poor countries have weak bargaining power. “Some [countries] have problems in enforcing their transfer pricing regimes due to gaps in the law, weak or no regulations and guidelines for companies,” says the OECD paper, adding that poor countries have limited technical expertise to assess the risks of transfer pricing and to negotiate changes with multinationals.   

  Offshore tax shelters

  According to the OECD paper, member countries are failing to identify company owners who benefit from money laundering. It criticizes OECD members for not doing enough to crack down on Financial Crime or illicit outflows. In order to prevent, uncover or prosecute money laundering, says the paper, authorities must be able to identify company owners. The OECD advises its members to invest in anti-corruption and tax systems in poor countries, as this has high payoffs.

  The bulk of Financial Crime dealings or illicit money today is channelled through international tax havens, says the Thabo Mbeki Foundation, an NGO set up by the former president to promote Africa’s renaissance. The foundation accuses “secrecy jurisdictions” of running millions of disguised corporations and shell companies, i.e., companies that exist on paper only. These jurisdictions also operate anonymous trust accounts and fake charitable foundations that specialize in money laundering and trade over-invoicing and underpricing.

  “Developing countries lose three times more to tax havens than they receive in aid,” said Melanie Ward, speaking to the Guardian. Ms. Ward is one of the spokespersons for the Enough Food for Everyone IF campaign, a coalition of charities calling for fairer food policies, and head of advocacy at Action-Aid, an anti-poverty group. The money lost, she says, should be spent on essential development of schools, employment, hospitals and roads, and on tackling hunger, not siphoned into the offshore accounts of companies.

  A 2007 joint report by the World Bank and UN Office on Drugs and Crime estimated that every $100 million returned to a developing country could fund up to 10 million insecticide-treated bed nets, up to 100 million ACT treatments for malaria, first-line HIV/AIDS treatment for 600,000 people for one year, 250,000 household water connections or 240 km of two-lane paved roads.

  Support for new rules to rein in offshore tax shelters has come from an unlikely source—the leaders of eight of the world’s biggest economies, the Group of Eight (G8). Having been stung by the 2008 global financial crisis, the G8 leaders at this year’s summit in Lough Erne, Northern Ireland, introduced—for the first time—rules to fight tax evasion. The rules will now require multinationals to disclose the taxes they pay in countries in which they operate.

  During the run-up to the G8 summit, advocacy groups campaigned to get rich countries to introduce laws on transparency in corporate taxes. Among them was the Africa Progress Panel, chaired by former UN Secretary-General Kofi Annan. On the eve of the summit, it published its annual flagship report, Africa Progress Report 2013, strongly criticizing the current rules on corporate transparency.

  Unconscionable act

  “It is unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximize their profits while millions of Africans go without adequate nutrition, health and education,” Mr. Annan wrote in the foreword to the report. Tax evasion, he said, has cut into African citizens’ fair share of profits from their abundant resources.

  In the end, the G8 leaders adopted the Lough Erne Declaration, a 10-point statement calling for an overhaul of corporate transparency rules. Among other things, the declaration urges authorities to automatically share tax information with other countries to fight tax evasion. It states that poor countries should have the information and capacity to collect the taxes owed to them. The declaration further calls on extractive companies to report payments to all governments, which should in turn publish them.

  While the Financial Times embraced the declaration as “an advance” in corporate transparency, Sally Copley, another spokesperson for the IF campaign, says in a statement, “The public argument for a crackdown on tax dodging has been won, but the political battle remains.” Copley wants the G8 to impose strict laws on tax evasion.

  For its part, Africa Progress Report 2013 calls for multilateral solutions to global problems because “tax evasion, Financial Crime and illicit transfers of wealth and unfair pricing practices are sustained through global trading and financial systems.” It urges African citizens to demand the highest standards of propriety and disclosure from their governments, and rich countries to demand the same standards from their companies.

  Initiatives by institutions in Africa and the adoption of the Lough Erne Declaration raise hopes for strict rules against Financial Crime and illicit financial flows from Africa. “Seizing these opportunities will be difficult. Squandering them would be unforgivable and indefensible,” Mr. Annan warns in his foreword to the panel’s report. Meanwhile, ECA’s slogan “Track it. Stop it. Get it” aptly captures what needs to be done about Financial Crime and money flowing illicitly out of Africa.

  “The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private-sector flows, without receiving much in return,” said Raymond Baker, president of Global Financial Integrity, in a statement released at the launch of the report earlier this year. Mr. Baker said the report turns that logic upside down, adding that Africa has been a net creditor to the rest of the world for decades.

  The composition of these outflows also challenges the traditional thinking about Financial Crime and illicit money. According to estimates by Global Financial Integrity, corrupt activities such as bribery and embezzlement constitute only about 3% of Financial Crime and illicit outflows criminal activities such as drug trafficking and smuggling make up 30% to 35% and commercial transactions by multinational companies make up a whopping 60% to 65%. Contrary to popular belief, argues Professor Baker, money stolen by corrupt governments is insignificant compared to the other forms of Financial Crime and illicit outflow. The most common way Financial Crime or illicit money is moved across borders is through international trade.

  Information scanty and scattered

  A ten-member high-level panel chaired by former South African President Thabo Mbeki leads research by the UN Economic Commission for Africa (ECA) into Financial Crime or illicit financial flows, assisted by ECA Executive Secretary Carlos Lopes as the vice-chair. Other members of the panel include Professor Baker and Ambassador Segun Apata of Nigeria. The ECA blames Financial Crime and illicit outflows for reducing Africa’s tax revenues, undermining trade and investment and worsening poverty. Its report was released in March 2014.

  Undoubtedly the panel faces a daunting task. Charles Goredema, a senior researcher at the South Africa–based Institute of Security Studies, cautions the panel on the challenges ahead. Writing in the institute’s newsletter, ISS Today, Goredema warns the panel that it will find that in many African countries, data on Financial Crime and illicit financial flows “is scanty, clouded in a mixed mass of information and scattered in disparate locations.” He ranks tax collection agencies and mining departments among the bodies most reluctant to share data.

  Goredema lists Transparency International, Global Financial Integrity, Christian Aid and the Tax Justice Network as some of the advocacy groups that have tried to quantify the scale of Financial Crime and illicit financial flows. The extent of such outflows remains a matter of speculation, he says, with the figures on Africa ranging between $50 billion and $80 billion per year. Other estimates by the ECA put the figure at more than $800 billion between 1970 and 2008.

  “The absence of unanimity on [the amount] is probably attributable to the fact that the terrain concerned is quite broad, and each organization can only be exposed to a part of it at any given point in time,” Goredema writes, adding, “It is less important to achieve consensus on scale than it is to achieve it on the measures to be taken to stem illicit financial outflows from Africa.”

  Financial crime linked to Nigeria

  Financial crime linked to Nigeria is a large and pressing problem for the British authorities, which are short of the information and resources needed to deal with it. Nigeria-related financial crime has grown in significance partly because it is not seen as a priority area. Private sector fraudsters and corrupt public officials and British companies have profited from the general Western focus on terrorist financing, drugs and people-trafficking. Other types of corruption and money-laundering, some of which involve British business people, have often been neglected. These general observations could be applied to crimes carried out by the nationals of many countries, including Britain itself. Criminal activity involves only a small minority of Nigerians, relative to the size of the country and the number of its national’s resident in Britain or visiting it. Nigeria is Africa’s most populous nation by far and is a former British colony: Jack Straw, the former foreign secretary, has referred to estimates that more than one million Nigerians live in Britain. 1 it is precisely because of these strong and deep links that Nigeria-related financial crime deserves attention. High levels of such crime are very damaging to the image and standing of the many Nigerians who live honestly in Britain or who visit the country to do legitimate business. One Lagos banker has described how the level of crime linked to Nigeria already leads holders of the country’s distinctive green passport to be ‘victimized’ anywhere they go in the world. Equally, the proportionally small but still substantial numbers of Nigerians who are involved in financial crime create a risk of what Tarique Ghaffur, a Metropolitan Police assistant commissioner, has described as large-scale ‘contamination of communities’ by organized crime.2 Extensive anecdotal evidence suggests that a significant amount of financial crime in Britain is linked to Nigeria. One police officer working on economic and specialist crime says so much Nigeria-related corruption goes through London that he could employ his entire command to deal with it. Another, who works on Cheque and credit card fraud, says Nigerians are in the ‘top three’ of nationalities of offenders with whom his group has to deal.3 The piecemeal figures on Nigeria-related fraud that do emerge seem at times to echo the recent warning of Bob Murrill, head of the Metropolitan Police organized crime unit, that criminal gangs are ‘out of control’ in London.4 On a single day check at Heathrow airport last year, for example, police discovered more than £20 million of forged cheques and postal orders in the courier mail from Lagos. Recent British government research found that at least 13 per cent of Nigerian applicants for visitors’ visas and at least 17 per cent of applicants for student visas tried to use some kind of fraudulent documentation, such as forged bank statements or tax returns.5 Many informed people think a large amount of Nigerian official corruption passes through Britain. In 2005, the British authorities charged D.S.P. Alamieyeseigha, governor of Nigeria’s Bayelsa state, with money-laundering after almost £1 million in cash was discovered at one of his London properties. A Nigerian law enforcement official estimates that between 80 and 90 per cent of the country’s 36 state governors own property in Britain, with many also having bank accounts in their own, their wives’ or their children’s names. Other important components of Nigeria-related financial crime are the British individuals and companies operating corruptly in Nigeria. London is increasingly attacked for alleged hypocrisy in failing to keep its promises to crack down on British corruption in Africa. Privately, British business people admit corruption is still commonplace: one British executive working in the oil industry says his company routinely pays immigration officials a bribe worth between 20 and 30 per cent of the cost of expatriate resident permits. In March 2006, a report by Britain’s All Party Parliamentary Group on Africa criticized the ‘limbo like state of anti-corruption legislation’, and the ‘fragmentation and under-resourcing’ of investigatory and enforcing agencies.6 The accusations come more than five years after Britain revealed that at least $1.3 billion looted by the late dictator General Sani Abacha had been processed through British financial institutions.7 Nigerians responsible for investigating financial crime in Nigeria have had some successes, but many are under no illusions about how severe and deeply entrenched the problem is after decades of autocratic government, rampant corruption and plunging living standards. Nigeria’s Economic and Financial Crimes Commission (EFCC) estimates that in under four years of operation it has recovered £2 billion of criminal money.8 One of its officials laments that Nigerian internet fraud has become ‘something huge’ because the authorities never seriously tried to stop it until very recently. The same could happen in Britain, he warns, if it makes the same mistake.

  Corruption is endemic in Sierra Leone.

  Sierra Leone is widely considered to be one of the most politically and economically corrupt nations in the world and international rankings reflect this. Transparency International's 2022 Corruption Perceptions Index scored Sierra Leone at 34 on a scale from 0 ("highly corrupt") to 100 ("very clean"). When ranked by score, Sierra Leone ranked 110th among the 180 countries in the Index, where the country ranked first is perceived to have the most honest public sector.^[1] For comparison, the best score was 90 (ranked 1), the worst score was 12 (ranked 180), and the average score was 43.^[2] The 2018 Global Competitiveness Report ranked Sierra Leone 109th out of 140 countries for Incidence of Corruption, with country 140 having the highest incidence of corruption.^[3] Corruption is prevalent in many aspects of society in Sierra Leone, especially in the aftermath of the Sierra Leone Civil War. The illicit trade in conflict diamonds funded the rebel Revolutionary United Front (RUF) forces during the civil war, leading to fighting between the Sierra Leone Army and the RUF for control of the diamond mines.^[4] Widespread corruption in the health care sector has limited access to medical care, with health care workers often dependent on receiving bribes to supplement their low pay.^[5]

  In understanding the problems of corruption in African Union Member States we can seek to solve the current issues in Africa.

  Income inequality is rising, while underemployment and the lack of economic opportunities push some individuals to join criminal groups, gangs or rebel movements, reinforcing the links between inequality, criminal activity and violence.  The United Nations Economic Commission for Africa’s High Level Panel on Financial Crime and Illicit Financial Flows has estimated that illicit financial flows (IFFs) from Africa could amount to as much as USD 50 billion (US dollars) per year. Although the figures on IFFs are heavily disputed, current analyses agree that IFFs exceed the amount of Official Development Assistance (ODA) provided to Africa.  Previous research has largely focused on capturing the volumes and sources of Fin-Crime and IFFs, and on identifying the commercial practices that contribute to them such as trade misinvoicing, mispricing, tax evasion and avoidance, and transfer pricing.  This Book takes a different approach by seeking to build the evidence basis on criminal and illicit economies, the Fin-Crime and IFFs these economies generate, and their impact on development. The Book reviews diverse forms of economies prevalent in  Africa that are usually seen as criminal or illicit, organizing them through a typology according to a range of illegal activities, from natural resource crimes to illicit trade in normal legal goods. This analysis leads to the following conclusions: Financial Crime, criminal and illicit economies produce IFFs that undermine country capacities to finance their development; and criminal economies and IFFs are a potent negative force that contribute to the degradation of livelihoods and ecosystems, undermine institutions, reinforce clientelist politics and enable impunity, in different ways across the region’s countries.   Key findings Criminal acts are enabled by a diverse set of actors, including criminal networks, the private sector (both domestic and international), and state officials. Criminal methods are dynamic processes, changing in response to opportunities, and to global and local market forces. IFFs and Financial criminality erode the fabric of the state across the region, and often cause politics, business and crime to converge, creating ambiguity around governance and rule of law. Certain criminal and illicit economies in the region carry low levels of stigma within communities, as they are an important source of livelihood, building legitimacy that enables alternative governance providers to compete with the state and create alternate sources of authority.

  
  
• achievements,

• OVERVIEW AND DEFINITIONS

  What are some of the main reasons for fighting Financial Crime in the African Continental Free Trade Zone Area?

  Interferes with government revenue:

  1.      To protect the Resources: As part of protecting the resources of Africa, financial criminals will often try to avoid paying taxes on goods and services. This gives a country's government less money to spend on important projects, makes tax collection more difficult, and often results in higher taxation on legitimate citizens.

  2.      Some people and groups will do anything for money or other forms of wealth—even resort to breaking the law. They may try to claim that these financial crimes are justifiable because they have no victims, or that the victims can afford the losses. In reality, they are still illegal because they can cause widespread harm—not only in finance, but also in business, politics, and culture.

  So what are financial crimes, and what are some common types? Why are they so damaging to so many areas of society?

  And what can organizations expect the battle against financial crime to look like in the near future? We’ll cover all that and more in this Book.

  In other to walk through this Book we have to understand the main definitions and terms that defines this Book.

  Let us look at some Terms and definitions according to the Oxford Languages Dictionary.

  African Union Continental Free Trade Zone

  What is Africa Continent?

  Africa is a Continent: The most important thing to know is that Africa is not a country; it's a continent of 55 countries that are diverse with culturally and geographically different. It's so diverse because Africa is really big as big as the combined landmasses of China, the United States, India, Japan and much of Europe.

  What is Union?

  ·         A union is a state of being united, a combination, as the result of joining two or more things into one: to promote the union between two families; the Union of African brings all Countries of Africans into one Union-Called the African Union (AU).

  ·         A union is a workers' organization which represents its members and which aims to improve things such as their working conditions and pay.

  What is a Continent?

  What is a simple definition of continent?

  A continent is a large continuous mass of land conventionally regarded as a collective region. There are seven continents: Asia, Africa, North America, South America, Antarctica, Europe, and Australia (listed from largest to smallest in size)

  What is Free?

  1.      Able to act or be done as one wishes; not under the control of another

  ·         Not or no longer confined or imprisoned.

  ·         Without cost or payment.

  ·         Release from confinement or slavery.

  ·         Remove something undesirable or restrictive from

  2.   What is Trade?

   

  The action of buying and selling goods and services

  Commerce:

  ·         buying and selling

  ·         dealing with  traffic or  transporting of business

  ·         marketing and merchandising

  ·         bargaining and dealings

  ·         transactions and  negotiations

  ·         proceedings

  3. A job requiring manual skills and special training. "The fundamentals of the construction trade"

  Similar:

  ·         craft occupation

  ·         job day job

  ·         career

  ·         profession

  ·         business

  ·         pursuit living

  ·         livelihood

  ·         line of work

  ·         line of business

  ·         vocation calling

  ·         walk of life province

  ·         field work

  ·         employment

  4.      What is Zone?

  ·         An area, especially one that is different from the areas around it, because it has different characteristics or is used for different purposes: a danger/safety zone.

  ·         an area or stretch of land having a particular characteristic, purpose, or use, or subject to particular restrictions

  ·         An encircling band or stripe of distinctive colour, texture, or character.

  5.      What is Area?

  Area is defined as the total space taken up by a flat (2-D) surface or shape of an object. The space enclosed by the boundary of a plane figure is called its area. The area of a figure is the number of unit squares that cover the surface of a closed figure.

  What is Financial Crime?

  Financial crime is any activity that allows an individual or group to unlawfully gain financial assets (including money, securities, or other property). It typically involves directly stealing from a person or institution, or else illegally changing or obscuring who owns an asset.

  ‍

  Financial crime is sometimes referred to as “white-collar crime” because it targets assets rather than people themselves, and so tends to be non-violent (but not always). In any event, it can still be extremely damaging to individuals’ financial situations, and even regional or global markets.

  What are the types considered a Financial Crime?

  Financial crimes can be divided into two categories.

  ·         The first category is an entity generating financial benefits for themselves or others through deceptive or illicit practices. This can include a business employee using privileged information to misappropriate some of the company’s or state funds for their own use. Another example would be criminal taking money or other assets from someone in exchange for a financial instrument (such as a Cheque or Money order) that turns out to be fake

  ·         The second category is an entity committing a crime that sets them up to commit another crime where they illegitimately gain a financial advantage or protect their financial benefits through dishonest or illegal methods. The most recognizable form of the latter is money laundering: putting the proceeds of crime through a series of complex transactions to make them appear as if they came from a legitimate source. Another example is people using shell corporations or shell banks to store their money, obscuring who owns it and therefore helping them avoid paying taxes on it.

  ‍

  What is a Shell Corporation?

  A shell Corporation is an entity with no active business operations or assets. These firms are often set up for illegal activities, such as tax evasion and money laundering, and to maintain anonymity during transactions. What are the Problems of shell  corporation?

  Some of problems of Shell Corporations

  Shell corps has minimal operations and exists only on paper, with a registered office and nominal directors/shareholders. They can be established quickly in jurisdictions with favorable regulations for company formation and privacy.

  The primary use of a shell crop is for illegal activities while appearing legitimate. For example, individuals or organizations may hide assets and launder money by transferring funds through multiple shell corps. Due to the complex ownership and operations across multiple jurisdictions, it is difficult to trace those behind these activities.

  To prevent abuse, governments should implement measures such as stricter regulatory requirements, enhanced due diligence, and increased transparency. These efforts aim to prevent criminals from exploiting shell corps for illegal purposes.

  Legitimate firms can also utilize shell corps, such as multinationals creating subsidiaries in different countries for tax planning or to simplify corporate structures. In these cases, the primary purpose is not illegal activities but to facilitate legitimate business operations.

  To ensure that shell corps, are not misused, regulations should include Know Your Customer (KYC) procedures when registering new companies. This involves conducting comprehensive background checks on directors and beneficial owners to verify their identities and credibility.

  Authorities should also require more reporting on financial transactions and beneficial ownership structures. By collecting and sharing this information internationally, law enforcement agencies can better detect and investigate activities involving shell corps.

  Other Shell Corporations Definitions

  Shell corporations, or shell entities, are defined by their lack of substantial business operations or assets. They are inactive and used for various financial transactions. Legitimate uses of shell corporations include tax planning, asset protection, and confidentiality. But, they can also be used for illicit activities like money laundering and fraud.

  Characteristics of Shell Corporations:

  1)      Shell corporations usually have no physical presence or employees. They may have a registered address, but no actual office or staff. This makes it hard to trace the true owners.

  2)      Nominee directors and shareholders are often used. These people act on behalf of the owners, but their names are listed in public records. This allows for anonymity.

  3)      Shell corporations usually have minimal capitalization and nominal assets. They may only hold a small amount of cash or shares in other companies. This makes it difficult for authorities to seize assets or hold the entity accountable.

  4)      Complex financial transactions are often carried out by shell corporations. These transactions are done to hide funds, evade taxes, or disguise illegal activities. This further complicates investigations.

  The Guardian found that, between 1995 and 2015, over 175,000 shell companies were set up in London with ties to offshore tax havens, such as British Virgin Islands and Panama Papers leak sources.

  Legal and Ethical Issues Surrounding Shell Corporations

  ·         Embezzlement Controls

  ·         Cybercrimes embezzlement schemes

  Shell corporations can bring a lot of legal and ethical problems. They’re often used for bad stuff, like money laundering, embezzlement, and dodging taxes. Here’s a breakdown of the main issues:

  Money Laundering: People use shell corporations as a way to funnel illegal money.

  Tax Evasion: By using overseas shell corporations, people can dodge taxes in their own countries.

  Fraud: Shell corporations are sometimes set up for fraud, like Ponzi or pyramid schemes.

  Anonymous Ownership: People use shell corporations to hide their identity, making them hard to punish for bad behavior.

  Regulatory Compliance: Shell corporations can manipulate regulations and get away with it.

  These aren’t the only problems with shell corporations. Terrorism financing and corruption are also involved. To crack down on them, regulatory bodies all over the world are keeping an eye out.

  Tip: When dealing with others, check if they have any links to shell corporations to avoid the risks.

  Types of Financial Crime

  Financial crime has a broad definition that sometimes includes all illegal activity targeting financial institutions, or even any illicit generation or use of money for an advantage. Here are ten common types of financial crime.

  Fraud

  Financial fraud crimes encompass any activities intended to gain or protect financial benefits through deceitful and unethical means. Fraud is a wide category that can include many of the other crimes on this list, such as impersonation, counterfeiting, identity theft, and falsifying business records.

  Money Laundering

  Money laundering is a financial crime that aims to cover up the source of the proceeds of crime. Its first objective is to sneak money generated through illegal activities into a financial system (placement). Its second objective is to move that money around to build up a transaction history, giving it the appearance of legitimacy and making it difficult to trace back to its original criminal source (layering/structuring). Its final objective is to return the money to criminals for them to spend without attracting attention from authorities (integration).

  Terrorist Financing

  Terrorist financing refers to entities providing financial assets to terrorists—both individuals and groups. Their aim is to help terrorists purchase weapons, supplies, and anything else they need to carry out attacks on innocent civilians.

  The penalties for being caught aiding terrorists are very severe, so terrorist financing is somewhat akin to money laundering. That is, criminals wanting to finance terrorists have to use tricks to sneak assets into legitimate financial systems, then conceal where the money is coming from and going to.

  Embezzlement

  Embezzlement is when an entity is entrusted with—or given access to—funds to be used towards certain ends, with the entity then illicitly using that money for other purposes. They may transfer it to their own accounts or those of another, creating fake invoices or receipts to try and cover their tracks. Embezzlement often occurs within organizations and can range from petty theft to multi-million dollar schemes.

  Corruption and Bribery

  Similar to embezzlement, corruption is when an entity in a position of power acts outside of its mandate in order to unlawfully gain advantages—including financial ones—for themselves or others. Corruption can actually involve embezzlement, and it can also involve bribery.

  Bribery is the other side of corruption. It’s when an entity illegally gives financial benefits to authorities in exchange for receiving preferential treatment in decisions affecting the public. An example is a company paying officials in a country to get them to allow it to operate there without needing to comply with all necessary regulatory obligations.

  Tax Evasion

  An entity intentionally not paying their taxes, or paying less tax than they owe, is a financial crime called tax evasion. There are several ways to commit tax evasion. One is to deliberately fail to report taxable income. Another is to purposely claim more tax deductions than one is entitled to. Refusing to file a tax return at all also counts as tax evasion.

  An entity may also commit tax evasion by storing or investing their assets in banks or companies in other countries, or that are “shells” (i.e. they have no physical location and/or no active operations). This allows them to falsely claim that they have fewer assets than they actually do, in an attempt to illegally pay less tax than they truly owe.

  Insider Trading and Market Abuse

  Sometimes, an entity may cheat the stock market by buying or selling securities based on proprietary information regarding a company’s financial situation. This is called insider trading, and it’s a financial crime in many places. This is because the entity either was entrusted with the information for other purposes (similar to corruption and embezzlement) or outright stole it. So they got an unfair advantage by using information the public wasn't supposed to know (yet).

  There are other ways criminals can illegally manipulate stock markets. One example is “wash trading”—purchasing and then immediately re-selling shares in a company. This creates the illusion that the company’s stock is seeing a lot of financial activity, which can inflate its price.

  Another such scheme is called “pump and dump”. This involves an entity purchasing a low-value stock, then spreading rumors or other misinformation suggesting that the stock will soon increase in price. Their goal is to create a flurry of trading activity around the stock, thereby inflating its value. Then they sell off their shares for a profit before others realize the hype surrounding the stock was fake, and trading activity returns to normal.

  Forgery and Counterfeiting

  Other financial crimes involve unlawfully manipulating or duplicating financial assets. These are known, respectively, as forgery and counterfeiting.

  Forgery is illicitly altering a genuine financial asset to create an unintended benefit. In check fraud, for example, a criminal may name a different payee on the check, or change the amount the check is for. They may even attempt to fake the signature or other credentials of the check payer or endorser to make it seem like they authorized the check, when in fact, they did not.

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  Meanwhile, counterfeiting creates imitations or unauthorized copies of legitimate financial assets. The criminal’s intention is to spend these fakes as if they were genuine, hoping the other transaction party doesn’t notice the difference. However, many financial assets now have security features that allow people to tell the difference between an imitation and a genuine one, or when a genuine one has been illegally copied.

  Identity Theft

  While identity theft doesn’t involve directly stealing financial assets, it’s often considered a financial crime anyway. This is because it’s typically used as a means of committing other financial crimes.

  The goal is for a criminal to steal someone’s private identity or account access credentials, then use them to forge the person’s authorization for transactions. This allows the criminal to illegally profit while the victim bears the costs.

  A criminal can use many different methods for identity theft. A common one is phishing, where they trick victims into revealing their credentials with an enticing and/or urgent request—often appearing as if it came from a legitimate and authoritative source. They can also break into online accounts to steal credentials or impersonate victims. Or they may simply purchase credentials exposed by data breaches from the black market.

  Cybercrime

  As more financial activity moves online, so too does financial crime. Fraudsters are turning to digital channels for stealing money and authorization credentials, exposing sensitive information, forging and counterfeiting financial assets, manipulating markets, and committing many different types of fraud.

  Virtual currencies are proving to be especially popular tools for financial crime. Reasons for this include a current lack of financial regulations surrounding them, as well as most transactions being semi-anonymous. In addition, many virtual currencies have non-centralized administration on the block-chain, making transactions difficult to undo once recorded.

  All of this has made virtual currencies ripe for schemes such as market manipulation, money laundering, terrorist financing, tax evasion, and other forms of fraud.

  •           Market Abuse and Insider Dealing:

  Market abuse and insider dealing involve using inside information to make financial gains or manipulate markets. This can include insider trading, spreading false rumors, or manipulating stock prices.

  •           Information Security:

  Information security involves protecting sensitive information from unauthorized access or disclosure. This can include theft of personal information, hacking into computer systems, or corporate espionage.

  Financial Crime Statistics and Trends to Watch For

  According to the Price Water house Coopers 2022 Global Economic Crime and Fraud Survey, about 46% of organizations worldwide encountered some kind of financial crime that year. Financial crime is tending to target larger organizations—52% of those targeted in 2022 had annual revenues over $10 billion US, as opposed to 38% of companies with less than $100 million US annual revenue.

  And financial crime is becoming more costly, more often. Of larger companies experiencing fraud, 18% had their biggest incident of financial crime in 2022, costing them over $50 million US. And 22% of smaller companies experiencing fraud said their most disruptive financial crime experience cost them at least $1 million US.

  Here are some other financial crime trends to watch for in the coming years.

  The rise of financial crime in cyberspace

  While global financial crime statistics show an overall downward trend, one notable exception is in cybercrime. The COVID-19 pandemic fueled the demand and adoption of instantaneous remote financial services, including neo-banks, virtual currency trading, and embedded finance.

  However, these services tend to prioritize smooth user onboarding and interface experiences at the expense of more robust security and risk assessment programs. This leaves them more vulnerable to bad actors—especially hackers, online fraudsters, and other external parties.

  A renewed importance for sanctions screening

  Incidents such as Russia’s invasion of Ukraine in February of 2022 have put a spotlight back on sanctions list compliance. Organizations are scrambling to avoid being penalized for illegally dealing with dangerous individuals, groups, and countries—both directly and throughout their supply chains. This will be made more difficult by the increasing popularity of decentralized financing, such as through virtual currencies and crowd funding.

  AI and other changing financial crime prevention procedures

  Regulators and compliance teams continue to realize that if they want to keep up with modern financial crime, they need to do things differently. That includes adopting machine learning models to more accurately identify signs of financial crime, as well as prioritize the alerts most likely to be true positives.

  It also includes taking a more holistic, organization-wide approach to fighting financial crime. That involves stronger communication between departments to assess customer risk across both onboarding and ongoing financial activity. It also involves more stringent auditing processes to ensure all parts of an organization are on board with its overall compliance efforts.

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  Consequences of Money Laundering and Financial Crime

  Again, while financial crime is typically non-violent, it can be used to cover up violent crimes that involve criminals taking what doesn’t rightfully belong to them. Beyond that, financial crime can have far-reaching socio-economic impacts that can threaten the administrative stability of entire countries, and even the world.

  Here are some reasons why.

  ·         Unfairly disadvantages legitimate private businesses: Individuals and groups that engage in financial crime sometimes conceal their activities behind “front” businesses. Since these businesses are backed by substantial amounts of illegal money, they can often offer their products or services at costs that legitimate businesses just can’t match.

  ·         Warps industry supply and demand: Financial criminals invest in crime to profit. So when they do invest in legitimate industries, it’s often as a means of protecting their assets through money laundering and not because they expect returns. This false demand can put industries in danger of collapsing when criminals decide to move their money somewhere else.

  ·         Threatens the stability of financial institutions: Financial institutions that house the proceeds of financial crime tend to see large amounts of money move around quickly. This is usually either to launder the funds or to keep them away from investigating authorities. That can cause liquidity problems for the FI, which in turn can cause customers to panic and go on bank runs.

  ·         Interferes with government revenue: As part of protecting their proceeds, financial criminals will often try to avoid paying tax on them. This gives a country’s government less money to spend on important projects, makes tax collection more difficult, and often results in higher taxation on legitimate citizens.

  ·         Hampers the economic growth of developing countries: Countries emerging as players on the world economic stage tend to be focused on growing their financial systems as opposed to regulating them. This makes them attractive to financial criminals, which makes them less attractive to people and companies looking to legitimately do business.

  ·         Hijacks control of economic policy: Another danger of financial crime being popular in lightly-regulated developing countries is that its proceeds may exceed the budgets of governments in those countries. This effectively means that criminals are in control of the country’s economy instead of the legitimate government.

  ·         ‍Contributes to moral breakdown: If financial crime is left unchecked in a country, it encourages more people to become involved. This results in more victims of criminal activities—such as drug distribution and human trafficking—who may eventually turn to crime themselves out of isolation and desperation. This cycle can subvert a country’s rule of law, and even its democratic principles.

  Examples of Financial Crime

  To illustrate what financial crime looks like in real life, here are a few famous examples of financial crimes that received significant media attention.

  Bernie Madoff’s Ponzi Scheme

  Bernie Madoff founded a legitimate investment firm in the 1960s, but it eventually morphed into the biggest Ponzi scheme in history. It took money from investors and used the funds to pay out dividends to clients who had come earlier; instead of to back what customers actually wanted to invest in. The fraud, worth $65 billion, was publicly exposed in 2009. Madoff was sentenced to 150 years in prison, and died in 2021.

  Enron’s Accounting Fraud

  At the turn of the 21st century, the American energy company appeared to be one of the most profitable corporations in the world. The reality, however, was that the business was deeply in debt. The company’s executives—along with accounting firm Arthur Andersen—had been hiding Enron’s money woes behind misleading financial reporting, accounting loopholes, and off-books subsidiary shell corporations.

  By late 2001, investors and journalists had exposed Enron’s fraud, putting the business on the verge of bankruptcy. The company’s collapse cost investors upwards of $74 billion US, and several executives from both Enron and Arthur Andersen were sentenced to long prison terms. The scandal led the US government to pass the Sarbanes-Oxley Act in 2002 to impose stricter regulations on corporate financial reporting.

  Martha Stewart’s ImClone Insider Trading Scandal

  The famed retail entrepreneur, author, and TV personality was involved in a very public insider trading scandal in the early 2000s. Her former stockbroker, Peter Bacanovic, illegally told her that ImClone—a biotechnology company she had shares in—was about to have an experimental cancer treatment rejected by the Food and Drug Administration. Knowing this would drive down the company’s stock price, Stewart sold her shares a day before the announcement went public.

  ‍

  The Securities and Exchange Commission launched an investigation, refusing to believe this move was mere coincidence. In mid-2003, both Stewart and Bacanovic were charged with insider trading. Stewart was found guilty and served 5 months in prison.

  ‍

  Financial Crime Prevention: How Governments and Businesses Can Stop Financial Crime

  Today, many criminals who commit financial fraud, launder money, and engage in terrorist financing are incredibly sophisticated and agile, allowing them to continue their criminal activity without detection.

  For businesses to avoid exposure to these sorts of illegal actions, they must take preemptive actions, including investing in the infrastructure and systems needed to prevent and identify any kind of criminal activity.

  Many of these financial crimes require cross-border transactions. Unfortunately, the current international financial network makes sophisticated criminal activity even more challenging to trace and prosecute. Money launderers leverage differences in regulations to move money between countries, clouding the trail.

  ‍

  And those financing terrorist activities need to transfer money in and out of countries to execute their attacks. To complicate matters further, in-country connections such as government officials, bank employees, accountants, and others make it easier for these illegal cross-border transactions to go undetected.

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  Most countries have deployed comprehensive regulations to enable financial institutions to help detect, investigate, and report suspicious activity.

  ‍

  Banks and financial institutions must comply with the Bank Secrecy Act (BSA) in the US. In addition, the UK has instituted the Proceeds of Crime Act (POCA), while the EU has put in place the Anti-Money Laundering Directives (AMLD). All of these regulations are consistent with the guidance provided by the intergovernmental organization, the Financial Action Task Force (FATF).

  ‍

  By complying with these regulations, financial institutions can help prevent financial crimes such as fraud, money laundering, and the financing of terrorist activity. On top of this, teams can optimize operations and reduce false positives. Compliance generally falls into detecting suspicious activity, investigation, and reporting to the appropriate government entity.

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  Unit21’s Anti-Fraud and AML Infrastructure is Here to Help You Guard Against Financial Crime

  There’s no denying that it takes a lot of work to stop financial crime. Compliance with national and international detection and prevention standards is a good start. However, this is often easier said than done. New types of financial crimes are constantly appearing as policies, procedures, and technologies change. So regulations—and, consequently, organizations’ compliance programs—have to adapt as well.

  ‍

  Ultimately, countering financial crime is about risk management: knowing how and where an organization is vulnerable, and implementing the proper controls where reasonable—including identity verification, transaction monitoring, and case management. This helps the organization not only limit the chance of being victimized by financial crime but also work quickly to control the damage financial crime causes if it actually happens.

  ‍

  Of course, using digital tools like Unit21’s is much more efficient than trying to handle everything manually. Contact us for a demo of how our infrastructure can save an organization time, money, and other resources.

  What is African Union Continental Free Trade Zone is all about?

  ·         What is the AfCFTA?

  AfCFTA by simply definition can be described as an interest ground that came together to defend the continental resources and trade right.  The AfCFTA is composed of almost all African countries. With Nigeria and Benin having agreed to join in, only Eritrea is yet to sign. Eritrea’s government declared that they will most likely come on board. This would result in a continental trade agreement and the largest FTA.

  The AfCFTA is an ambitious trade pact to form the world’s largest free trade area by creating a single market for goods and services of almost 1.3bn people across Africa and deepening the economic integration of Africa. The trade area could have a combined gross domestic product of around $3.4 trillion, but achieving its full potential depends on significant policy reforms and trade facilitation measures across African signatory nations.

  The AfCFTA aims to reduce tariffs among members and covers policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade.

  The agreement was brokered by the African Union (AU) and was signed by 44 of its 55 member states in Kigali, Rwanda on March 21, 2018. The only country still not to sign the agreement is Eritrea, which has a largely closed economy.

  As of May 2022, 46 of the 54 signatories had deposited their instruments of ratification with the chair of the African Union Commission, making them state parties to the agreement.

  Figure 1.1 Leadership and Trade-nexus

  The AfCFTA Secretariat, an autonomous body within the African Union based in Accra, Ghana, and led by secretary general Wamkele Mene, is responsible for coordinating the implementation of the agreement. (1. https://african.business/2022/05/trade-investment/what-you-need-to-know-about-the-african-continental-free-trade area#:~:text=The%20AfCFTA%20is%20an%20ambitious,the%

  Objective:

  The main objectives of the ACFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union.

  Why is this Book looking at Financial Crime, criminal economies and illicit financial flows in Africa?

  Financial crimes can have serious consequences or impacts for the African Union Leaders, individuals and society as a whole, including economic instability, loss of public trust in financial institutions, and erosion of the rule of law.

  Organized criminal groups, however, may also adopt terrorist tactics of indiscriminate violence and large-scale public intimidation to further criminal objectives or fulfill special operational aims. Organized criminal groups and terrorist organizations may build alliances with each other. The nature of these alliances varies broadly and can include one-off, short-term, and long-term relationships. With time, criminal and terrorist groups may develop a capacity to engage in both Financial Crime and Illicit Financial outflows into their criminal and terrorist activities, thus forming entities that display the characteristics of both groups.

  Financial crime is a broad term used to describe criminal activities that involve money or other financial resources. It refers to any illegal activity that involves the use of financial systems, institutions, or instruments for illicit purposes, typically with the goal of generating profits for the perpetrators.

  Financial crimes can take many different forms:

  1.      Money laundering

  2.      Fraud,

  3.      Embezzlement,

  4.      Insider trading or Fraud

  5.      Cybercrime.

  6.      Bribery  and Corruption

  Who Commit these Crimes?

  These crimes are often committed by:

  ·         Individuals

  ·         groups of People

  ·         Governmental and Non-Governmental Organizational

  ·         Banking and other Financial  Institutions Seeking to profit

  From illegal activities,

  Ø  Such as drug trafficking,

  Ø  Human trafficking, or

  Ø  Terrorism.

  Ø  Rebel Wars

  Figure 1.2 Crime-terror nexus

  Financial crime is a complex and ever-evolving problem that requires a multifaceted approach to combat. This includes all Leadership sector, the Law enforcement agencies, regulatory bodies, and financial institutions all play important roles in detecting and preventing financial crimes. Leaders should implement  Effective measures to combat financial crime include strengthening anti-money laundering and counter-terrorist financing regulations, enhancing cross-border cooperation, and leveraging technology and data analytics to identify suspicious activities.

  Financial Crimes are criminal activities carried out by individuals or criminal organizations to provide economic benefits through illegal methods. Financial crimes, which have become a critical issue in recent years worldwide, cause significant harm to the economy and society of Africa.  Income from financial crimes corresponds to a substantial proportion of global GDP. Therefore, regulatory bodies constantly develop new tactics to combat financial crimes. In addition, with the development of technology, criminals develop new tactics. Today's most common financial crimes are terrorist financing, money laundering, corruption, and fraud.

  Money laundering is the process of turning earnings from crime into legal earnings. Cartels and gangs are the most common money launderers. Some sophisticated techniques may include different financial institutions such as accountants, shell companies, and financial and consulting institutions. These criminal organizations use assets that make money laundering and increase complexity to finance money laundering in illegal money transfers between countries and terrorism. As a result, regulators have obliged financial institutions to implement various controls to prevent financial crimes. These are commonly referred to as "anti-money laundering obligations." Organizations that do not fulfill their AML obligations are punished with fines by regulatory bodies.

• size,             The whole Africa Continent and the World Over

• 
  

• 
  

• philosophy.   

  Why the Need for Effective Leadership in Africa? To prevent susceptibility to criminal activities in the African Union Continental Free Trade Zone Area

  T

  his chapter looks at Leadership and the key Characteristics of Effective Leadership in African and the relevant of understanding the need  for combating criminal activities, and improving Leaders positive interactions with citizens in the state. These include the development and demographic status of the African countries, and the dynamics of the African’s economy and trade. The chapter provides an overview of the African’s governance and democracy, and highlights salient features of its peace and security, or instability. Taken together, these characteristics will lessen the impact on the way criminality develops in the African Union Member States. Consequently, they are relevant for developing responses to criminality and illicit financial flows, and working to mitigate the impact of these factors on their economic development.

  What is Leadership? Leadership in this context is a set of behaviors of African Leaders used to help people or Citizens of African States align their collective direction, to execute strategic plans, and to continually renew their States approach in Combating Financial Crime.  

  The typology of the Leadership we need in the African Continent

  The political leaders of Africa come in all sizes, shapes, and persuasions. There are liberal democratic heads of state and heads of government, presidents and prime ministers; elected democratic leaders who become wily autocrats; strong authoritarians who brook no opposition and respect few freedoms; military men ruling because their followers are well-armed; kleptocrats who govern so that they can steal from the state and its citizens; a few who profess strong support for the public interest; and many who serve clan, family, and narrow conceptions of national “interest.” There are few women. Ideology plays little part in the very different styles and mechanisms of governance that these political leaders display. But nearly all of them are transactional; hardly anyone today is transformational in the manner of several of Africa’s founding fathers, such as Nelson Mandela.

  All we need is African’s customary behavioral made leaders that align to the Need and Aspiration of our National Development. Africa has an oriented system of Love, dedication, and hard-work People that helps our upcoming generation thrive for the better and is careful for her People.   

  All leaders, to a certain degree, do the same thing. Whether you’re talking about a President, Head of States, an executive, manager, sports coach, or schoolteacher, leadership is about guiding and impacting outcomes, enabling groups of people to work together to accomplish what they couldn’t do working individually in a Nation. In this sense, leadership is something you do, not something you are. Some people in formal leadership positions of some African Countries are poor leaders, and, so many people exercising leadership have no formal authority but have good ideas. It is their actions, not their words that inspire trust and energy. What’s more, leadership is not something people are born with—it is a skill you can learn with the aim of developing. At the core are mindsets, which are expressed through observable behaviors, which then lead to measurable outcomes of how we handle our National issues.  

  Is there a Leader in Africa that is communicating effectively or engaging others by being a good listener? Focusing on their behaviors lets us be more objective when assessing leadership effectiveness. The key to unlocking shifts in behavior is focusing on their mindsets, becoming more conscious about our thoughts and beliefs, and showing up with integrity as their full authentic selves. There are many contexts and ways in which leadership in Africa exercised their Power. But, according to analyses of academic literature as well as a survey of nearly 200,000 people in 81 organizations all over the world, there are four types of behavior that account for 89 percent of leadership effectiveness:

  ·         Being supportive to your People

  ·         Operating with a strong results orientation for Development

  ·         Seeking different perspectives towards development and Security  

  ·         Solving problems effectively Effective leaders know that what works in one situation will not necessarily work every time.

  Leadership strategies in Africa must reflect each Country’s context and stage of evolution of their GDP’s and cause of depreciation symptoms and effect to National Development. One important lens is African’s health, a holistic set of factors that enable an African Countries to grow and succeed over time.

  A situational approach enables leaders to focus on the behaviors that are most relevant as an African becomes healthier. Senior leaders must develop a broad range of skills to guide Africans. Ten timeless topics are important for leading nearly any African’s Nations, from attracting and retaining talent to making culture a competitive advantage. Leading African’s Nations: Ten Timeless Truths goes deep on each aspect. How is leadership evolving? In the past, leadership was called “management,” with an emphasis on providing technical expertise and direction. The context was the traditional industrial economy command-and-control Nations, where leaders focused exclusively on maximizing value for shareholders. In these Nations, leaders had three roles:

  ·         Planners (who develop strategy, then translate that strategy into concrete steps),

  ·         Directors (who assign responsibilities), or

  ·         Controllers (who ensure people do what they’ve been assigned and plans are adhered to).

  What are the limits of traditional management styles? Traditional management was revolutionary in its day and enormously effective in building large-scale global enterprises that have materially improved lives over the past 200 years. However, with the advent of the 21st century, this approach is reaching its limits. For one thing, this approach doesn’t guarantee happy or loyal Leaders or followers. Indeed, a large portion of Followers—56 percent—claim their Leaders are mildly or highly toxic, while 75 percent say dealing with their Larders is the most stressful part of their  Nations troubles. For 21st-century African operating in today’s complex African’s business environment, a fundamentally new and more effective approach to leadership is emerging. Leaders today are beginning to focus on building agile, human-centered, and digitally enabled Africans able to thrive in today’s unprecedented environment and meet the needs of a broader range of stakeholders (Public and Private Sector, in addition to investors). What is the emerging new approach to leadership?

  This new approach to leadership is sometimes described as “servant leadership.” While there has been some criticism of the nomenclature, the idea itself is simple: rather than being a manager directing and controlling people, a more effective approach is for leaders to be in service of the people they lead. The focus is on how leaders can make the lives of their Country’s Men easier— physically, cognitively, and emotionally. Research suggests this mentality can enhance both team performance and satisfaction. In this new approach, leaders practice empathy, compassion, vulnerability, gratitude, self-awareness, and self-care. They provide appreciation and support, creating psychological safety so their People are able to collaborate, innovate, and raise issues as appropriate. This includes celebrating achieving the small steps on the way to reaching big goals and enhancing people’s wellbeing through better human connections. These conditions have been shown to allow for a team’s best performance. More broadly, developing this new approach to leadership can be expressed as making five key shifts that include, build on, and extend beyond traditional approaches:

  1. Beyond executive to visionary, shaping a clear purpose that resonates with and generates holistic impact for all stakeholders

  2. Beyond planner to architect, reimagining industries and innovating business systems that are able to create new levels of value

  3. Beyond director to catalyst, engaging people to collaborate in open, empowered networks

  4. Beyond controller to coach, enabling the organization to constantly evolve through rapid learning, and enabling colleagues to build new mindsets, knowledge, and skills

  5. Beyond boss to human, showing up as one’s whole, authentic self Together, these shifts can help a leader expand their repertoire and create a new level of value for an African’s stakeholders.

  The last shift is the most important, as it is based on developing a new level of consciousness and awareness of our inner state. Leaders who look inward and take a journey of genuine self-discovery make profound shifts in themselves and their lives; this means they are better able to benefit their Countries. That involves developing “profile awareness” (a combination of a person’s habits of thought, emotions, hopes, and behavior in different circumstances) and “state awareness” (the recognition of what’s driving a person to take action). Combining individual, inward-looking work with outward-facing actions can help create lasting change. Leaders must learn to make these five shifts at three levels: transforming and evolving personal mindsets and behaviors; transforming teams to work in new ways; and transforming the broader organization by building new levels of agility, human-centeredness, and value creation into the entire enterprise’s design and culture.

  What is the impact of this new approach to leadership in African?

  This new approach to leadership is far more effective. While the dynamics are complex, countless studies show empirical links among effective leadership, Citizens satisfaction, investors’ loyalty, and profitability for the African Continent. How can leaders empower African’s Citizens? Empowering African State owned Agencies, surprisingly enough, might mean taking a more hands-on leadership approach. Countries whose leaders successfully empower others through coaching are nearly four times more likely to make swift, good decisions and outperform other African Countries. But this type of coaching isn’t always natural for those with a more controlling or autocratic style. Here are five tips to get started if you’re a leader looking to empower others: — Provide clear rules, for example, by providing guardrails for what success looks like and communicating who makes which decisions. Clarity and boundary structures like role remits and responsibilities help to contain any anxiety associated with work and help teams stay focused on their primary tasks.  

  —     Establish clear roles, say, by assigning one person the authority to make certain decisions.

  —     Avoid being a complicit manager

  ·         For instance, if you’ve delegated a decision to a team doesn’t step in and solve the problem for them.

  Address culture and skills, for instance, by helping African State owned Agencies learn how to have difficult conversations.

  Begin soliciting personal feedback from others, at all levels of your Country, on how you are experienced as a leader. How can leaders communicate effectively? Good, clear communication is a leadership hallmark. Fundamental tools of effective communication include:

  §  defining and pointing to long-term goals

  §  listening to and understanding stakeholders

  §  creating openings for dialogue

  Communicating proactively and in times of uncertainty, these things are important for crisis communicators:

  §  give people what they need, when they need it

  §  communicate clearly, simply, and frequently

  §  choose candor over charisma

  §  revitalize a spirit of resilience

  §  distill meaning from chaos

  Support people, teams, and African’s State to build the capability for self-sufficiency is leadership different in a hybrid Countries? A leader’s role may look slightly different in remote or hybrid Countries settings. Rather than walking around a physical Countries site, these leaders might instead model what hybrid looks like, or orchestrate transparency based on tasks, interactions, or purpose. Being communicative and radiating positivity can go a long way. Leaders need to find other ways to be present and accessible, for example, via virtual drop-in sessions, regular countries podcasts, or virtual town halls. Leaders in these settings may also need to find new ways to get authentic feedback. These tactics can include pulse surveys or learning to ask thoughtful follow-up questions that reveal useful resource management insights. Additional considerations, such as making sure that in-person work and togetherness has a purpose, are important. Keeping an eye on African in hybrid Financial Crime is also crucial. Listening to what Africans want, with an eye to their lived experience, will be vital to leaders in these settings. And a focus on output, outcomes, results, and impact—rather than What is leadership? Arbitrary norms about time spent in offices—may be a necessary adaptation in the hybrid era. How should Leaders lead in this new Africa? Just as for leadership more broadly, today’s environment requires Leaders to lead very differently. Recent research indicates that one-third to one-half of new Leaders fail within 18 months. What helps top performers thrive today? To find out, Prof. Paul Allieu Kamara led a research effort to identify the Leaders who achieved breakaway success. We examined 20 years’ worth of data on 17 Leaders—from 300 public Institutions across 17 countries and 24 Financial and Security Agencies. The result is Excellence:

  The Six  Mindsets That Distinguish the Best Leaders from the Rest (SLPSD, March 2022). Getting perspective on leadership from Leaders themselves is enlightening—and illustrates the nuanced ways in which the new approach to leadership described above can be implemented in practice. Here are a few quotes drawn from SLPSD’s interviews with these top-level leaders:

  ·         “I think the fundamental role of a leader is to look for ways to shape the decades ahead, not just react to the present, and to help others accept the discomfort of disruptions to the status quo.”

  ·         “The single most important thing I have to do as Leader is ensuring that our Country continues to be relevant.”

  ·         “Leaders of other Nations often define themselves as captains of the ship, but I think I’m more the ship’s architect or designer. That’s different from a captain’s role, in which the route is often fixed and the destination defined.”

  ·         “I think my leadership style [can be called] ‘collaborative command.’ You bring different opinions into the room, you allow for a really great debate, but you understand that, at the end of the day, a decision has to be made quickly.”

  ·         “We need an urgent re-foundation of African and capitalism around purpose and humanity. To find new ways for all of us to lead so that we can create a better future, a more sustainable future.”

  ·         Former chairman and Leader of Best Country in Africa what is leadership development?

  Leaders aren’t born; they learn to lead over time. Neuroplasticity refers to the power of the brain to form new pathways and connections through exposure to novel, unfamiliar experiences. This allows adults to adapt, grow, and learn new practices throughout our lifetimes. When it comes to leadership within Africans, this is often referred to as leadership development. Programs, books, and courses on leadership development abound, but results vary. Leadership development efforts fail for a variety of reasons. Some overlook context; in those cases, asking a simple question (something like “What, precisely, is this program for?”) can help. Others separate reflections on leadership from real work, or they shortchange the role of adjusting leaders’ mindsets, feelings, assumptions, and beliefs or they fail to measure results. So what’s needed for successful leadership development? Generally, developing leaders is about creating contexts where there is sufficient psychological safety in combination with enough novelty and unfamiliarity to cultivate new leadership practices in response to stimuli. Leadership programs that successfully cultivate leaders are also built around “places capes”

  These are novel experiences, like exploring wilderness trails, practicing performing arts, or writing poetry. When crafting a leadership development program, there are six ingredients to incorporate that lead to true National impact:

  What is leadership?

                              5 Set up for success:

  ·         Focus your leadership transformation on driving strategic objectives and initiatives.

  ·         Commit the people and resources needed. Be clear about focus: Engage a critical mass of leaders to reach a tipping point for sustained impact.

  ·         Zero in on the leadership shifts that drive the greatest value. — Execute well: Architect experiential journeys to maximize shifts in mindsets, capabilities, and practices.

  ·         Measure for holistic impact. A well-designed and executed leadership development program can help a Country build leaders’ capabilities broadly, at scale. And these programs can be built around coaching, mentoring, and having people try to solve challenging problems—learning skills by applying them in real time to real work. What are mentorship, sponsorship, and apprenticeship? Mentorship, sponsorship, and apprenticeship can also be part of leadership development efforts. What are they? Mentorship refers to trusted counselors offering guidance and support on various professional issues, such as career progression. Sponsorship is used to describe senior leaders who create opportunities to help junior colleagues succeed. These roles are typically held by more senior colleagues, whereas apprenticeship could be more distributed. Apprenticeship describes the way any colleague with domain expertise might teach others, model behaviors, or transfer skills. These approaches can be useful not only for developing leaders but also for helping your Country up-skill or reskill employees quickly and at scale.

  6 CHARACTERISTICS OF AN EFFECTIVE LEADER

  Although there isn’t a single right way to effectively lead a team, there are several characteristics common among successful leaders and managers you should consider when developing your Incorporating these abilities into your professional development can enable you to make difficult decisions, align your organization on common goals, and lead your team to success.

  WHY EFFECTIVE LEADERSHIP IS IMPORTANT

  Ineffective leadership can cost Countries more than just morale. According to research from SLPSD, 24 percent of Citizens are actively disengaged as a result of poor management, leading to teams that are less productive, less profitable, and more likely to cause turnover. And that turnover adds up quick: translating into nearly two times the annual Profits of every Financial Criminal who quits.

  That’s why effective leadership skills are important. In order to retain national developments, satisfy customers, and improve country’s productivity, you need Citizens who can effectively communicate the country’s vision, guide teams, and influence change.

  If you aspire to be that person, here's how you can become a more effective leader.

  CHARACTERISTICS OF AN EFFECTIVE LEADER

  1. Ability to Influence Others

  “[Leadership] is all about influencing people,” said Kirstin Lynde, founder of leadership development firm Catalyze Associates, in a Facebook Live interview.

  Early in your career, you might exercise authority by being the go-to person on a certain subject within your organization, or by actively listening and building consensus among your team. As you advance, you may exert influence by knowing how to articulate the direction you think the company should head in next.

  According to the online course Power and Influence for Positive Impact, influence is “the ability to produce effects on other people’s behavior.” Influencing others requires building a strong sense of trust with your colleagues.

  “This means [you] need to understand the types of resources people value when it comes to achieving safety and self-esteem,” says Harvard Business School Professor Julie Battilana in her course Power and Influence for Positive Impact.

  Focus on understanding their motivations and encourage them to share their opinions. You can use that knowledge to make change and show their voice matters.

  2. Transparency—to an Extent

  Part of building trust is being transparent. The more open you are about the organization’s goals and challenges, the easier it is for employees to understand their role and how they can individually contribute to the company’s overall success. That sense of value and purpose translates into higher levels of employee engagement.

  “To get people on board, they need to grasp what you’re conveying so they’re excited to join you in turning that direction into a reality,” says HBS Professor Anthony Mayo in the online course Organizational Leadership. “Your communication should meet people where they are, give them a sense of where the organization is going, and then give them a roadmap for how they can bridge the gap from where the organization is now to where you want to take it.”

  While transparency is often intended to promote collaboration, knowledge sharing, and accountability, too much of it can have the opposite effect, according to Ethan Bernstein, an associate professor of organizational behavior at HBS.

  “Wide-open workspaces and copious real-time data on how individuals spend their time can leave employees feeling exposed and vulnerable,” writes Bernstein in the Harvard Business Review. “Being observed changes their conduct. They start going to great lengths to keep what they’re doing under wraps, even if they have nothing bad to hide.”

  Bernstein encourages balancing transparency with privacy and setting different types of boundaries to still foster experimentation and collaboration.

  3. Encourage Risk-Taking and Innovation

  Experimentation is critical to establishing and maintaining your company’s competitive advantage. Great leaders recognize this and encourage risk-taking and innovation within their organization.

  “You can’t wave a wand, dictate to people that they need to be more creative, and wake up the next day to find people taking risks and trying new things,” Mayo says in Organizational Leadership.

  Instead, leaders must actively foster a culture of innovation by supporting experimentation, challenging unwritten rules, and embracing mistakes. These steps, backed by data, can yield innovations that wouldn’t have otherwise surfaced.

  By creating a culture that embraces failure and experimentation, employees are more emboldened to test theories or propose new ideas, because they see that creativity is valued. For example, Google’s innovation lab, X, offered bonuses to each team member who worked on a project the company ultimately decided to kill as soon as evidence suggested it wouldn’t scale, in an effort to “make it safe to fail.”

  After all, big breakthroughs don’t happen when companies play it safe; experimentation is needed to reach lofty business goals. If well-intentioned, failures often become valuable lessons.

  Related: How to Be an Effective Leader at Any Stage of Your Career

  4. Integrity and Accountability

  One of the most important aspects of leadership is demonstrating integrity. In a survey by consulting firm Robert Half, 75 percent of employees ranked “integrity” as the most important attribute of a leader. In a separate survey by Sunnie Giles, creator of Quantum Leadership, 67 percent of respondents ranked “high moral standards” as the most important leadership competency. Yet, it can be easy for leaders to deprioritize integrity when faced with organizational power. The ability to balance power and accountability can set successful leaders apart from ineffective ones.

  “It’s precisely these two levers—sharing power and accountability—that enable workplaces and societies to keep power in check,” Battilana says in Power and Influence for Positive Impact.

  Employees want to know that their manager will advocate for them, treat them fairly, and, ultimately, do what’s right for the business. As a leader, it’s important to not only avoid the consolidation of power but also any decision-making that could negatively affect others. Doing so can foster trust within your team and model behavior for others in the organization. The culmination of these factors can help you build a successful team.

  5. Act Decisively

  In today’s fast-changing, complex business environment, effective leaders need to make strategic decisions quickly—even before any definitive information is available.

  Once you make a choice, stick with it, unless there’s a compelling reason to shift focus. Your goal is to move the organization forward, but that won’t happen if you can’t make a decision without wavering.

  While timely decision-making is essential for any effective leader, it’s important to remember that decision-making is a process.

  “The majority of people think about making decisions as an event,” says HBS Professor Len Schlesinger in the online course Management Essentials. “It’s very rare to find a single point in time where a ‘decision of significance’ is made and things go forward from there. What we’re really talking about is a process. The role of the manager in overseeing that process is straightforward, yet, at the same time, extraordinarily complex.”

  By acting decisively, continuously evaluating, and pivoting when necessary, you can lead your organization through the ever-changing business landscape.

  6. Demonstrate Resilience

  Every decision you make won’t result in success. There will be times when you’re met with failure; it’s your job as a leader to exercise resiliency.

  Consider the example of Antarctic explorer Ernest Schackleton presented in HBS Online’s sample business lesson on resilient leadership, led by HBS Professor Nancy Koehn.

  When Shackleton’s ship, the Endurance, was trapped and crushed by icebergs, the original mission—traversing Antarctica—suddenly became irrelevant. The new mission was to get his team of 28 men home alive. To do so, he needed to quickly lead his team through crisis.

  The lesson outlines three key components of Shackleton’s approach that all leaders can learn from when facing major challenges:

  Continuously assess and reassess your leadership approach

  Commit to your primary objective while exercising flexibility

  Maintain belief in the team’s mission by managing collective and individual energies

  Effective leaders don’t avoid hard truths or difficult challenges. Instead, they take responsibility for their decisions, maintain optimism, and focus on charting a new course of action. They also help others cope with organizational change and address issues quickly, so that problems don’t fester and escalate.

  Which HBS Online Leadership and Management Course is Right for You? | Download Your Free Flowchart

  ASSESSING YOUR STRENGTHS

  Becoming an effective leader doesn’t happen overnight. It’s an iterative process and requires you to assess your strengths and evaluate who you are as a communicator and collaborator.

  “In many cases, it’s your strong performance as an individual contributor that lays the foundation for your leadership roles,” says Mayo in the course Leadership Principles. “But what got you there won’t get you to the next level. As you shift from doing the work yourself to creating the conditions in which others excel, your identity is less about your individual accomplishments and tasks and more about the collective work of the group.”

  With that shift in mind, you can take action to develop your leadership style and become the type of leader your organization needs.

  Do you want to enhance your leadership skills? Download our free leadership e-book and explore our flowchart to see which online leadership and management course can help you become a more effective leader and unleash the potential in yourself and others.

  LINK BETWEEN EFFECTIVE LEADERSHIP AND COMBATING FINANCIAL CRIME

  The link between effective leadership and combating crime focuses on A the African Continental Free Trade Area which is the world's largest free trade area, connecting 1.3 billion people across 55 countries.

  The African Continental Free Trade Area (AfCFTA):

  10 Basics

  1.  Sheer Size: The AfCFTA will be world’s largest free trade area in terms of number of member countries, territory, and population.  It connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. 

  2. Business Opportunities: Even though the United States is not a party to the agreement creating this free trade area, there are concrete business opportunities stemming from this regional integration initiative for U.S. companies that have a creative, strategic vision for doing business on the African continent.

  3.  Status of ratification: As of January 2022, 41 African countries have signed and ratified the agreement; 14 still need to ratify.

  4.  Commercially meaningful trade is expected to start soon as African countries finalize rules of origin negotiations on key products. African tariff reductions to zero are generally staged over 5, 10, or 13 years, depending on the development level of the country—and for some products— whether they are deemed to be sensitive.

  5. What the AfCFTA covers:  trade policy areas such as tariffs, rules of origin, services, customs, standards and conformity assessment, sanitary and phytosanitary measures (SPS), investment, competition, intellectual property rights (IPR), and ecommerce. 

  6. What the AfCFTA does not cover: areas such as government procurement, state aid (subsidies), labor, and the environment. 

  7. Good news: Many of the trade principles in the agreement reaffirm World Trade Organization rules that the United States itself negotiated and agreed to in the WTO. This is the case in areas such as standards, SPS, IPR, and customs, for example.

  8. Concrete new innovations are already implemented. On January 13, 2022, the landmark Pan-African Payments and Settlements System (PAPSS) was commercially launched.  It allows payments among companies operating in Africa to be done in any local currency, facilitating and accelerating trade transactions.

  9. Negotiations continue in areas such as tariffs, services, IPR, investment, competition, and ecommerce, among other areas. 

  10. U.S. Commercial Service can help you understand the latest developments and formulate your strategy for doing business in this evolving African context. The city of Accra, Ghana hosts the Secretariat for AfCTA which oversees the negotiation and implementation of the AfCFTA.

  55 countries covered by the African Union States (AU): Algeria Angola Central African Republic            Chad  Comoros          Djibouti          Equatorial Guinea      Eswatini          Gabon            Gambia           Ghana  Ivory Coast   Kenya Lesotho           Mauritania      Morocco         Mozambique   Niger  Republic of the Congo            Rwanda           Sahrawi Arab Democratic Republic  Senegal           Seychelles       South Africa   Sudan Tanzania            Uganda          Zimbabwe      Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone Togo etc. AU brings these countries together around the shared commitment to build a “borderless, peaceful, prosperous and cohesive Africa, built on good governance” (AU, 2018). This commitment recognizes that owing to a range of systemic factors, African nations and peoples are uniquely bound together, with highly homogenous societies and interwoven, complementary economies. As borders between these states are highly porous, freedom of movement and trade sits at the cornerstone of a shared understanding of resilience, economic growth and development.

  This Chapter identifies some of the factors that make African Leaders and their countries more susceptible to the impacts of Financial Crime and illicit financial flows (IFFs) and criminal economies. While analyzing the African States as a whole, it recognizes that African countries are not uniform. They present appreciable differences in their forms of political Leadership and institutionalization, governance, economic performance and state building, resulting in different political arrangements, institutions and patterns of economic development. These differences have affected the extent to which criminal economies and IFFs feature in the economy and infiltrate the state (Felbab-Brown, 2010). Arguably, governments’ resilience and capacity to counter criminal economies and prevent IFFs reflect the resources available to them and their political will – thus making West African countries highly susceptible to the development of criminal economies and their resultant IFFs. 

  Though it is not possible to isolate the specific conditions that directly lead to criminal activity, certain structural factors appear to contribute to a country’s vulnerability. These include “high unemployment, high income inequality, prior exposure to violence, democratic collapse, low gross domestic product and weak institutional capacity” (Cockayne, 2011), as well as the size of the informal economy compared to the formal economy. Combined with global dynamics, these factors highlight vulnerabilities to criminal activity and serve as bulwarks against effective responses by African’s Leaders.

  This chapter reviews key characteristics of Leadership in the region, relevant for understanding both the growth of criminal economies, and their interactions with citizens and the state. These will have consequences on the responses to criminality and IFFs arising in this context, as well as for those working to mitigate their impact on National development.

  Development and demographic looks of Africa

  Most Developed Countries in Africa 2023

  A developed country is one that boasts features such as a mature and varied economy, a stable and functional government, a robust infrastructure, a strong educational system, ample job opportunities, comprehensive health and social services, and a high degree of personal freedom. Countries that fall slightly short of these goals are classified as developing countries. Those that fall far short are designated the least developed countries and become eligible for specific United Nations assistance programs.

  The most widely used and respected measure of a country's development status is the United Nations' annual Human Development Index (HDI). This advanced metric tracks a wide range of indicators, from Adult Literacy Rate and Life Expectancy to Income Inequality and Mobile Phone Subscriptions, then compiles them all into a number between 0.00 and 1.00. This score slots each country into one of four different classifications: low human development (0 to .55), medium human development (.55 to .70), high human development (.70 to .80), and very high human development (.80 to 1.00).

  Sixty-six countries scored .80 or higher in the 2021/22 HDI, qualifying them for "developed" status. However, Africa is the least-developed continent other than Antarctica, with many of its countries still mired in issues including poverty, government corruption, and armed conflict. As of the 2021/22 HDI, only one of Africa's 54 countries, Mauritius, is considered to have "very high human development." On the bright side, eight African countries have "high human development", and could reach the Very High plateau soon.

                                  Top 10 Most Developed Countries in Africa - 2021/22 HDI

  Mauritius — .802 (Very High)

  Seychelles — .785 (High)

  Algeria — .745 (High)

  Egypt — .731 (High)

  Tunisia — .731 (High)

  Libya — .718 (High)

  South Africa — .713 (High)

  Gabon — .706 (High)

  Botswana — .693 (High)

  Morocco — .683 (Medium)

  The island country of Mauritius is Africa's most developed country with an HDI of .802, which just clears the "very high human development" threshold. Mauritius boasts a life expectancy of 75 years and a literacy rate of 91.3%, and is known for its advanced economy and free health care and schooling. Globally, Mauritius still ranks 66th out of 189 countries examined, which illustrates the gap between Africa and the other continents, but other African countries can draw inspiration from the country's success.

  Seychelles (.785) lands right behind Mauritius. The country's economic growth is mainly driven by tourism, and its GDP has increased nearly sevenfold since 1976. The third most developed country in Africa, Algeria has an HDI score of .745 and currently possesses the highest life expectancy of all African countries

  Country          

  HDI 2021       

  HDI Tier

  Mauritius         0.802   Very High

  Seychelles       0.785   High

  Algeria            0.745   High

  Egypt  0.731   High

  Tunisia 0.731   High

  Libya   0.718   High

  South Africa   0.713   High

  Gabon 0.706   High

  Botswana        0.693   Medium

  Morocco          0.683   Medium

  Cape Verde     0.662   Medium

  Ghana  0.632   Medium

  Sao Tome and Principe           0.618   Medium

  Namibia           0.615   Medium

  Eswatini          0.597   Medium

  Equatorial Guinea       0.596   Medium

  Zimbabwe       0.593   Medium

  Angola            0.586   Medium

  Cameroon        0.576   Medium

  Kenya  0.575   Medium

  Republic of the Congo            0.571   Medium

  Zambia            0.565   Medium

  Comoros          0.558   Medium

  Mauritania       0.556   Medium

  Ivory Coast     0.55     Medium

  Tanzania          0.549   Low

  Togo    0.539   Low

  Nigeria            0.535   Low

  Rwanda           0.534   Low

  Uganda           0.525   Low

  Benin   0.525   Low

  Lesotho           0.514   Low

  Malawi            0.512   Low

  Senegal            0.511   Low

  Djibouti           0.509   Low

  Sudan  0.508   Low

  Madagascar     0.501   Low

  Gambia            0.5       Low

  Ethiopia           0.498   Low

  Eritrea 0.492   Low

  Guinea Bissau 0.483  

  Liberia 0.481   Low

  DR Congo       0.479   Low

  Sierra Leone    0.477   Low

  Guinea 0.465   Low

  Burkina Faso   0.449   Low

  Mozambique   0.446   Low

  Mali     0.428   Low

  Burundi           0.426   Low

  Central African Republic        0.404   Low

  Niger   0.4       Low

  Chad   0.394   Low

  South Sudan   0.385   Low

  Somalia                       not rated

  Reunion                      

  Western Sahara                      

  Mayotte                      

  Owing to the topological conditions of the Sahara and Sahel, resilience systems in Africa are unique. These systems have required a degree of mobility and inter-dependence among communities that belies the region’s geographical distances and topography. Agricultural lands are scarce and thinly distributed. Whereas agro-pastoral production drives the economy in most of sub-Saharan Africa, in Africa – and particularly in the Sahel – trade is the economic cornerstone, and seasonal exchange or travel are often the only options available (Krätli, Swift and Powell, 2014; OECD/Sahel and  Africa Club Secretariat [SWAC], 2014). Many analysts believe the populations of Africa are better understood as a network that spans the Sahara, rather than as nation-states and borders (Meagher, 2005; Scheele, 2012; OECD/SWAC, 2014).

  Urbanization Dynamics in Africa 1950–2010

  Since 1950, the number of urban agglomerations in some part of Africa increased from 152 to almost 2000, and today towns and cities are home to 41% of the region’s total population. Cities and their inhabitants are increasingly shaping Africa’s economic, political and social landscape. Yet there is little up-to-date data available for analysis and the formulation of development policy at the local, national and regional levels.

  Africa polis, a comprehensive and homogenous dataset on urbanization, is a significant step towards closing this data gap. The 2015 update covers 17 African countries spanning the period 1950 to 2010. Its original methodology combines demographic sources, satellite and aerial imagery to provide population estimates and geolocation at the level of individual agglomerations. The morphological approach adopted by Africa polis helps identify territorial transformation processes which are at the core of West Africa’s complex urbanization dynamics and can be observed at several levels: metropolises, secondary cities, the merging of villages and the formation of conurbations.

  The identification of cities with fewer than 100 000 inhabitants is a major contribution of Africa polis – 90% of Africa’s cities, or a combined population of 45 million people, fall into this category – a figure which underscores the important role of small cities within the urban system. This book also includes new measurements of urbanization in Nigeria, Africa’s most populous nation, constituting the most complete dataset on urbanization dynamics in this country to date.

  With low levels of agricultural production in rural areas, Africa’s development has been characterized by rapid urbanization. In 1950, the region comprised 152 cities and major towns; today, it has nearly 2000 – more than 12 times that number. In 1950, no urban area had a population of more than 1 million; now 22 such areas exist (OECD/SWAC, 2015). Urbanization has profoundly shaped the region’s economic, political and social environment (OECD/SWAC, 2014). State institutions are struggling to manage urban development effectively, leading to growing informal economies and settlements, and chronically poor living conditions for large portions of the population (AfDB, 2012).

  Another defining feature of Africa is its demographic profile. Where the population of continental Africa as a whole is young and growing at twice the pace of other continents’, growth in Africa is even more marked. Between 1950 and 2007, the region’s population increased fourfold, from approximately 70 million to more than 300 million; 60% of the population is under 25 years of age, and one third is aged 15-24 years (Figure 2.1). This youth bulge is expected to plateau around 2050, at which point the region’s population may have doubled, reaching 700 million people (Fortune et al., 2015). This exponential population growth is a challenge for ineffective Leadership and delivery of services and realization of development, even when growth is positive. For example, positive economic growth, regional integration and coherence have meant that AU has increased per-capita food production by more than 40% since the 1980s. Ensuring food security and creating productive livelihoods, however, remains a serious challenge: an estimated 36 million Africans are still undernourished, and several million face food emergencies every year (FAOSTAT, 2015). Development in the health and education sector is challenged to provide the desired returns to meet the needs of growing populations.  Unemployment rates are high, particularly for youth. Improvements in technology and communication, and investments in education, have transformed young people’s expectations with regard to employment and the future, yet these are out of step with opportunities in the formal sector, particularly for those completing higher education (Fortune et al., 2015; Marc et al., 2015; WA-IOM-130515). Economies have remained caught in predominantly informal, subsistence and basic trading activities. Limited high value-added work (AfDB, 2012) fails to offer most citizens any hope of social advancement or return on educational investment. Informal enterprise accounts for anywhere between 40% and 75% of gross domestic product (GDP) and employs anywhere between 50% and 80% of the available workforce in different African countries. By one estimate, the informal sector currently accounts for around 60% of all urban employment and provided 90% of all new employment created in the 1990s (Fortune et al., 2015). Consequently, economic growth has translated into increasing inequalities, and a highly visible gap between the “haves” and the “have nots”. This, in turn, has caused young people to become disillusioned with their governments and has entrenched intergenerational differences (Reitman and Shaw, 2014; Marc et al., 2015). Arguably, these schisms have exacerbated social fractures and weakened the rule of law, with implications for the recruitment of youth into criminal industries

  Projection of the total population of Africa 2020-2050

  According to the forecast, Africa's total population would reach nearly 2.5 billion by 2050. In 2020, the continent had around 1.34 billion inhabitants, with Nigeria, Ethiopia, and Egypt as the most populous countries. In the coming years, Africa would experience significant population growth and would nearly reach the Asian population by 2100.

  Rapid population growth

  The population of Africa has been increasing annually in recent years, growing from around 811 million to just over 1.37 billion between 2000 and 2021, respectively. In the same period, the annual growth rate of the population has been constantly set at roughly 2.5 percent, with a peak of 2.62 percent in 2012 and 2013. The reasons behind this rapid growth are various. One factor is the high fertility rate registered in African countries. In 2019, a woman in Niger had an average of over six children in her reproductive years, the highest rate on the continent. High fertility resulted in a large young population and partly compensated for the high mortality rate in Africa, leading to fast-paced population growth.

  High poverty levels

  Africa’s population is concerned with widespread poverty. In 2021, over 489 million people on the continent are extremely poor and live with less than 1.90 U.S. dollars per day. Globally, Africa is the continent hosting the highest poverty rate. In 2021, the countries of Nigeria and the Democratic Republic of the Congo account for 22 percent of the world population living in extreme poverty. Nevertheless, poverty in Africa is forecast to decrease in the coming years.

  Economy and trade

  Like the rest of the world, Africa has seen a surge in global trade flows over the last decade, mostly driven by natural-resource extraction. Africa’s proportional contribution to global imports and exports appears to be falling (UNCTAD, 2013), while the rest of Africa’ share has remained constant or increased. Illicit activity, criminal economies and the diversion of legitimate trade flows outside of the formal economy could explain Africa’s relatively poor performance. The establishment of ECOWAS in 1975 created a free-trade area. This was followed in 1994 by the creation of the West African Economic and Monetary Union (also known as Union Économique et Monétaire Ouest Africaine [UEMOA]). Eight countries within the UEMOA (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo) share a common currency (the African CFA franc), as well as common customs capacity. In terms of economic structure, UEMOA countries are heterogeneous. Although most depend on agriculture, services, and oil and mineral extraction as their primary economic drivers, only a few member countries have developed sizeable manufacturing industries. Mali, Niger and Burkina Faso are landlocked, while all other member countries have access to the sea. Cabo Verde – a small-island economy – has the highest GDP per capita, although Nigeria has by far the largest economy overall. The economies of AU countries have been growing quickly in the last 50 years. As Figure 2.2 shows, GDP grew from USD 50 billion to nearly USD 300 billion in real terms between 1966 and 2014, while the region as a whole achieved 4-5% growth rates per year over the same period (World Bank, 2014).

  Connections to the hydrocarbon-dominant economies of North Africa and the Maghreb have a significant impact on economic realities, as they create economic opportunities for goods, services, income and employment. For centuries, North African ports were global trade gateways to the Sahel countries and countries further south, with trade routes facilitated by nomadic groups spanning the Sahara. This northward pull was reinforced by the discovery of vast hydrocarbon reservoirs in Algeria and Libya; their boom economies and need for labour pushed the migration patterns from all the countries of sub-Saharan Africa northwards (OECD/SWAC, 2014).

  Over the past decade, Chinese exports to AU countries have expanded more than tenfold. The People’s Republic of China (hereafter China) is now the largest national exporter to AU (Figure 2.4). In Ghana, for example, imports from China account for around 20% of total imports. The bulk of counterfeit and substandard goods brought into Africa are concealed within legitimate trade flows into the region. Limited state resources, endemic corruption within port authorities and a lack of capacity to physically inspect most containers provide an environment conducive to contraband shipments. Control of imports and product quality in the marketplace is also limited.

  From a global perspective, Africa remains a relatively small market and a relatively complex operating environment. OECD estimates of the prevalence of counterfeit goods based on customs-seizure data suggest a global increase, but no reliable regional figures exist. Anecdotally, the perception is that both substandard and counterfeit goods are highly prevalent in Africa, and that the problem has grown.  The seizure data indicate that China is the main source country of fake and counterfeit goods (including foodstuffs, pharmaceuticals, and a wide variety of consumer and fake luxury goods) heading to Africa and the United Arab Emirates. China serves as transit points to African markets.  African countries have also served as transit points to other countries on the continent (OECD/European Union Intellectual Property Office, 2017).

  With their economies so heavily driven by external exports, that begs the need for effective Leadership and the ability of Africa governments to fund their National development strategies depends and that also depends on their capacity to capture a fair share of the export wealth generated by minerals and other resources. In the Book Track it! Stop it! Get it! Illicit Financial Flows from Africa, the High Level Panel (HLP) on Illicit Financial Flows from Africa made three key points:

  1.      African governments are unable or unwilling to successfully negotiate resource-extraction contracts that are fair and favorable in the long term; private companies investing in the Africa combine legal, illegal and borderline activities to limit taxation; and the international financial system provides loopholes and jurisdictions in which capital resources and revenues can be diverted (United Nations Economic Commission for Africa [ECA]/HLP, 2015).

  The Africa Progress Panel (2013) has suggested that African governments lack the Leadership capacity and the resources necessary to effectively assess the tax liabilities of overseas organizations. As a result, these organizations may be able to engage in tax evasion or aggressive tax avoidance. When countries have attempted to reform the taxation system against the interests of powerful corporations, these corporations have used their position to rail against such moves (ECA, 2011). Tax is also evaded through misinvoicing, typically for intangible goods or services (e.g. intergroup loans, intellectual-property taxes, procurement costs, and expert or management fees). Mis-invoicing practices have been used in multiple ways, e.g. to pay bribes and reduce profit margins (ECA/HLP, 2015)

  the scope of AfCFTA is large. The agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regu­latory measures such as sanitary standards and technical barriers to trade. Full implementation of AfCFTA would reshape markets and economies across the region and boost output in the services, manufacturing and natural resources sectors.

  As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional mar­ket is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment.

  The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effects, is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks. Creating a continent-wide market will require a determined effort to reduce all trade costs. Governments will also need to design policies to increase the readiness of their workforces to take advantage of new opportunities.

  Key Findings | Data | About the Authors

  Creating a single, continent-wide market for goods and services, business and investment would reshape African economies. The implementation of AfCFTA would be a huge step forward for Africa, demonstrating to the world that it is emerging as a leader on the global trade agenda.

  Image

  Caroline Freund

  Global Director of Trade, Investment and Competitiveness

  The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans. The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers—women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.

  The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Implementing AfCFTA would:

  Lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day;

  Boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world.

  Increase Africa’s exports by $560 billion, mostly in manufacturing.

  Spur larger wage gains for women (10.5 percent) than for men (9.9 percent).

  Boost wages for both skilled and unskilled  workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.

  Under AfCFTA, extreme poverty would decline across the continent—with the biggest improvements in countries with currently high poverty rates.

  West Africa would see the biggest decline in the number of people living in extreme poverty—a decline of 12 million (more than a third of the total for all of Africa).

  Central Africa would see a decline of 9.3 million.

  Eastern Africa would see a decline of 4.8 million.

  Southern Africa would see a decline of 3.9 million.

  Countries with the highest initial poverty rates, would see the biggest declines in poverty rates.

  In Guinea-Bissau, the rate would decline from 37.9 percent to 27.7 percent In Mali; the rate would decline from 14.4 percent to 6.8 percent.

  In Togo, it would decline from 24.1 percent to 16.9 percent.

  Of the $450 billion in income gains from AfCFTA, $292 billion would come from stronger trade facilitation—measures to reduce red tape and simplify customs procedures.

  Tariff liberalization is important, but by itself it would boost the continent’s income by just 0.2 percent.

  Adding trade facilitation to the mix—including measures to reduce red tape, simplify customs procedures, and make it easier for African businesses to integrate into global supply chains—would boost the income gains by $292 billion.

  These gains will require major efforts by countries to reduce the burden on businesses and traders to cross borders, quickly, safely, and with minimal interference by officials.

  The World Bank report is designed to guide for the Need for Effective Leadership and policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks.

  Creating a continent-wide market will require a determined effort to reduce all trade costs. In general, this will require legislation and regulations to enable the free flow of goods, capital and information across borders; create competitive business environments that can boost productivity and investment; and promote increased foreign competition and foreign direct investment that can raise productivity and innovation by domestic firms.

  In a few sectors facing job losses, governments will need to be ready to support workers with adequate safety nets and policies to retrain workers.

  Governments will need to design policies to increase the readiness of their workforces to take advantage of new opportunities.

  Achieving the gains from AfCFTA is especially important due to the COVID-19 pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020 alone.

  COVID-19 has caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.

  By increasing regional trade, lowering trade costs and streamlining border procedures, full implementation of AfCFTA would help African countries increase their resiliency in the face of future economic shocks and help usher in the kinds of deep reforms that are necessary to enhance long-term growth.  

  Trade within the African Continental Free Trade zone is limited, with 14.4% of total exports going to regional markets. From 2020, AfCFTA adopted common tariffs against the outside world, and established a customs union featuring free trade between the member states and a common trade policy that overrides national law. The common external tariff for consumer goods is set at 90%; the external tariff for specific goods boosting economic development is set at 90%. Individual member states do, however, maintain the option to institute import bans and quotas, and to set taxes. Hence, the customs union is still not fully realized (International Centre for Trade and Sustainable Development, 2015). All countries in the region have sizeable informal economies. An estimated 40-80% of economic activity takes place outside of the formal banking sector. In 2012, the ECA argued that informal cross-border trade constituted on average 43% of GDP; case studies in West Africa and the Horn of Africa show that informal cross-border trade vastly exceeds reported bilateral trade (Golub, 2015). The ECA study also noted that in some – albeit unnamed – African countries, informal regional trade flows may constitute up to 90% of official trade movement (ECA, 2012). The ECA defines informal cross-border trade as the movement of legitimately produced goods and services that avoid custom controls and/or pass through official channels. They use illegal practices such as under-invoicing (reporting a lower quantity, weight or value of goods to incur lower tariffs) and misclassification (falsifying the description of goods so they appear to be goods attracting a lower tariff). The ECA posited three categories of informal cross-border trade (Table 2.2)

  Table 2. 2. Types of informal cross-border trade

  Category A	Category B	Category C
  Informal (unregistered) traders or firms operating entirely outside the formal economy	Formal (registered) firms fully evading trade-related regulations and duties (e.g. avoiding official border-crossing posts)	Formal (Registered) firms partially evading trade-related regulations and duties by resorting to illegal practices (e.g. under-invoicing)

  Continually fragmented policies on taxation, quotas, tariffs and currency control have meant that cross-border illicit trade has flourished within the AU zone. Mbaye (2014) argued that in Africa, “… documented intra-regional trade is small but smuggling is pervasive, despite regional integration schemes intended to promote official trade.” The assessment further argued that “cross border trade involves a complex interplay of formal and informal operators and practices” and “ethnic and religious networks play a large role in organizing the informal sector, resulting in a set of shadow institutions that in some respects are more effective and powerful than official institutions” (Mbaye, 2014). Informal trade of this sort, however, should be distinguished from criminal cross-border trafficking. Faleye (2014) asserts that “there is clear distinction between criminals involved in the trafficking of illegal goods, such as guns, which are a direct threat to national security and informal cross-border traders who buy and sell ‘legal goods’ including contraband commodity goods, such as clothes, which contribute to the wellbeing of the masses of the society.”

  For example, one of the most significant border regions in Africa lies between Nigeria and Benin. The economies of these two countries rely upon both illegal and legal cross-border trade, “an essential part of the Abidjan-Lagos transport and migration corridor”, which “also represents a key transport vein in the AU region” (Blum, 2014). A similar narrative applies to the Saharan states bordering North Africa, where variable pastoral conditions, minimal domestic resources or industries, and heavily subsidized commodities in the oil-rich states of North Africa contribute to highly mobile populations and active cross-border trading networks. With 16 794 kilo-metres of land borders between the Sahel states, Algeria and Libya, cross-border trade in subsidized commodities is significant (OECD/SWAC, 2014). Research has shown that Algeria provides transport subsidies in the range of USD 12.5 million per year to ensure that subsidized commodities reach communities in the country’s southern regions. This has created a cross-border smuggling economy, estimated at around USD 50 million with communities in northern Mali. The fiscal cost of food and energy subsidies from the government of Libya before the current crisis amounted to USD 11.5 billion a year (equivalent to nearly 14% of Libya’s GDP); smuggling of licit commodities from Libya alone has been estimated at USD 4 billion per year (Reitano and Shaw, 2014). In the Sahel and Africa, active networks of informal cross-border trade have facilitated the growth of more damaging criminal cross-border trafficking. Local border populations – who depend on, protect and sustain smuggling networks – do not distinguish between commodities with varying degrees of illegality (OECD/SWAC, 2014).

  This has implications for those seeking to combat illicit trade. Strengthening lengthy and porous borders requires overcoming the entrenched nature and legitimacy of cross-border informal trade, and accounting for the livelihoods associated with it. Most of the goods available in this region are smuggled commodities; in fact, the communities provide services for traffickers. Successful smugglers and traffickers are seldom stigmatized, and may be lauded by communities where informal trade is the rule, rather than the exception (OECD/SWAC, 2014; Reitano and Shaw, 2014). As seaborne trade has increasingly superseded the need for land-based trade, smuggling and trafficking of increasingly high-value illicit commodities have penetrated the informal economy. Some analysts have argued that the distinction between informal and formal economies is less valid, and that the economy should instead be understood as a series of social networks based around kith and kin (Meagher, 2005). Most transactions in the informal economy – including those supporting illegal activities – are paid in cash or through informal financing mechanisms. Financial services in the AU region are available to a small segment of the population: access to finance averages only 20%, ranging from 6% in Sierra Leone to 51% of the adult population in Cabo Verde (Inter-Governmental Action Group against Money Laundering in West Africa [GIABA], 2014a). Similarly, a large proportion of remittances – which are among the largest contributors to domestic income in most African economies – travel outside of the formal banking system. For example, surveys in Burkina Faso and Senegal revealed that over 60% of the receiving households used informal channels for cross-border remittances (World Bank, 2011), affecting the capacity of the region’s governments to benefit from taxation. At the same time, senders are paying a disproportionate cost for their transactions, owing to two major challenges: the high rates of informality (particularly within the continent) and a regulatory environment favouring monopolies. 

  Most African countries restrict outbound flows of money, unless they are used for trade or being deposited in banking institutions (International Fund for Agricultural Development, n.d.). In West Africa, a single money transfer operator (MTO) handles 70% of official payments. It also has a monopoly on money transfers between banks (Watkins and Quattri, 2014). In Nigeria, a single MTO handles nearly 80% of remittance transfers, valued in excess of USD 20.5 billion per year; it also expects exclusivity and prevents other MTOs from entering into agreements with banks disbursing remittances. Since banks are the only entities allowed receiving and distributing money transfers, a small group of financial institutions end up handling all official flows, relying on fewer than four MTOs (International Fund for Agricultural Development, n.d.)

  WHY DO WE NEED EFFECTIVE LEADERSHIP TO ADDRESS THE COMPLEX PROBLEM

  WHAT IS THE COMPLEX PROBLEMS AREA?

  1.       Africa is losing 88.6 Billion in Dollars which 3.7 % per year, According to The Tax Justice Network Africa (TJNA) and the recent data from the United Nation’s conference on Trade and Development’s Economic Development in Africa 2020

  IMPLICATIONS TO SERVICE DELIVERY:

  This is more than: 

  ·         Health Financial gap per year

  ·         Twice the need of education each year

  ·         Road maintenance, and Constructions

  ·         Youth Employment 

  ·         Rural Development

  ·         Inflation of Price and stability

            African’s Population

  ·         We have 1.3 Billion People across 55 Countries

  2.       Sani Abacha looted wealth

  ·         Sani Abacha looted 1.3 Billon Dollars

  ·         2 Billion of criminal money was recovered by EFCC

  ·         Stealing of 65 Billion of oil revenue every year

  ·         Embezzlement

  ·         Market Abuses and insider dealings or fraud

  ·         Mis-invoicing

  ·         Tax avoiding  and mispricing

  3.       Central Bank of Nigeria (CBN)

           How can they handle Illicit Financial Flows and Financial Crime?

  ·         Investigations of Compliance and regulations

  ·         Clean up their Balance Sheets

  ·         Improve on Exchange rate because 1000 Naira in a Dollar

  ·         Addressing Debit of 87 Trillion Dollars borrows from external loans

  ·         Monitoring The Economy

  ·         Physical and Monitoring of Banks

  ·         Maintaining the independence of CBN from Political dedicates 

  ·         Tax evaluations

  THE NEED FOR EFFECTIVE LEADERSHIP

  1.       The Political Will

  2.       Effectiveness of Leadership in handling these issues

  ·         Policy- Leaders deals with Policy Matters

  ·         Technical Capacity-Technology, AI, internet fraud, Computer fraud etc.

  ·         Effective Communication

  ·         Building of confidence

  ·         Building and re-enforcing the culture of compliance

  Governance and democracy

  Th5 ways to help prevent financial crime prevent financial crime

  Organizations from all industries from around the world are facing ever-increasing challenges to prevent financial crime and other fraudulent actions taking place. Fraudsters are constantly evolving their techniques and target the weaknesses in processes.

  One process weakness could affect an entire industry, especially if it were a bank or some other mainstream financial institution. Therefore, it’s important for organization’s to stay ever vigilant and stay up to date with ever-changing money laundering and regulatory developments, which are usually implemented because of an organization’s failure to prevent financial crime.

  There is no one method of preventing financial crime but rather a mix of actions that work in harmony to combat fraudsters, these include the following.

  1. Implement strong internal controls

  Establishing strong internal controls is crucial in preventing financial crime. This can include procedures to verify the identity of customers, monitor transactions for suspicious activity, and detect and report any unusual or suspicious transactions.

  2. Conduct regular risk assessments

  Regular risk assessments can help organization’s identify potential areas of vulnerability to financial crime and take appropriate measures to prevent it. This can include identifying high-risk clients or business partners and implementing extra controls and due diligence measures. 

  3. Provide financial crime prevention training and education

  Training and education are important in preventing financial crime. Employees should be trained on how to identify and report suspicious activity, as well as how to comply with relevant regulations and internal policies. 

  4. Implementing strong KYC, KYB and AML policies

  Implementing strong Know Your Customer (KYC), Know Your Business (KYB), and Anti-Money Laundering (AML) policies is a critical step in preventing financial crime. KYC policies involve verifying the identity of clients and assessing their potential risks to prevent money laundering, terrorist financing, and other illegal activities.

  KYB policies involve verifying the identity and legitimacy of businesses and their ownership structure to prevent fraudulent activities.

  AML policies are designed to prevent the use of financial systems for money laundering and other criminal activities by establishing policies and procedures to detect, prevent, and report suspicious behaviours.

  Strong KYC, KYB, and AML policies can help organisations to identify potential risks and take appropriate measures to prevent financial crime. These policies can also help to protect the organization’s reputation and prevent financial losses from fraud or other illegal activities.

  5. Foster a culture of compliance and heighten its importance

  Fostering a culture of compliance is crucial in preventing financial crime. This involves creating an environment where employees are encouraged to report suspicious activity without fear of retaliation, and where compliance with regulations and internal policies is seen as a priority within all organizations.

  Financial crime prevention will always be a continuous fight

  The steps outlined in this article will help combat financial crime; however there is always the risk that it may happen regardless of your due diligence and processes that you have implemented. It’s important not to sweep any problems under the carpet and hope they go away as with all financial crime problems; they tend to become public.

  It’s good practice to be open and clear about what you do if a breach occurs, such as self-reporting it to the prosecuting authorities (SFO) and the financial regulators (FCA). Although there is no guarantee that there won’t be a punishment, they may be willing to hand out lesser fines to those who are proactively reporting financial crime and are genuinely making efforts to prevent future problems.

  North Row are on hand to help you improve your financial crime prevention processes with our software including KYC, KYB and ID&V, ensuring you are best placed for the continuous fight against financial crime’s 2014 Africa Commission on Drugs (WACD) determined that corruption at the top is facilitating drug trafficking across the subcontinent. It found that traffickers were able to connect easily with people of influence by both creating and using informal social networks to access or co-opt the formal security apparatus where necessary. One key weakness (though by no means restricted to West Africa) appears to be the electoral process. Most African nations have limited or no restrictions on campaign funding and do not possess monitoring mechanisms, making them susceptible to offers of illicit resources (WACD, 2014). Once elected, politicians distribute access to resources based on patronage, rather than development objectives. In certain countries, the levels of capital flight (both from illicit and legitimate resources) are significant.

  African states feature some of the weakest governance indicators in the world. As Table 2.3 shows, most score in the bottom quartile for key indicators such as rule of law, government effectiveness, political stability, accountability and control over corruption (Kaufmann, Kraay and Maastruzzi, 2015). In addition to – or interconnected with – the low governance indicators, AU states are also marred by high levels of corruption.

  Numerous studies (both quantitative and perception-based) have found corruption in almost all facets of private and public life. Ghana was the highest performer on Transparency International’s Transparency Corruption Perceptions Index: it ranked as the eighth least-corrupt country in sub-Saharan Africa – higher than South Africa – but still scored less than one-half of 100 possible points. Nigeria, the region’s largest economy, ranked close to the bottom: it was assessed as the 136th least-corrupt country, scoring only one-quarter of the maximum possible points. The Ibrahim Index on African Governance (IIAG) shows that while most countries in Africa score less than 40% for accountability, the indicators for two-thirds of AU countries are worsening, rather than improving (IIAG, 2014). Citizens experience corruption on all scales: small-scale graft by local officials is almost an alternative form of taxation on the most common forms of civic engagement, such as registering births or deaths, obtaining identification and conducting business (Reitano and Shaw, 2014). At a higher level, the state diverts resources.

  Africa Population 2024

  1,494,988,668

  CSVJSON

  According to the World Population Review

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Note: Score is calculated as per-country compliance against a series of pre-established indicators. Score is the country’s ranking against the 140 countries compared in the report.

Source: World Economic Forum (2014).

The international community plays an important role in signaling acceptable governance standards, and placing bulwarks between criminal associations and governance. The decision to legitimize (or not) an unconstitutional change in government sends an important signal.

Peace and security

Fragility, insecurity and conflict, as well as growing violent extremism, undermine state institutions, set back development progresses and facilitate the growth of criminal economies in the region. Most West African states gained their independence between 1960 and 1975. Since then, a number of protracted, violent conflicts have beset the region, with countries experiencing at least 60 coups and attempted coups, as well as numerous civil wars and insurgencies. Armed rebel and terrorist groups – often enriched by illicit resources – remain active across the region. With the high prevalence of weapons in circulation, used in everything from insurgencies and criminal protection to electoral violence, these threats are proving increasingly difficult to quell.

In the last decade, the nature of conflict in the region has changed. It has evolved from civil wars towards lower level, protracted insurgencies predicated on ethnic or nationalistic grievances, including repeated acts of terrorism against both domestic and foreign targets (Table 2.5).

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