Illicit Financial Flows, Theft and Gold Smuggling in Africa

Abstract

The article reviews recent research and controversies surrounding the quantificationof illicit financial flows (IFF) in the gold mining sector in Africa. It is argued that themethodology and data used in the quantification of the most frequently analysedtechnique, i.e., export undervaluation, is flawed not only because of the recognizedweakness of the international trade data, but also because it focuses only on one aspectof IFF, and does not attempt to address issues pertaining to actual undermeasurementor misspecification of volumes. It is argued that estimates of tax evasionactivities can only be determined through forensic economic and accountingtechniques, and not through macro-economic or trade data. The last section considersthe increased evidence of gold smuggling to the UAE from various African countries,some of which produce no gold of any significance, but appear to export in very largevolumes; and at unit import values well below world market prices.Keywords: transfer pricing, illicit financial flows, gold mining, smuggling, Africa