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Illicit financial flows and human rights

Reports by the Independent Expert:

Background

During its 25th Session, the Human Rights Council adopted resolution 25/9 in which it requested the Independent Expert on the effects of foreign debt to undertake a study to analyse the negative impact of illicit financial flows on the enjoyment of human rights in the context of the post 2015 development agenda.

In March 2015 the Independent Expert presented an interim study (A/HRC/28/60) to the 28th session of the Human Rights Council. The study stressed that illicit financial flows generated from crime, corruption, embezzlement and tax evasion represent a major drain on the resources of developing countries, reducing tax revenues and the scope for progressive taxation, hindering development and the rule of law, exacerbating poverty and inequality, and undermining the enjoyment of human rights. Tax evasion and abuse are considered to be responsible for the majority of all illicit financial outflows, followed by illicit financial flows relating to criminal activities, such as drug and human trafficking, the illicit arms trade, terrorism and corruption-based illicit financial flows.

According to some estimations developing countries lost US$ 991 billion in illicit financial outflows in 2012 and those flows increased in real terms at a rate of 9.4 per cent per annum over the period 2003–2012. The annual loss is substantially more than the estimated yearly costs of achieving the Millennium Development Goals.

The interim study emphasizes the need for due diligence and due process in the fight against illicit financial flows, for better protection of witnesses and whistle-blowers and for incorporating human rights considerations in the management of returned stolen assets. It concludes with recommendations on how the goal of curbing illicit financial flows could be operationalized within the post-2015 development agenda of the United Nations.

The Human Rights Council welcomed in March 2015 the interim study presented by the Independent and adopted resolution 28/5 requesting him to "convene an experts’ meeting, on the issue of the negative impact of the non-repatriation of funds of illicit origin to the countries of origin on the enjoyment of human rights, [and] to include the outcome of that meeting in a study that he will present to the Human Rights Council at its thirty-first session".

In this context, the Independent Expert organized two events on 29 and 30 October 2015 in New York and New Haven.

For more information on these events, click here.

Illicit financial flows and the post-2015 development agenda of the United Nations

The United Nations Sustainable Development Summit, held from 25-27 September 2015 in New York, adopted new international development goals for the period 2015-2030. The outcome document of the summit (A/Res/69/315) includes under the target to reduce by 2030 significantly illicit financial and arms flows, strengthen recovery and return of stolen assets, and combat all forms of organized crime (see target 16.4).  At the 3rd International Conference on Financing for Development, held from 13-16 July 2015 in Addis Ababa, States made as well the commitment to “redouble efforts to substantially reduce illicit financial flows by 2030, with a view to eventually eliminating them, including by combating tax evasion and corruption through strengthened national regulation and increased international cooperation.” (A/CONF.227/L.1). States also agreed to “strive to eliminate safe havens that create incentives for transfer abroad of stolen assets and illicit financial flows.”

In March 2016 the Independent Expert presented his final study (A/HRC/31/61) to the Human Rights Council. The final study focuses in more detail on tax-related illicit financial flows, in particular on tax evasion and avoidance by transnational corporations. It argues that tax abuse deprives governments of resources required to progressively realize human rights, including economic, social and cultural rights. In effect, tax abuse forces governments to raise revenue from other sources, including through regressive taxes, the burden of which ultimately falls hardest on the poor. This has important human rights implications because regressive tax structures limit the redistributive impact of social programmes which end up being funded by the very people they are supposed to benefit. 

Read the final study and its recommendations.

Earlier studies on illicit financial flows and human rights

Earlier reports on the topic include  a report prepared by the Office of the United Nations High Commissioner for Human Rights (A/HRC/19/42) and two reports by the previous Independent Expert on the negative impact of non-repatriation of illicit funds on the enjoyment of human rights (see A/HRC/22/42 and A/HRC/25/52).  The reports provided estimates of illicit financial flows, a review of current initiatives to curb illicit financial flows, and assessed their impact from a human rights perspective.

A report by the Special Rapporteur on extreme poverty and human rights on taxation policies, submitted to the Human Rights Council in June 2014, addressed as well the related topic of tax evasion by multinational business corporations (A/HRC/26/28).

Expert consultation, June 2013

In accordance with Human Rights Council resolution 22/12 an expert consultation was held from 20-21 June 2013 in Geneva. Experts from around the world in the fields of human rights, finance and economics participated.

  • Agenda of the expert consultation

In the context of the expert consultation States have as well been invited to provide submissions

The following submissions were received: