Seth Emmanuel Terkper
Seth Emmanuel Terkper: Finance Minister

In 10 years between 2004 and 2013, Ghana has lost a cumulative $4 billion to illicit financial flows.

A report issued last week by the Global Financial Integrity (GFI), a Washington DC-based research and advisory organization found that every year $401 million leave the shores of Ghana illicitly.

The report found that global volumes of illicit financial flows (IFFs) reached $1.1 trillion in 2013 and the developing world lost $7.8 trillion between 2004 and 2013, the last year for which data are available.

According to GFI it measures illicit financial outflows using two sources: 1) deliberate trade misinvoicing (gross excluding reversals or GER) and 2) leakages in the balance of payments (hot money narrow or HMN).

“Trade misinvoicing is the primary measurable means for shifting funds out of developing countries illicitly.

Over the ten-year time period of this study, an average of 83.4 per cent of illicit financial outflows were due to the fraudulent misinvoicing of trade,” it says.

In response to questions about Ghana, a co-author of the report, Joseph Spanjers noted that the estimates presented in the report about Ghana reflect only outflows due to leakages in the balance of payments – “this is essentially money that has disappeared from the economy. This could be due to wire transfers by certain banks and foreign exchange brokers that are not registered with the Central Bank or another regulatory agency, for example,” he told

While the report found that trade misinvoicing is the primary measurable means for shifting funds out of developing countries illicitly, in the case of Ghana, the authors found no outflows due to trade misinvoicing.

However, Spanjers was quick to remark, “They certainly would have been if Ghana reported bilateral trade data to the IMF. Unfortunately, Ghana is among the countries that do not file this data, though several other West African countries do, including Cote d’Ivoire, Senegal, and Togo. Ghana should join them.

There is no reason for the public not to know the destination and origin breakdown of their country’s exports and imports (through officially reported data to the IMF),” he added.

Former Finance Minister, Dr. Kwabena Duffuor told Parliament Wednesday November 16, 2011 that Ghana loses $36 million through transfer pricing in the mining industry alone. Figures for other sectors were not available.

In 2012, the country has passed the Transfer Pricing Regulation 2012 (L.I.2188). The L.I. 2188 deals with the application of the arms length principle in transactions between connected persons and also information, documentation and penalties that will apply. The law gives greater clarity to the arms length principle contained in the Internal Revenue Act of 2000 (Act 592). It also appears to give discretionary powers to the Commissioner General of the Ghana Revenue Authority in the assessment of transactions subject to transfer pricing adjustments.

Speaking to journalists in Accra Monday November 16, 2015, Dr. Edward Larbi Siaw, the Tax Policy Advisor of the Ministry of Finance said the government is auditing some multinationals in relation to transfer pricing. He however added that, the process would be long and he did not mention any names.

However, some sources familiar with the audit tell that the audit has been completed and some companies have been found culpable but the government is reluctant to publicize the list. The sources however, did not say why.

Meanwhile Ghana is said to have weak laws in the area of checking illicit financial flows.

Ghana’s financial secrecy is rated 67 per cent because it has the tendency to facilitate tax evasion, money laundering and illicit financial transfers.

The Tax Justice Network, an organisation concerned with tax havens and tax evasion, ranked Ghana 48th out of 92 territories, in its 2015 Financial Secrecy Index which ranks jurisdictions according to their propensity to facilitate huge illicit financial flows.

Ghana’s rating is not too far behind Switzerland, which leads the ranking in financial secrecy with 73 per cent, maintaining the popular perception of Swiss banks as the most financially secretive and the most preferred destination for capital flight.

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