Illicit Financial Flows and Domestic Resource Mobilization

Updated on: 2023-09-13 13:20:57

The goal is to promote financial transparency in Uganda by mitigating Illicit Financial Flows and increase domestic resource mobilization for development

The Illicit Financial Flows and Domestic Resource Mobilization project is an international initiative to promote financial transparency being implemented in Uganda, Kenya, Ghana, Belize, and Colombia. The project seeks to address the critical issue of Illicit Financial Flows (IFFs) to increase domestic resource mobilization. Illicit financial flows (IFFs) are illegal movements of money or capital from one country to another. According to the Global Financial Integrity (GFI), this movement is classified as an illicit flow when funds are illegally earned, transferred, and/or utilized across an international border. IFFs, driven by illicit financial activities, tax evasion, and corruption, undermine the economic stability and development potential of a nation.

Illicit financial flows result in a loss of tax revenues often desperately needed to fund public projects or critical public investments. Collectively, for developing countries, this often represents millions of dollars in lost or foregone tax revenues that could have otherwise been collected and used to support sustainable economic growth and job creation, reduce inequality and poverty, and address climate change, among other priorities. With billions of dollars estimated to be illicitly leaving developing countries including Uganda every year, this drain of public resources undermines the efforts of countries to mobilize more domestic resources to meet their development agendas.

While much attention is given to the problem of illicit capital outflows, the problem of illicit financial inflows is also a serious issue. Common reasons for illicit inflows are tax evasion and financing illegal activities of international criminal networks engaged in human trafficking and smuggling of arms, drugs, and valuable minerals. Both illicit outflows and inflows result in the same problem - taxes not being paid to the government.

As part of the international project, ACODE is implementing activities focused on achieving two overarching objectives to promote financial transparency:

Objective 1: Improved corporate and land ownership integrity. The project recognizes the importance of transparency in corporate and land ownership as a cornerstone for curbing IFFs. To achieve this objective, ACODE will: (a) advocate for and support the enactment of beneficial ownership laws, regulations, and a central registry in Uganda; (b) support the implementation and enforcement of these legal frameworks; and (c) foster awareness and capacity-building among relevant stakeholders, including government agencies, legal professionals, civil society, and the media.

Objective 2: Greater natural resource, tax, and trade integrity. Natural resources, taxation, and trade play pivotal roles in a nation's economic prosperity. The project is committed to enhancing this integrity through (a) monitoring the implementation of the Mining and Minerals Act 2022 and the supply chain to strengthen regulatory frameworks and enforcement mechanisms related to natural resource management; (b) conducting tax gap analysis to determine DRM loses and support the development of fair and effective taxation policies, promoting tax compliance, and mitigating tax evasion; (c) training of journalists on investigative techniques to produce analysis of IFFs that enhances trade practices, reduce smuggling, and promote fair trade agreements; and (d) collaborating with international organizations and experts to share best practices.

The project implementation strategy takes a multidimensional approach, involving close collaboration with government agencies, civil society including the media, international partners, and the private sector. The project uses a combination of advocacy, capacity-building, technical assistance, and support policy reform to achieve its objectives.

The project last through December 31st, 2025, anticipates that Uganda will have enhanced transparency and accountability in corporate and land ownership; increased revenue collection through improved tax and trade integrity; and reduced IFFs, leading to greater domestic resource mobilization for national development.