Illicit Financial Flows, Theft and Gold Smuggling in Africa

Abstract

The article reviews recent research and controversies surrounding the quantification
of illicit financial flows (IFF) in the gold mining sector in Africa. It is argued that the
methodology and data used in the quantification of the most frequently analysed
technique, i.e., export undervaluation, is flawed not only because of the recognized
weakness of the international trade data, but also because it focuses only on one aspect
of IFF, and does not attempt to address issues pertaining to actual undermeasurement
or misspecification of volumes. It is argued that estimates of tax evasion
activities can only be determined through forensic economic and accounting
techniques, and not through macro-economic or trade data. The last section considers
the 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 large
volumes; and at unit import values well below world market prices.

Keywords: transfer pricing, illicit financial flows, gold mining, smuggling, Africa