Fight against illicit financial flows

Illicit financial flows (IFFs) are commonly defined as money illegally earned, transferred or used which stems from corruption and commercial activities, including money laundering, embezzlement and tax evasion, and crimes such as drug and human trafficking. Switzerland has repeatedly expressed its commitment to tackling the issue of illicit financial flows. 

Although IFFs affect all countries, they have a particularly devastating impact on developing countries. Every year huge sums of money are transferred out of developing countries, eroding their ability to generate higher revenues, including tax revenues, and thus to finance their development. While the enormous sums involved substantially exceed the value of official development assistance, estimates of the scale of illicit flows of money from developing countries are not necessarily reliable. However, the 2015 Report of the High Level Panel on Illicit Financial Flows from Africa estimated that the continent lost over USD 50 billion annually as a result of illicit financial flows. It also claimed that commercial activities by multinationals, including aggressively avoiding tax and shifting profits, cost African countries some USD 32.5 billion.

In adopting the 2030 Agenda for Sustainable Development and the 2015 Addis Ababa Action Agenda for financing sustainable development, the international community has acknowledged the scale of IFFs and their adverse impact on developing countries. The international community is therefore committed to reducing IFFs by 2030 and building the capacity of developing countries to mobilise resources at national level, including raising tax revenues. 

Action by the Federal Council

In its report of 12 October 2016 on illicit financial flows from developing countries, the Federal Council presented its understanding and a thorough analysis of the issue, covering the many and varied factors underlying IFFs. According to the Federal Council, IFFs primarily concern international border-crossing funds which are associated with crime, corruption, money laundering, the financing of terrorism and tax avoidance and evasion.

Federal Council report: Illicit financial flows from developing countries, 12 October 2016

Meanwhile, the Federal Council has on numerous occasions reaffirmed its commitment to combating IFFs, both internationally and within Switzerland. In line with international discussions on the topic, it recognises not only the importance of the national legal framework in curtailing inflows of undesirable funds but also the significant role of international cooperation on the ground. 

In cooperation with the State Secretariat for Economic Affairs (SECO), the SDC has defined five priority areas for action:

  • Minimising the risk of IFFs in the commodities sector
  • Improving access to financial services and remittances
  • Combating tax evasion and aggressive tax avoidance practices
  • Combating transnational corruption and money laundering
  • Recovering illicitly acquired assets

Specific measures for repatriating stolen assets

Corruption and transfers of assets abroad pose major challenges to developing countries. Switzerland is therefore working in partnership with various international organisations that have expertise in this field. Along with other donors, Switzerland supports the Basel-based International Centre for Asset Recovery (ICAR) and the UN and World Bank Stolen Asset Recovery Initiative (StAR). The ICAR and StAR advise and assist countries whose funds have been stolen and deposited in offshore financial centres. The SDC is also a member of the U4 Anti-Corruption Resource Centre, based in Norway, which conducts research into the links between corruption and development and provides targeted support to development agencies on the ground.

By lending their expertise and coordinated assistance, development agencies and international organisations help to establish anti-corruption strategies and trace, confiscate and repatriate assets derived from corruption, money laundering and related offences.