Financing the Sustainable Development Goals (SDGs) and poverty reduction continues to be recognized as one of the most significant challenges to achieving progress. Two major limitations have been observed when dealing with this challenge.
First, corruption and poor governance persist as major bottlenecks for the achievement of the SDGs due to the vast amount of resources lost through corrupt practices. It is now widely acknowledged that illicit financial flows (IFFs) represent a considerable drain on financial resources from developing countries. According to Global Financial Integrity (2021), developing countries lost an estimated US$1.6 trillion in illicit financial outflows in 2018 alone, primarily through trade misinvoicing, tax evasion, and corruption-related activities.
The second major limitation is that the traditional approach towards IFFs has been either taxation-centric (addressing the problem through standard economic policy measures) or asset-recovery-centric (as reflected in the global anti-corruption discourse and the implementation of UNCAC). There is still no comprehensive, integrated framework for strengthening national capacities to prevent IFFs—one that combines effective taxation, financial transparency, and oversight mechanisms.
Curtailing illicit capital outflows has the potential to unlock billions of dollars in domestic resources for SDG-related investments, particularly in countries that remain considerably off track in achieving their development targets.
