Every year, an estimated US$88.6 billion leaves Africa in illicit capital flight. This grand larceny is facilitated by some of the world’s biggest accounting and consulting firms, whose executives know how to remain just within the law. But it is possible to bring those involved to book and recover stolen national assets. Africa should do exactly that.
Criminal authorities globally have struggled to bring enforcement actions against state actors that steal from their own people. Although regulatory and anti-money laundering regimes have helped in certain instances, clever advisers are constantly finding ways to circumvent legal and regulatory frameworks, while remaining within the boundaries of what is technically legal.
At issue is a key question: how can major auditing and advisory firms and financial institutions be made more accountable? They are very careful to always act within the letter of the law, but their actions raise questions about their business practices, whether there could be conflicts of interest, and the extent to which some actions could be viewed as violating the spirit, if not the letter of the law.
Although regulatory and anti-money laundering regimes have helped in certain instances, loopholes remain. For example, the UK’s competition regulator, the Competition and Markets Authority, proposed that the ‘Big Four’ accountancy firms’ auditing divisions function more independently from their consulting and tax services; the recommendations did not call for their break-up.
The report and proposals came on the heels of a number of scandals that rocked various accounting firms. Government actions to follow up have, in the view of some, not gone far enough.
While reform is necessary, concurrently there should be enforcement claims. Many argue that as well as the principals, their agents, consultancy firms and financial institutions should be pursued for the recovery of stolen assets. Corrupt leaders and other influential figures have been and are pursued to recover desperately needed public resources.
It is clear that those who have gained from corruption need help in carrying out the theft of their ill-gotten gains and, importantly, in squirrelling them away in overseas jurisdictions, often using ‘legal’ structures.
It is also clear that world-class experts within advisory firms should often be able to identify corrupt transactions being conducted by the principals behind the corruption. So why should they not be subject to enforcement actions?
The short answer is that they should be. Benefits would include helping to clean up large-scale financial transactions, keeping large amounts of money onshore and in national coffers so that countries benefit, and reducing the opportunity for political elites to steal with both ease and impunity. Pursuing adviser-enablers, where appropriate, would serve as an important deterrent to grand corruption.