The East African Legislative Assembly (Eala) has passed the East African Community Illicit Financial Flows Bill, 2025, aimed at stemming illicit outflow of resources, which undermines growth.

If signed, the law slaps offenders with fines of up to $5 million or 10 percent of annual turnover, suspension of operational licences, and even criminal liability.

Kennedy Mukulia, the South Sudanese MP who chairs the Committee on Legal, Rules and Privileges, said the law will impose strong penalties on companies and individuals found guilty of concealing financial information or engaging in tax evasion.

According to the UN Trade and Development (Unctad), Africa loses between $88.6 billion and $100 billion every year, equivalent to 3.7 percent of its GDP, to illicit outflows. Nearly $40 billion of these losses stem from the extractive sector, largely through tax evasion, mispricing, corruption, and illegal commercial practices.

These outflows deprive governments of vital revenues, weaken public services, slow down development, and deepen inequality.

In the EAC, Kenya, Tanzania, and Uganda have high illicit financial flows (IFFs).

The Bill defines illicit financial flows as funds that are illegally earned, transferred, or used.

These, Mr Mukulia, explains, often arise from commercial tax evasion, trade mispricing, and abusive transfer pricing, as well as criminal activities such as drug trafficking, human trafficking, illegal arms trade, smuggling, bribery, and corruption.

The bill outlines a comprehensive framework to combat IFFs, including mandatory financial transparency, joint audits, anti-corruption compliance, asset recovery and regional oversight.

EAC partner states will conduct joint audits of multinational corporations, guided by Organisation for Economic Co-operation and Development and African Union standards on transfer pricing, and companies will be required to implement anti-corruption programmes and conduct due diligence on contractors and suppliers.

Assets linked to IFFs will be traced, frozen, and repatriated for reinvestment in social services and development.

Lawmakers said the passage of the proposed law would strengthen the region’s ability to mobilise domestic resources, expand employment opportunities, and attract investor confidence.

“This Bill seeks to ensure that East Africa fully benefits from its natural wealth,” Mukulia said after the vote.“By closing the loopholes of illicit financial flows, we are building a foundation for equitable and sustainable growth.”The Bill also aligns with the recommendations of the African Union High-Level Panel on Illicit Financial Flows from Africa, chaired by former South African president Thabo Mbeki, which require governments to strengthen transparency, governance, and international cooperation.

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