Report on the Capacity Building Workshop on Illicit Financial Flows for the Portfolio Committee on Budget, Finance and Economic Development

  1. Introduction

Illicit Financial Flows (IFFs) are illegal movements of money from one country to the other. Global Financial Integrity classifies this movement as an illicit flow when funds are illegally earned, transferred, and/or utilized across an international border. The concept of IFFs can be rather complex and daunting to many thus the need to build the capacity of the Parliamentary Portfolio Committee on Budget, Finance and Economic Development for them to understand better what IFFs are. For this portfolio committee to be able to exercise their parliamentary responsibility of oversight on budget, finance and economic development they need to better understand the concept and how best they can curb them.


  1. Welcome Remarks 

Between 2004 and 2013, Zimbabwe lost more than 200 million to externalisation, tax evasion, corruption and creative accounts; this according to Dr Nyashanu, the Chairperson of the Portfolio Committee on Budget, Finance and Economic Development. He called IFFs, the enemy of financial progress and said the executive must adhere to the principal elements in financial management, Section 198 of the Constitution of Zimbabwe. He said the MPs must address all forms of Illicit Financial Flows through gaps in legislation through the Public, Financial Management Bill. Lastly, he called on MPs to invest their energies into the series of workshops facilitated by Silveira House in partnership with the Parliament of Zimbabwe. 


  1. Workshop Objective: 

To capacitate the Portfolio Committee on Budget, Finance and Economic Development on the effects of illicit financial flows in financial development 


  1. Facilitators 

Fr Charles Chilufya SJ- Jesuit Justice and Ecology Network Africa (JENA) 

Fr Fernando Saldivar SJ- (JENA) 


  1. Workshop Participants 

The workshop was attended by the Chairperson of the Portfolio Committee on Budget, Finance and Economic Development, Dr Nyashanu, the Director of Silveira House Fr Moyo, members of the parliamentary Portfolio Committee on Budget, Finance and Economic Development, representatives from the Ministry of Finance and Economic Development, a representative from AFRODAD and Parliament of Zimbabwe Staff. 






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  1. Training Methodology 

Facilitators made use of powerpoint presentations but made sure sessions were interactive with the participants. 


  1. Overview of Illicit Financial Flows- Fr Fernando Saldivar

IFFs are a global problem which affect different countries differently, but the solution is not a one size fits all. One of the MDGs targets is to reduce IFFs and organised crime by 2030.  According to the International Monetary Fund (IMF), IFFS are broad cross border economic financial transactions, that is money illegally earned; corruption; tax evasion; funds that are the result of illegal acts (drug trafficking, professional wildlife poaching); and funds used for illegal purposes. But not all illicit flows are illegal which is problematic. IFFs do not agree on what is legal or illegal therefore, conditions must determine what is legal and what is not. For example, tax evasion is debated on whether it is an IFF or not. 


Definition of Terms 

Tax Evasion- activities which are intentionally illegal, there is no attempt to work within the confines of tax laws; aim is to hide revenue. 

Tax avoidance- Schemes which are illegitimate but not necessarily illegal; Stretching tax laws; looking for loopholes and grey areas. 

Licit Tax Savings- Businesses lower tax by finding ways to; for example, philanthropic work lower taxes on business. 


Global Dimension on IFFs 

IFFs represent a significant leakage of finances. 1.3 trillion dollars over 20-25 years left the continent through IFFs. This money could have gone to development. This has a negative impact on the ability for states to develop especially during COVID. There is a substantial overlap of mechanisms:

  1. Transparency, openness will cast a light on IFFs because they succeed in secret and in shadows. It’s a shadow world that wants to survive outside of the bright light. 
  1. Everything is tied to taxation and revenue and is a result of tax avoidance by large companies.  


Base Erosion and Profit Sharing (BEPS) –When tax avoidance is manipulated to reduce the tax that corporations are supposed to pay. BEPS happens when there is the use of aggressive tax transfer pricing. 


Transfer Price is the price for labour, goods and service across a large product spectrum, when a large corporation is doing business with itself. Corporations manipulate this by saying they are realising gains in ways that do not happen in the market, because if they show the actual pricing, they will end up paying higher taxes. Multinational corporations manipulate pricing by charging or reporting artificially low pricing and profits, for example the bulk of profits in cocoa in Ivory Coast are manipulated through the Cayman Islands and Luxembourg which are tax evasion districts. This is the heart of BEPS.






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