By Mahdi Waziri Isa
A renowned scholar and international Law expert, Prof Muhammed Tawfiq Ladan has said criminals exploit the increased volume of cross-border transactions to disguise illicit funds through trade, threatening to derail the progressive realization of the goals of AfCFTA in boosting intra-African trade, creating access to a single continental market, for shared economic prosperity in Africa.
The Professor, who spoke at the rounding up of the concurrently run NILDS-ILA 13-16 April 2026 Advanced Certificate Course on AfCFTA Law and the 9th ILA Annual Conference held at NILDS, Abuja, laid out the scope of the threat.
He stressed that trade-based illicit financial flows (IFFs) and money laundering (TBML) pose a significant threat to the African Continental Free Trade Area (AfCFTA), with estimated illicit outflows from Africa averaging $88.6 billion per year, equivalent to 3.7% of the continent’s GDP.
He revealed that as AfCFTA reduces tariffs and eases trade barriers in 2025–2026, the increased volume of cross-border transactions creates opportunities for criminals to disguise illicit funds through trade, threatening to derail the agreement’s goals of boosting intra-African trade and fostering economic development.
He stated that trade-based money laundering involves manipulating trade transactions to transfer value illicitly. He stressed that in the context of AfCFTA, prevalent methods include Trade Mis-invoicing (Over/Under Invoicing): This remains the primary technique, involving the systematic overstatement or understatement of goods’ value in customs documents to shift profits or launder money. UNCTAD estimates that export under-invoicing in commodities alone causes billions in losses, with gold exports alone responsible for a massive portion.
He revealed that other methods include Phantom Shipments (Paperwork Fraud): Creating documentation for goods that never existed or were never shipped to justify international fund transfers; Multiple Invoicing: Using the same shipment to generate multiple payment claims across different financial institutions; Misrepresentation of Quality/Type: Involving the shipping of low-value goods described as high-value items (or vice versa); exploitation of Free Trade Zones (FTZs) where weak monitoring allows “shell companies” to move goods and money without proper oversight; and The Black Market Peso Exchange used by criminals in Africa to convert illicit local currency into foreign currency through informal trade channels.
He stressed that the impact on AfCFTA implementation includes a drain on foreign exchange reserves: These flows deplete essential forex needed for legitimate imports, impacting the effectiveness of the Pan-African Payment and Settlement System (PAPSS). He added that mis-invoicing falsifies trade statistics, making it harder to track genuine intra-African trade trends, while illicit actors can undercut honest businesses.
He revealed that TBML directly causes massive losses in tax and customs revenues (estimated 10-30% tax gap), undermining the ability of states to fund the infrastructure needed for AfCFTA. He stressed that if trade becomes synonymous with money laundering, trust in the AfCFTA framework will diminish, discouraging foreign direct investment.
He revealed that addressing these challenges requires a proactive, technology-driven, and collaborative approach: The AfCFTA framework must incorporate robust anti-money laundering (AML) protocols. This includes creating a unified digital platform for real-time exchange of customs and financial intelligence among member states to detect TBML.
He stated that strategic approaches include implementation of advanced analytics: Customs authorities are increasingly using the Partner Country Method Plus (PCM+) and Price Filter Method Plus (PFM+) to detect invoice disparities; and adoption of AI and Machine Learning: Using artificial intelligence to analyze high-volume trade data, such as flagging invoices that deviate significantly from standard commodity price benchmarks.
He stressed the need for strengthening beneficial ownership transparency by implementing public registers of beneficial ownership to identify the real individuals behind companies operating in Free Trade Zones, reducing the ability to use shell companies.
He revealed that public-private partnerships (PPPs) are critical for enhancing cooperation between customs, law enforcement, and financial institutions (banks) to identify suspicious transactions, as TBML often involves complex banking transactions. He added that capacity building requires specialized training for custom officers and Financial Intelligence Units (FIUs) on identifying sophisticated TBML typologies.
He stressed that by integrating these measures, African nations can turn the AfCFTA into a secure engine for legitimate trade, ensuring that its benefits are not lost to financial crimes.