AfricaFocus Bulletin
February 7, 2017 (170207)
(Reposted from sources cited below)

Editor’s Note

In the world of large multinational corporations, secrecy is more
than the rule rather than exception. Despite this reality, there
have been some advances in recent years, including U.S. legislation
and regulations requiring disclosure of payments by U.S. oil, gas,
and mining companies to foreign governments. Last week, the U.S.
Congress revoked this Security and Exchange Commission rule, a year
before it was actually to be implemented. Although comparatively
little noticed in comparison to the tumult around White House
actions, this was an indication that the Republican Congress as well
was determined to reverse even modest steps to fight corporate
corruption and other similar abuses.

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In this context, the continuing Africa-wide campaign to curb some
$70 billion in illicit financial flows from the continent   becomes
both more difficult and even more imperative. A timely new report
just released on January 27 by six civil society organizations lays
out specific steps that African governments can take to “accelerate
the IFF agenda.” The six include five African organizations (Trust
Africa, Tax Justice Network-Africa, the Pan African Lawyers Union,
CRADEC (Cameroon),  CISLAC (Nigeria), and Global Financial Integrity
(Washington, DC).

This AfricaFocus Bulletin contains (1) a brief article on the U.S.
congressional action to revoke the SEC rule on transparency for oil,
gas, and mining companies, and (2) the full text of “Accelerating
the IFF Agenda for African countries.”

For more information on the revocations of the SEC rule, visit
https://thefactcoalition.org/press/news-releases/,
http://www.pwypusa.org/category/press-releases/, and
http://tinyurl.com/ze7rr6k

For previous AfricaFocus Bulletins on illicit financial flows,
corruption, and related issues, see
http://www.africafocus.org/intro-iff.php

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The Trump Election: Intersecting Explanations
http://www.noeasyvictories.org/usa/trump-win-reasons.php

Observations (third installment, Feb 7, 2017)

Since the inauguration of President Donald Trump on January 20, the
news cycle has been driven by the rapid pace of executive orders,
tweets, and, most surprisingly, an unprecedented range of resistance
to the assault on democratic values and rationality by the new
administration. Although the debate about explanations for the Trump
election have faded into the background, they remain highly relevant
for the present and future, for evaluation of his questionable
legitimacy, analysis of both medium-term and long-term strategies
for resistance, and, at a deeper level, as x-rays or CAT scans to
help piece together a deeper analysis of the history and driving
forces underpinning the U.S. and global socioeconomic and political
order.

[Continued at http://www.noeasyvictories.org/usa/explanations.php]

++++++++++++++++++++++end editor’s note+++++++++++++++++

Following House, Senate Axes SEC Oil, Mining Payments Rule Bloomberg
BNA, February 6, 2017

By Rob Tricchinelli

http://tinyurl.com/zxm2bs6

The Senate voted early Feb. 3 to revoke an SEC rule requiring oil,
gas and mining companies to disclose more about their operations,
two days after related House action. President Donald Trump can now
sign the measure, which would negate the long-embattled Securities
and Exchange Commission rule mandated by the 2010 Dodd-Frank Act and
designed to fight overseas corruption.

It was set to take effect in 2018 and force companies like Chevron
Corp. to reveal payments to governments tied to resource
development.

Republican lawmakers are using the Congressional Review Act to kill
the rule, which skirts the procedural requirement for 60 Senate
votes. The vote broke along party lines, 52-47, with Sen. Ed Markey
(D-Mass.) not voting.

Dodd-Frank Mandate

While the CRA action negates the SEC rule, it doesn’t strip away the
Dodd-Frank Act provision mandating the regulation. This means the
SEC is still technically required to craft the measure, even though
a Republican-led commission is unlikely to act and Republican
lawmakers are seeking to repeal that part of Dodd-Frank.

Several Republican lawmakers said they want the SEC to craft a
better rule. “It’s time to go back to the drawing board and redo
it,” Rep. Bill Huizenga (R-Mich.), who sponsored the effort in the
House, told Bloomberg BNA in a brief interview. Democrats slammed
the move. “This bill puts Big Oil and its cronies ahead of
transparency and accountability, and ought to be called the
Kleptocrat Relief Act,” Sen. Sherrod Brown (D-Ohio) said in a news
release.

Try, Try Again

The rule has a tortured history. The SEC’s first attempt was struck
down in a lawsuit by the American Petroleum Institute. The second
attempt was prompted by a different lawsuit alleging the agency was
dragging its feet in reproposing it. Oil, gas and mineral companies
argue that the rule’s compliance costs, which the SEC estimates to
run in the tens or hundreds of millions industry-wide, outweigh its
benefits. The rule’s supporters counter that similar rules are
already in effect in other jurisdictions without hampering the
industry. They also say disclosures would reduce graft in mineral-
rich countries whose residents have low standards of living.

“It is alarming that lawmakers would move to undermine American
efforts to combat violent extremism abroad by rolling back this
anti-corruption measure, which protects American companies and
democratic interests around the globe,” Clark Gascoigne, deputy
director of the Financial Accountability and Corporate Transparency
Coalition, said in a news release.

To contact the reporter on this story: Rob Tricchinelli in
Washington atrtricchinelli@bna.com

******************************************************

Accelerating the IFF Agenda for African Countries

January 2017

http://tinyurl.com/jf6ro5n

Introduction

Illicit financial flows (IFFs) are a large and growing problem for
the African continent, with upwards of $70 billion in IFFs leaving
the continent annually. African governments, intergovernmental
organizations, industry, and civil society have come to understand
the severity of the problem over the past few years.

The following list of actions are meant to address some of the first
steps in addressing IFFs. These actions are foundational, involving
measures that can either be undertaken more quickly and easily in
some countries where some of the processes and commitments may
already be underway or measures that lay the groundwork for later
reforms. The result is an Accelerated IFF Agenda that governments
can use as a place to begin their work to tackle IFFs in their own
countries, leading to greater domestic resource mobilization and
growth, resources which will be critical in making progress on the
Sustainable Development Goals of the 2030 Agenda for Sustainable
Development, and the African Union’s Agenda 2063, the Addis Tax
Initiative, and the Africa Mining Vision.

In considering the items on the Accelerated IFF Agenda, it is
important to remember two things. The first is that this should not
be seen as an all-or-nothing agenda. Each of these measures is
important in its own right and can be implemented independently of
others, and governments may want to consider ways to phase in
certain actions. For example, requiring country-by-country reporting
of all multinational companies operating in the country is one
option, but a government could instead require it only of companies
operating in the extractive industries or in construction. Second,
public involvement in helping achieve many of these aims can be of
great benefit. For example, a team of computer science students at a
university might be able to assist in the creation of an online
registry for corporations. Civil society organizations, academics,
the country’s youth, and other parts of society want to help tackle
IFFs for the good of their countries and their futures. Working with
them can multiply the effectiveness of many of the government’s
efforts, as well as building confidence with donors, investors, and
citizens.

The Accelerated IFF Agenda

Below is a list of fourteen measures governments can take in the
immediate term to catalyze their efforts to combat IFFs. Brief
explanations of each measure are included in the pages that follow.

Create Governmental IFF Policy

1. Establish Multi-Agency Units within Governments to Address IFFs

2. Include IFF Accountability within the African Peer Review
Mechanism

Promote Financial Transparency

3. Establish or Enhance Online Corporate Registries, Make
Information Publicly Available, and Require Beneficial Ownership
Information as Part of the Registration Process

4. Adopt the Open Contracting Data Standard

5. Require Disclosure of Beneficial Ownership Information from all
Government Contract Bidders

6. Require Disclosure of Beneficial Ownership Information in
Political Asset Declarations

7. Establish Government/Independent Measurement Mechanisms for
Extracted Natural Resources

Increase Enforcement Efforts and Powers

8. Adopt a Law Clearly Prohibiting Trade Misinvoicing

9. Establish Specialized Asset Forfeiture and Recovery Units and/or
Advocate for the Creation of a Special Office of Asset Recovery
within the African Union

Tackle Tax Evasion and Avoidance

10. Join African Tax Information Sharing Networks

11. Establish Transfer Pricing Units within Tax Authorities

12. Require Public Country-by-Country Reporting by Multinationals

Prevent Financial Crime

13. Mandate Rigorous Customer Due Diligence and Suspicious Activity
Reporting Programs within Banks

14. Empower Strong and Effective Financial Intelligence Units (and
create them if not yet established)

Several of the actions identified above require that certain
information be made available to the public. Countries may also want
to consider adopting a more wide-ranging law, regulation or policy
that provides the public with greater access to government
information and data, often called freedom of information
provisions.

Additional Detail for Accelerating the IFF Agenda for African
Countries

Create Governmental IFF Policy

1. Establish Multi-Agency Units within Governments to Address IFFs

IFFs affect all aspects of a country’s economy, therefore approaches
to curtailing IFFs must include agencies from across government,
enabling agencies to come together to coordinate and to develop
policy.

Governments should consider establishing multi-agency units that
include officials from various ministries or departments who
specialize in:

*  Financial intelligence and bank supervision

*  Import administration

*  Export administration

*  Transfer pricing

*  Income tax

*  Natural resource exploitation

*  National criminal investigations

*  National criminal prosecutions

*  Anti-corruption

To ensure that these multi-agency units can function effectively,
countries should ensure that laws are in place to allow officials
from different agencies to share information within these multi-
agency units. Some African countries have begun to establish multi-
agency units, but they are often more narrowly focused on, for
example, corruption or ‘illicit finance’ as described in the US-
Africa Partnership on Illicit Finance. While we welcome the
initiative to build on these existing multi-agency endeavors, we
believe it is imperative that the scope of work for the units be
broad enough to encompass the entirety of the IFF challenge.

2. Include IFF Accountability within the African Peer Review
Mechanism and Open Government Partnership Commitments

Countries should call on the African Union to include IFF-related
questions on the African Peer Review Mechanism questionnaire. As a
starting point, questions on this questionnaire could address each
of the policy areas recommended in this document. In addition,
African countries that are part of the Open Government Partnership
(OGP) should include in their OGP National Action Plans commitments
to carry out the action items identified in this document.

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa,  which were endorsed by the African
Union in January 2015. The High Level Panel on Illicit Financial
Flows from Africa is now a joint initiative of the African Union and
the UN Economic Commission for Africa.

Promote Financial Transparency

3. Establish or Enhance Online Corporate Registries, Make
Information Publicly Available, and Require Beneficial Ownership
Information as Part of the Registration Process

Countries could look to legislation and regulation from early
adopters like the United Kingdom and the Ukraine for models on how
to implement these measures. In addition, a number of other
countries have committed to establishing public registers or
exploring their establishment and may soon have legislation that
could be referenced in developing domestic measures. These countries
include Bulgaria, France, Ghana, Indonesia, Jordan, Kenya,
Netherlands, New Zealand, and Nigeria.

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa, and the Human Rights Development
Initiative, which was appointed by the African Union’s African
Commission on Human & Peoples’ Rights to conduct a study on the
human rights implications of IFFs.

4. Adopt the Open Contracting Data Standard

The Open Contracting Data Standard (OCDS) is a common data model
that establishes a framework to enable governments to publish
shareable, reusable, and machine-readable procurement data that is
publicly accessible. While many countries have started to publish
PDFs of procurement contracts, information provided in PDF form is
of extremely limited utility. Adoption of a global data standard
like the OCDS is not just an exercise in publishing procurement
information. It enables governments to conduct assessments on the
fitness of their procurement systems by examining the experiences
and outcomes of other countries using the same standard. In
addition, the OCDS is a mature standard, offering practical tools,
expertise, and support to assist governments in adoption of the
standard.

The Contracting 5—Colombia, France, Mexico, Ukraine, and the UK—are
implementing the OCDS, and Cote d’Ivoire, Ghana, Kenya, Malawi,
Nigeria, Sierra Leone, and Tunisia have included open contracting in
their National Action Plans for the Open Government Partnership.
Uganda developed an open contracting platform, the Government
Procurement Portal (GPP), and continues to work to improve the
system.

This action would implement previous recommendations on open
contracting and open spending made by the UN Economic Commission for
Africa’s High Level Panel on Illicit Financial Flows from Africa,
and the Pan African Lawyers’ Union.

5. Require Disclosure of Beneficial Ownership Information from all
Government Contract Bidders

Currently, the Open Data Contracting Standard does not collect
information on beneficial ownership. To fill this gap, countries
should require beneficial ownership disclosures for all bidders for
and recipients of government contracts to help prevent sham bidding,
bidding by persons barred from government procurement for past
actions, and other forms of corruption in bidding processes. Such
policies are already in place in Slovakia and could serve as a study
for countries wishing to implement this recommendation.

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa.

6. Require Disclosure of Beneficial Ownership Information in
Political Asset Declarations

Conflicts of interest may not be readily identifiable in asset
declarations unless the beneficial owners of the entities included
are known. Adding this detail to the asset declaration requirements
can help identify where potential conflicts may arise in the
individual’s political work. The Ukraine has passed legislation
requiring the inclusion of beneficial ownership of property
information on its asset declarations, and Liberia has included
making use of beneficial ownership information on asset declarations
an element of its National Action Plan for the US-Africa Partnership
on Illicit Finance.

7. Establish Government/Independent Measurement Mechanisms for
Extracted Natural Resources

Governments should independently determine or verify the actual
volume of natural resources being extracted from the ground by
mining and oil companies and not just rely on the volumes reported
by the companies. Without independent verification of the volume of
natural resources being extracted, it is impossible to determine if
companies have in fact paid the correct amount to the government
under their extraction contracts.

Zambia has implemented the Mineral Value Chain Monitoring Project
(MCVMP), which aims to independently monitor and facilitate the
exploration and exploitation of mining and mineral value chains in
the country. International support has contributed to the MCVMP
effort in Zambia, including the Government of Norway, the European
Union, and the Public Finance Management Reform programme. 8 Where
the African Mining Vision and/or the African Mineral Governance
Framework call for similar verification of the volume of minerals
extracted, this action item could be implemented through those
initiatives. This action builds on the strength of the OCDS and the
Extractive Industries Transparency Initiative (EITI), which track
agreements and payments between governments and companies.

Increase Enforcement Efforts and Powers

8. Adopt a Law Clearly Prohibiting Trade Misinvoicing

Trade misinvoicing is the manipulation of the price, value, or
quantity of a good on an international invoice in order to avoid
taxes, move money, or evade capital controls. Of measurable IFFs,
trade misinvoicing has historically represented and continues to
represent the largest portion of IFFs. Though trade misinvoicing is
a relatively simple technique to use, it is exceedingly difficult
for government officials to identify. Moreover, the widespread,
routine, and customary nature of its use makes enacting a law
prohibiting the conduct essential in order to put business persons
on notice and to empower prosecutors to prosecute the conduct when
it is identified.

Example of a model law criminalizing trade misinvoicing:

Whoever, in relation to the importation or exportation of goods or
in relation to the trade in services or intangible property,
deliberately misstates, manipulates, falsifies, or omits a price,
quantity, volume, grade, or other material aspect of an invoice for
the purpose of (i) evading or avoiding VAT taxes, customs duties,
income taxes, or any other form of tax or revenue collected by the
Government; (ii) obtaining a tax benefit, export subsidy, or other
benefit provided by the Government; or (iii) evading or avoiding
[capital or foreign exchange controls]; shall be subject to a civil
or criminal fine of up to [specific amount] [or imprisoned for up to
[x] year[s], or both].

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa.

9. Establish Specialized Asset Forfeiture and Recovery Units and/or
Advocate for the Creation of a Special Office of Asset Recovery
within the African Union

Asset forfeiture and recovery efforts deprive all types of criminals
of the proceeds of their crime, providing powerful disincentives for
crime in the first place. However, in order to be effective
disincentives, these efforts must be consistent and efficient.
Because they involve funds found in other jurisdictions, asset
recovery efforts require specialized knowledge of foreign legal
systems and mutual legal assistance treaties. Establishing units
specializing in asset forfeiture and recovery ensures that all
criminals face the potential for the loss of their criminal proceeds
and improves the odds of a country recovering the funds because of
the increased capacity and expertise that these units develop over
time.

Another approach would be to advocate for the creation of a special
office of asset recovery within the African Union. This office could
assist and facilitate asset repatriation requests among states,
including the maintenance of a public list of funds requested for
return and the status of such requests. Taking this approach could
contribute to the implementation of the recommendation by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa for the African Union to lead an effort
to establish a global governance framework for asset freezing and
repatriation. 10 The African Development Bank has also committed to
supporting a regional network on recovery of stolen assets in its
recently adopted Bank Group Policy on the Prevention of Illicit
Financial Flows. In addition, collaborative asset recovery
approaches already exist. For example, Asset Recovery Inter-Agency
Networks (ARIN) have been initiated in Southern Africa, East Africa,
and West Africa.

Tackle Tax Evasion and Avoidance

10. Join African Tax Information Sharing Networks

Several African countries have signed up to the OECD-led Common
Reporting Standard (CRS) for the international exchange of
information about bank accounts held by citizens abroad in an effort
to capture lost tax revenue. Access to this information is critical
in identifying and pursuing cases of individual tax evasion because
without the information provided by the foreign countries, the home
country has no way of knowing which citizens hold taxable bank
accounts abroad and must instead rely upon self-reporting by
individuals.

However, some African countries may have difficulty initially
accessing the broader international system for automatic exchange of
tax information because of how the system has been set up (with
little input from developing countries). Despite this, the
international framework could readily be adapted to establish
exchange arrangements among developing countries, especially within
regions. In fact, the African Tax Administration Forum (ATAF) is
currently engaged in a pilot program facilitating automatic exchange
of tax information among a number of African countries. In addition
to enabling African countries to get this critical information
sooner than may be available from developed countries, it offers
countries the opportunity to demonstrate capacity to perform within
these arrangements, making the country a more attractive potential
exchange partner for developed countries down the line.

11. Establish Transfer Pricing Units within Tax Authorities

Financial arrangements within corporate groups or among related
entities are nearly impossible to observe from the outside and
consequently are of high risk for manipulation. For this reason,
transactions among these parties, referred to as transfer pricing,
warrant special attention. Given the complexity of these
arrangements and transactions, it has been found that forming units
with highly trained officials to monitor these types of transactions
yields the most consistent and effective results for tax
administrations.

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa, and the Human Rights Development
Initiative.

12. Require Public Country-by-Country Reporting by Multinationals

Public country-by-country reporting (CBCR) helps identify where
transfer pricing investigations should focus. By requiring companies
to provide basic financial information for entire corporate groups,
disaggregated by country, tax administrations are better able to
identify the risk of potential transfer pricing abuse and even
identify jurisdictions of concern to help establish more sensitive
risk management frameworks within tax administrations.

African countries should require foreign multinational corporations
(MNCs) operating in their country to provide their country-by-
country reports with their local tax returns and encourage those
MNCs to make the information publicly available. Further, African
countries should require MNCs headquartered in their country to
prepare and publish country-by-country reports.

This action would implement previous recommendations made by the UN
Economic Commission for Africa’s High Level Panel on Illicit
Financial Flows from Africa. 12

Prevent Financial Crime

13. Mandate Rigorous Customer Due Diligence and Suspicious Activity
Reporting Programs within Banks

The Financial Action Task Force (FATF) has set the international
standards for customer due diligence and suspicious activity
reporting in their FATF Recommendations 2012 standard,
Recommendations 10 and 20, respectively. Countries can look to their
FATF-Style Regional Body (FSRB) for assistance in implementing and
strengthening their laws and regulations in this area. This action
would implement previous recommendations made by the UN Economic
Commission for Africa’s High Level Panel on Illicit Financial Flows
from Africa, and the Human Rights Development Initiative. 14.
Empower Strong and Effective Financial Intelligence Units (and
create them if not yet established)

Financial intelligence units (FIUs) are bodies that collect and, if
given the power, coordinate intelligence on financial crime that
results in IFFs. Creating FIUs where none exist, and giving them
strong powers of coordination and information collation from
different arms of government (possibly in a lead role in a Multi-
Agency IFF Unit (see point 1 above)), is critical to organizing and
operationalizing counter-IFF measures. Additionally, connecting to
the international network of FIUs, the Egmont Group, can help
facilitate cooperation among FIUs of different countries. While most
African countries do have FIUs, only twenty-two African countries
have FIUs that are members of the Egmont Group.

About

This document is the result of consultations among experts on
various elements of illicit financial flows, including:

* Raymond Baker – Global Financial Integrity, Washington, D.C., USA

* Jason Braganza – Tax Justice Network-Africa (TJN-A), Nairobi,
Kenya

* Liz Confalone – Global Financial Integrity, Washington, D.C., USA

* Donald Deya – Pan African Lawyers’ Union (PALU), Arusha, Tanzania

* Donald Ideh – TrustAfrica, Abuja, Nigeria

* Heather Lowe – Global Financial Integrity, Washington, D.C., USA

* Jean Mballa Mballa РCentre R̩gional Africain pour le
Développement Endogène et Communautaire (CRADEC), Yaoundé, Cameroon

*  Auwal Ibrahim Musa (Rafsanjani) – Civil Society Legislative
Center (CISLAC), Abuja, Nigeria

*  Crystal Simeoni – Tax Justice Network-Africa (TJN-A), Nairobi,
Kenya

We wish to thank the Swedish International Development Agency for
their support of this project.

*****************************************************

AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

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