top of page
Jun 20, 20223 min read

Illicit Financial Flows and the Glencore Scandals: A Growing Threat to Resource-Rich Nations

In recent years, the issue of illicit financial flows (IFFs) has gained global attention. These flows, representing cross-border transfers of money that are illegally earned, transferred, or utilised, have a particularly negative impact on developing countries, especially those rich in natural resources. Africa, one of the most resource-rich continents, reportedly loses around $50 billion annually to IFFs – a figure that seems astronomical when compared to the $48 billion it receives in Official Development Assistance (ODA) and to the $54 billion of Foreign Direct Investment (FDI). These figures highlight an urgent need to tackle IFFs to prevent massive capital losses that could otherwise support essential development initiatives.


According to the 2015 report by the High-Level Panel on Illicit Financial Flows from Africa, IFFs have had detrimental effects on the continent, exploiting its wealth of natural resources, and in particular, countries with rich reserves of oil, minerals, and other valuable commodities. Due to a lack of transparency, weak governance, and most importantly, inadequate regulatory frameworks, these countries frequently fall victim to international corporations that exploit these vulnerabilities for profit.


A striking example of corporate misconduct contributing to IFFs is Glencore, a Swiss-British multinational commodity trading and mining company. Glencore has repeatedly faced accusations and legal actions over its operations in countries like Nigeria, Chad, and the Democratic Republic of Congo (DRC). In fact, Glencore’s subsidiary in the UK admitted in a Southwark Crown Court hearing in 2022 to paying over $28 million in bribes to secure preferential access to oil in countries including Cameroon, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan. These actions reportedly took place between 2011 and 2016, resulting in substantial illicit profits for the company, as they received preferential access to oil, including increased cargoes, valuable grades of oil, and preferable dates of delivery. Glencore’s involvement in IFFs and the subsequent investigations reveal a well-structured criminal machine, with targeted interference at specific points in the commodity trade chain and established offshore financial centres (OFCs) to avoid regulatory oversight.


Despite growing awareness of IFFs, there remains a lack of adequate legislative frameworks to combat the issue. Even though there have been some improvements in prosecuting corporations involved in foreign bribery and IFFs, as seen in the recent cases against Glencore, the lack of comprehensive international coordination and enforceable global standards still enable companies to exploit legal loopholes. The OECD Development Assistance Committee (DAC) has highlighted the need for countries to implement stronger regulations and pursue initiatives to repatriate illicit funds. This includes greater transparency in financial reporting, robust anti-bribery laws, and enhanced support for African nations seeking to hold multinational corporations accountable. In addition, participation by civil society organisations plays an essential role in advocating for these measures and the affected nations, as they work to uncover cases of misconduct and push for systemic change.


The international community needs to address these systemic challenges more effectively, and work towards implementing stronger governance measures and promoting transparent corporate practices. In light of cases like Glencore, the call for accountability and responsible investment in Africa’s abundant resources needs to be stronger than ever, to ensure a fairer, more sustainable future.


Sources:


Picture:

Comments

bottom of page