“Governments should prioritize combating and preventing illicit financial flows”, Deputy Finance Minister tells UN Development Forum

New York, USA - Liberia’s Deputy Finance Minister for Economic Management, Hon. Augustus J. Flomo, has underscored the need for governments around the world to continuously prioritize combating and preventing illicit financial flows.

Presenting the country’s case at the financing for development forum of the World Bank Spring Meeting on Wednesday, April 27, 2022; Minister Flomo stated that combating illicit financial flows remains a critical task for all governments.

Referencing the OECD report which revealed that over US$1.6 trillion get lost to Money laundering each year which affect development across the world, he pointed out that these measures should help countries grow better and avoid money-laundering and financing of terrorists.

On the topic: “BUILDING A FAIR AND EFFECTIVE TAX SYSTEM AND COMBATING ILLICIT FINANCIAL FLOWS”, the deputy finance minister said that a good tax system gets nations to have the necessary assets expected to put resources into development, reduce poverty and transform public administration.

“Now a day, there are many governments, especially those of developing countries and LDCs that are strong in developing their Domestic Revenue Mobilization (DRM) programs meant to help enhance revenue collection; they need more help to get it work.”

According to him, DRM programs have focused on tax expansion initiatives including VAT, excise, property, personal and corporate income taxes.

Hon. Flomo told the panel that more focus has shifted to tax reform programs including administratively reforms through simplifying the tax code, streamlining tax payments through digital means as a result of the COVID-19 pandemic affecting many countries’ economies, especially Developing Countries.

He highlighted that building capacities in the application and use of digital systems, and in revenue administration as well as reducing the size of the informal sector by incentivizing and improving business registration processes, would make it appealing for more businesses to get into the tax net and make the necessary contribution to increasing the fiscal space.

He informed the panel that Liberia has taken concrete measures to include the imposition of excise tax on certain commodities; making provisions for online filing of taxes and the availability of online platforms for payment of taxes that are due; and ensuring some robust enforcement mechanisms by the Revenue Authority that are meant to increase compliance; and a strong anti-smuggling measures implemented by customs to reduce under declaration and false declarations of taxable transactions.

However, he said Raising revenue to generate additional fiscal space for investments in the SDGs comes with a lot of effort that must see all stakeholders as partners as they build.

Hon. Flomo suggested that to address these, developing countries must develop the political will to strongly commit to the fight against corruption by strengthening the legal and regulatory environments and building the capacities of integrity institutions such as Financial Intelligence Units, and audit agencies, that could help with fundamental and important measures like conducting national risks assessment that allow the system to identify and understand risks to money laundering and developed strategic and action plans to mitigate the risks identified.

Others he said should be banks and financial institutions to be held accountable to write Suspicious Transactions Reports (STRs) and Currency Transactions Reports (CTRs) and do those regularly for Law Enforcement to be able to take the necessary actions; Financial Intelligence Units to increase freezing orders on suspicion accounts leading to indictment; and a rigorous monitoring of cross border movements of cash especially in Countries where there are active cross border trading and have a way to control movements.

Moreover, he stated that corruption and money laundering can undermine efforts to increase fiscal space due to leakages in national systems that allow for illicit financial flows.

He called on stakeholders in public and private sectors to continuously work on executing their responsibilities to prevent and fight corruption of all forms including: bribery and money laundering; while at the same time recognizing those frameworks set up by the international architecture.