A whole of government approach to tackle illicit financial flows

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Legal Advisor Explaining the Offense to Client Photo: wutzkoh

In 2020 the Uganda Revenue Authority (URA) realized that fraud and corruption were interfering with the taxes collected on infrastructure projects.  In response, it took an unusual step: creating an anti-money laundering unit that would work with tax investigators, the Uganda National Roads Authority (UNRA), the Financial Intelligence Agency (FIA), and the Directorate of Immigration and Passport Control which was established to collect actionable intelligence to investigate and prosecute those involved with money laundering. Through techniques learned at World Bank workshops, investigators have been able to recover roughly USD 10.5 million from the road construction sector alone.  With an additional reduction in reported losses of approximately USD 16.6 million, these taxpayers will now have to pay that amount in the short term.

Similarly, the Kenya Revenue Authority (KRA) has seen a rise in tax evasion investigations and revenue collection following a technical assistance project aimed at increasing their capacity to investigate tax crimes and money laundering. A regular exchange of information between the KRA and the Kenya Financial Reporting Center (FRC) has led to the Kenya Directorate of Public Prosecutions (DPP) successfully prosecuting tax offenses and money laundering cases. As a result, the KRA has reported completing 51 cases, recovering roughly USD 3 million.

These are the outcomes of taking a whole of government approach to tackle illicit financial flows, which the World Bank has supported since 2020, when under the project “Strengthening the Capacity to Investigate Tax Crimes”, a multidisciplinary team of anti-money laundering experts and tax enforcement experts joined forces to create innovative technical assistance products in the areas where tax and money laundering come together. The team has been working with Kenya and Uganda, and more recently also with Tanzania, Rwanda, Burundi, and South Sudan, through the forum for East African Revenue Authorities Commissioners for Tax Investigations (EARACTI) - a committee under the East African Revenue Authorities for Commissioner Generals (EARACG).

To a large degree, the methods used to conceal assets from the prying eye of revenue authorities are the same used to conceal ill-gotten gains. Therefore, the skills of tax investigators and importantly, the information available to revenue authorities can be incredibly useful to support money laundering investigations. And vice versa, anti-money laundering authorities have access to a wide range of information that can be relevant when investigating tax offenses. An additional advantage is that by bringing in the tax investigators, countries can now tax proceeds of crime and support asset recovery efforts.

This approach has been promoted by the Organization of Economic Cooperation and Development (OECD) for some time now, and more recently has been taken up by the Financial Action Task Force (FATF), by including tax authorities as a relevant authority to money laundering investigations and recommending the use of tax liabilities for asset recovery.

This project was possible thanks to the support of the Global Tax Program (GTP), which receives funding from a multi-donor trust fund for the advancement of tax policy. The work has also benefited from knowledge produced by the Stolen Asset Recovery Initiative (StAR) on tax and crime, namely the recently published Taxing Crime: a Whole of Government Approach to Fighting Corruption, Money Laundering and Tax Crimes. The best practices and lessons learned compiled and analyzed in this publication have been rolled out into practical workshops centered around the investigation of tax evasion, fraud, corruption, and money laundering. Participants must “investigate” a case, organize their evidence, and present their cases ready for prosecution.

The team has replicated this approach in other regions. In collaboration with the Asia Pacific Group on Money Laundering, the World Bank delivered a similar workshop to Asian countries at a workshop hosted by the Indian Government in Delhi, this time under a twin project called “East Asia: Building Capacity to investigate Tax Crimes”.  This year we will continue to roll out this approach in East Africa, in coordination with the Vienna Tax Institute, and in Latin America, in coordination with the OECD Tax Inspectors without Boarders and the Financial Action Task Force of Latin America (GAFILAT).

Yara Esquivel

Senior Financial Sector Specialist

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