36/52 Research-based study on the impact of flow of funds of illicit origin and the non-repatriation thereof to the countries of origin on the enjoyment of human rights, including economic, social and cultural rights - Progress report of the Advisory Committee of the Human Rights Council
Document Type: Final Report
Date: 2017 Aug
Session: 36th Regular Session (2017 Sep)
Agenda Item: Item3: Promotion and protection of all human rights, civil, political, economic, social and cultural rights, including the right to development, Item5: Human rights bodies and mechanisms
Human Rights Council Thirty- sixth session
11-29 September 2017
Agenda items 3 and 5
Promotion and protection of all human rights, civil,
political, economic, social and cultural rights,
including the right to development
Human rights bodies and mechanisms
Research-based study on the impact of flow of funds of illicit origin and the non-repatriation thereof to the countries of origin on the enjoyment of human rights, including economic, social and cultural rights
Progress report of the Advisory Committee of the Human Rights
Obiora Okafor* and Jean Ziegler** (Co-Rapporteurs)
* Mr. Okafor is the author of sections I, II, IV, VIII and IX. The Co-Rapporteur would like to thank Sanaa Ahmed, of the Osgoode Hall Law School, Toronto, Canada, for her assistance in their
preparation. ** Mr. Ziegler is the author of sections III, V, VI, VII and X. The Co-Rapporteur would like to thank
Milena Costas Trascasas for her assistance in their preparation.
United Nations A/HRC/36/52
I. Mandate and background .............................................................................................................. 3
II. Introduction and definition ............................................................................................................ 3
A. Definition of illicit financial flows ....................................................................................... 3
B. Estimates ............................................................................................................................... 5
III. Non-repatriation of illicit financial flows: overview of the problem ............................................. 5
IV. Best practices in the return of illicit funds ..................................................................................... 6
V. National legislation: Switzerland .................................................................................................. 9
A. Compliance of Swiss banks with anti-money-laundering legislation ................................... 10
B. Return of stolen assets .......................................................................................................... 11
VI. Case studies on the repatriation of illicit financial flows .............................................................. 11
A. Nigeria .................................................................................................................................. 11
B. Tunisia .................................................................................................................................. 12
C. Malaysia ................................................................................................................................ 13
VII. Negative impact of the non-repatriation of illicit financial flows on the enjoyment
of human rights ............................................................................................................................. 13
VIII. Main challenges inhibiting the return of illicit funds .................................................................... 15
IX. Importance of international cooperation in the return of funds of illicit origin ............................. 17
X. Conclusions and recommendations ............................................................................................... 18
I. Mandate and background
1. In its resolution 31/22, the Human Rights Council requested its Advisory Committee
to conduct a comprehensive research-based study on the impact of flow of funds of illicit
origin and the non-repatriation thereof to the countries of origin on the enjoyment of human
rights, including economic, social and cultural rights, with a special emphasis on the right
2. Among its other goals, the study was commissioned with a view to compiling
relevant best practices and main challenges and to make recommendations on tackling
those challenges on the basis of the best practices in question. The Advisory Committee
was asked to present a progress report to the Human Rights Council at its thirty-sixth
session for its consideration. The Council also requested the Advisory Committee to seek, if
necessary, further views and the input of Member States, relevant international and regional
organizations, the United Nations High Commissioner for Human Rights and relevant
special procedures, as well as national human rights institutions and non-governmental
organizations (NGOs) in order to finalize the study. The Council further requested the
Advisory Committee to take into account the final study on illicit financial flows, human
rights and the 2030 Agenda for Sustainable Development by the Independent Expert on the
effects of foreign debt and other related international financial obligations of States on the
full enjoyment of all human rights, particularly economic, social and cultural rights
3. At its seventeenth session, the Advisory Committee established a drafting group
composed of Mario Luis Coriolano, Mikhail Lebedev, Obiora Chinedu Okafor (Co-
Rapporteur), Ahmer Bilal Soofi (Chair) and Jean Ziegler (Co-Rapporteur). Mona Omar
joined the drafting group during the eighteenth session of the Committee.
4. The present report additionally draws on earlier studies sponsored by the United
(a) Illicit financial flows, human rights and the post-2015 development agenda:
interim study by the Independent Expert on the effects of foreign debt and other related
international financial obligations of States on the full enjoyment of all human rights,
particularly economic, social and cultural rights, Juan Pablo Bohoslavsky (A/HRC/28/60
(b) Final study on illicit financial flows, human rights and the 2030 Agenda for
Sustainable Development by the Independent Expert, Mr. Bohoslavsky (A/HRC/31/61);
(c) “Illicit financial flows, tax and human rights”, background paper prepared by
Esther Shubert to inform the final study;1
(d) The negative impact of the non-repatriation of funds of illicit origin on the
enjoyment of human rights: interim report by the Independent Expert on the effects of
foreign debt and other related international financial obligations of States on the full
enjoyment of all human rights, particularly economic, social and cultural rights, Cephas
Lumina (A/HRC/22/42 and Corr.1).
II. Introduction and definition
A. Definition of illicit financial flows
5. As important as it is to the problems of underdevelopment, poverty and the lack of
realization of human rights around the world, the expression “illicit financial flows” is a
1 Available at www.ohchr.org/Documents/Issues/IEDebt/IllicitFinancialFlows
term that has no single, universally accepted definition. The United Nations has, thus far,
not expressly defined the term.
6. The emergent consensus, however, is that “illicit” means much more than simply
“illegal”. Accordingly, definitions such as those offered by Global Financial Integrity, a
research and advocacy organization working to curb such flows, which conflate the term
“illicit” and “illegal” and thus limit the meaning to the “illegal movements of money or
capital from one country to another”2 are now generally disfavoured, including by the
International Monetary Fund (IMF), 3 the Organization for Economic Cooperation and
Development (OECD)-Group of 20 (G-20)4 and the Tax Justice Network.5 Other abusive
practices, such as forms of tax avoidance and transfer mispricing, are now seen as also
being within the ambit of illicit financial flows. Even more strikingly, the United Nations
Conference on Trade and Development (UNCTAD) has adopted a broader definition of
illicit financial flows that includes activities “contravening the law or its spirit”.6 What is
more, the Economic Commission for Africa (ECA) has defined illicit financial flows to
include “commercial tax evasion, trade misinvoicing and abusive transfer pricing; criminal
activities, including the drug trade, human trafficking, illegal arms dealing, and smuggling
of contraband; and bribery and theft by corrupt government officials”.7
7. Based on the foregoing, any useful definition of illicit financial flows would
necessitate a broader, two-tiered interpretation of the word “illicit”. In the first
interpretation, “illicit” would refer to funds which are illegally earned, transferred or
utilized and include all unrecorded private financial outflows that drive the accumulation of
foreign assets by residents in breach of relevant national or international legal frameworks.
More specifically: funds relating to the proceeds of crime — for example, funds acquired
through corruption; criminal activities; abuse of powers including theft of State
assets/funds; market abuse; tax abuse; and regulatory abuse would be included.
8. In its second sense, “illicit” would refer to funds from legitimate economic activity
that become illicit due to their being handled or dealt with subsequently in contravention or
circumvention of the law (see A/HRC/22/42 and Corr.1, para. 5). This includes all
arrangements designed to circumvent the law or its spirit such as tax evasion, forms of tax
avoidance and forms of tax optimization schemes, as well as profit shifting by multinational
corporations, trade misinvoicing and transfer mispricing. This definition is consistent with
the one employed in the final study.
9. Finally, and perhaps more importantly, this definition, with its inclusion of tax
avoidance, is in consonance with current politico-economic exigencies. Two recent
“political” events seem to indicate the increasing centrality of tax avoidance to a working
definition of illicit financial flows. The first is the political fallout from the Panama Papers
and the second is the creation of the Platform for Collaboration on Tax, a joint initiative of
IMF, OECD, the United Nations and the World Bank. Thus, tax avoidance has clearly
evolved into a significant political issue distinct from its twin (i.e., tax evasion) and any
2 See www.gfintegrity.org/issue/illicit-financial-flows/.
3 Rabah Arezki, Gregoire Rota-Graziosi and Lemma W. Senbet, “Capital flight risk”, Finance and
Development, vol. 50, No. 3 (September 2013). Available at www.imf.org/external/pubs/ft/
4 See www.oecd.org/tax/beps/beps-about.htm and www.oecd.org/tax/closing-tax-gaps-oecd-launches-
5 See www.taxjustice.net/topics/inequality-democracy/capital-flight-illicit-flows/.
6 United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report,
2014 (United Nations publication, Sales No. E.14.II.D.4), p. 173. Available at
7 Economic Commission for Africa (ECA), Illicit Financial Flows: Report of the High Level Panel on
Illicit Financial Flows from Africa (2016), p. 9. Available at
www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf. ECA was
mandated to establish the High Level Panel by the Joint African Union Commission on Human and
Peoples’ Rights-Economic Commission for Africa Conference of African Ministers of Finance,
Planning and Economic Development at its fourth meeting, held in 2011. The Chair of the Panel was
the former President of South Africa, Thabo Mbeki.
attempt to sidestep it in a study like the present one is untenable. This is particularly true as
the majority of all illicit financial flows are related to cross-border tax transactions (see
A/HRC/31/61, para. 5), while corruption-based outflows are a very small fraction of the
total (see A/HRC/28/60 and Corr.1, para. 14).
10. Relying on trade data and balance of payments leakages for its December 2015
report, 8 the research and advocacy non-profit organization Global Financial Integrity
estimated that in 2013, $1.1 trillion left developing countries in illicit financial outflows.
This highly conservative estimate does not pick up movements of bulk cash, the mispricing
of services or many types of money-laundering. 9 UNCTAD, meanwhile, endorses the
estimate of the French NGO Comité catholique contre la faim et pour le dévelopment-Terre
solidaire of €800 billion worth of illicit financial flows per annum.10 Significantly, in its
analysis of the three broad motivations driving illicit financial flows — crime, corruption
and tax abuse — UNCTAD argues that “only about a third of total illicit financial flows
represent criminal money, linked primarily to drugs, racketeering and terrorism. …
[M]oney from corruption is estimated to amount to just 3 per cent. The third component,
which accounts for the remaining two thirds of the total, refers to cross-border tax-related
transactions, about half of which consists of transfer pricing through corporations.” 11
Comparatively, Global Financial Integrity estimates that trade misinvoicing accounts for
83.4 per cent of measurable illicit financial flows, on average.12 ECA, on the other hand,
estimates that the continent has lost more than $1 trillion in illicit financial flows in the last
50 years and continues to haemorrhage over $50 billion per annum. The figure is
understood to be a conservative estimate due to, first, the lack of accurate data for all
African countries and second, the fact that some forms of illicit financial flows — such as
the proceeds of bribery and drugs/firearms and human trafficking — cannot be reliably
III. Non-repatriation of illicit financial flows: overview of the problem
11. The effective repatriation of looted assets to the countries of origin remains
instrumental to the global effort to support development, good governance, the enjoyment
of all human rights and the strengthening of the rule of law around the world. The non-
return of such funds contributes immensely to the violation of human rights (including
social and economic rights), especially in developing countries. However, numbers show
that only a tiny portion of illicit funds transferred abroad is effectively returned to the
countries of origin. In the period 2006-2012, the total amount of assets returned by OECD
States represented 1.6 per cent of those that remained frozen.14 Six years after the Arab
8 Dev Kar and Joseph Spanjers, Illicit Financial Flows from Developing Countries: 2004-2013 (Global
Financial Integrity, 2015). Available at http://www.gfintegrity.org/wp-content/uploads/2015/12/IFF-
Update_2015-Final-1.pdf. In its report, Global Financial Integrity estimated that developing and
emerging countries lost $7.8 trillion during the period under study. Illicit financial flows grew at an
average rate of 6.5 per cent per annum during this period and topped $1 trillion in 2011. The authors
of the report justify the selection of the period 2004-2013 for analysis by pointing to the fact that that
was the most recent 10-year period for which data were available (pp. vii and 5).
9 See www.gfintegrity.org/issue/illicit-financial-flows/.
10 UNCTAD, “Urgent global action needed to tackle tax avoidance”, 30 September 2014. Available at
11 UNCTAD, Trade and Development Report, 2014, p. 173.
12 Kar and Spanjers, Illicit Financial Flows, p. 1.
13 ECA, Illicit Financial Flows: Report of the High Level Panel, p. 15.
14 Between 2006 and 2009, $277 million out of $1,225,000,000 frozen, and between 2010 and2012,
$147.2 million out of $1,398,000,000 frozen. OECD, Illicit Financial Flows from Developing
Spring, this trend remains: the looted States (Egypt, Libya, Tunisia and Yemen) have
recovered only $1 billion of the $165 billion stolen by their former dictators.15
12. Attempts to repatriate stolen assets most commonly imply undertaking long,
complex and costly mutual legal assistance procedures which, in the best scenario, may end
up with the repatriation of only a portion of the misappropriated assets to the country of
origin.16 The burden of reaching a solution essentially relies on the good faith and the
success of the cooperation between the concerned States.17
13. Proving the illicit origin of the stolen money often turns out to be an unsurmountable
requirement in practice.18 Difficulties in such procedures may lead a State to conclude
extrajudicial agreements by means of which impunity is granted to those who looted the
public funds in exchange for recovering a part of the assets.19
14. It is striking to see how the money that has been stolen and is urgently needed for
development and the realization of all human rights is instead stalled in banks of developed
countries that continue to accrue gains from it.20 As long as the “dirty money” remains
frozen, banks continue to charge their “captive clients” particularly high management
15. The role played by banks as facilitators of money-laundering and corruption very
often goes unnoticed. Domestic laws require enhanced scrutiny of politically exposed
persons, but such laws are often not observed.21 In addition, offshore jurisdictions provide a
perfect regulatory set-up to those seeking to obscure links to money, by means of shell
companies, nominee directors and secrecy.22
IV. Best practices in the return of illicit funds
16. A number of global best practices in the return of illicit funds can be discerned from
the available evidence. If globally adhered to, these best practices will help in ensuring that
countries of origin have much greater access to the necessary funds to ensure the enjoyment
Countries: Measuring OECD Responses (2014), p. 88. Available from
15 Transparency International, Lost Billions: Recovering Public Money in Egypt, Libya, Tunisia and
Yemen (2016), p. 1.
16 Generally speaking, frozen assets can only be returned to the country of origin after the judicial
authorities demonstrate the illicit origin of the assets, normally on the basis of information obtained
within the framework of mutual legal assistance.
17 There is no structured international process or established body to facilitate asset recovery processes.
In the framework of the United Nations Convention against Corruption, the Open-ended
Intergovernmental Working Group on Asset Recovery was set up in 2006 to provide advice and
assistance to the Conference of States Parties.
18 M. Schnebli, “Lessons learned from the past: today’s response from requested countries”, in G.
Fenner Zinkernagel, Charles Monteith and Pedro Gomes Pereira, Emerging Trends in Asset Recovery
(2013), p. 51.
19 In 2016, following a reconciliation agreement concluded by the Government of Egypt, criminal
proceedings against several persons connected with former President Mubarak were dropped. As a
consequence, SwF 180 million that were frozen in Switzerland were released without any condition.
Proceedings on money-laundering in Switzerland were also precluded. Swiss Confederation, “Arab
Spring: Attorney General meets Egyptian authorities in Cairo”, 17 December 2016.
20 A report of the United States Senate showed how financial professionals and institutions were used to
bring large amounts of suspect funds into the country to advance their interests. Permanent
Subcommittee on Investigations, Keeping Foreign Corruption Out of the United States: Four Case
21 Banks are among the biggest facilitators of tax dodging by other corporations. The list of European
banks setting up offshore companies is headed by UBS and Credit Suisse. See Oxfam International,
Opening the Vaults. The Use of Tax Havens by Europe’s Biggest Banks (2017), p. 8.
22 As the Independent Expert on the promotion of a democratic and equitable international order
observes: “Collusion between the world’s biggest banks, specialized law firms, and consulting and
accounting firms has led to a global system designed to hide money and avoid taxes by virtue of
secretive offshore structures” (see A/71/286, para. 13).
of human rights, including social and economic rights, in their jurisdictions. The following
are some of these best practices.
17. Greater scrutiny of politically exposed persons. The term politically exposed
persons was devised by the Financial Action Task Force in 2003 to refer to individuals (or
their family members or close associates) who were or had been entrusted with a prominent
public function. 23 The Task Force contended that such persons should undergo additional
scrutiny since they were capable of abusing their position and influence to launder money
or commit related predicate offences, including corruption and bribery, as well as conduct
activity related to terrorist financing. The February 2012 revision to the Financial Action
Task Force rules expanded the definition of politically exposed persons to include domestic
politically exposed persons, in addition to those in foreign jurisdictions. 24 More
significantly, the definition was extended to cover politically exposed persons in
international organizations.25 Financial institutions and other professionals were charged
with conducting this scrutiny.26
18. Reversal of the burden of proof. This new requirement under money-laundering and
anti-corruption laws — that an individual possessed of excessive wealth must demonstrate
that such wealth has a legitimate origin — has had some success in impeding illicit
financial flows. Further success may be achieved if destination countries accept foreign
confiscation orders and provide legal and technical assistance to foreign jurisdictions. 27
This would be in consonance with articles 31, 43 and 48 (1) (f) of the United Nations
Convention against Corruption. However, a few caveats are in order. First, several
jurisdictions still adhere to the requirement that the prosecution must establish guilt beyond
a reasonable doubt in criminal cases.28 Second, such reversal also seems to run counter to
the due process guarantees contained in the International Covenant on Civil and Political
Rights, a point also articulated by Juan Pablo Bohoslavsky with respect to freezing assets or
prosecuting those suspected of corruption or of handling or facilitating crime-related
19. Pro-repatriation laws in destination countries. The former President of Haiti, Jean-
Claude Duvalier, was believed to have amassed over $300 million by skimming
government contracts. This money was deposited in Swiss bank accounts. When Duvalier
was deposed by popular revolt in 1986, Haiti asked the Swiss authorities to freeze $5
million, but couldn’t secure its return since Haiti failed to mount a legal case. Duvalier
23 See www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF Recommendations
2003.pdf, p. 14. Article 52 of the United Nations Convention against Corruption echoes this definition
but in far less detail.
24 Foreign politically exposed persons are defined as individuals who are or have been entrusted with
prominent public functions by a foreign country, for example Heads of State or Government, senior
politicians, senior government, judicial or military officials, senior executives of State-owned
corporations and important political party officials. Domestic politically exposed persons are
individuals who are or have been entrusted domestically with prominent public functions, for example
Heads of State or Government, senior politicians, senior government, judicial or military officials,
senior executives of State owned-corporations and important political party officials. Financial Action
Task Force, FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22) (2013), pp.
4-5. Available at www.fatf-gafi.org/media/fatf/documents/recommendations/Guidance-PEP-Rec12-
25 International organization politically exposed persons are persons who are or have been entrusted with a prominent function by an international organization. The term refers to members of senior
management or individuals who have been entrusted with equivalent functions, i.e., directors, deputy
directors and members of the board or equivalent. While even the 2003 version of the Task Force’s 40
recommendations advised caution in dealings with politically exposed persons, the focus was on
foreign politically exposed persons. FATF Guidance, p. 3.
26 Ibid., p. 5.
27 OECD, Illicit Financial Flows from Developing Countries, p. 16.
28 See, for example, the response of Malaysia to the illicit funds questionnaire circulated by the
Advisory Committee, available at www.lan.ohchr.org/EN/HRBodies/HRC/AdvisoryCommittee/
Pages/QuestionnairesIllicitFunds.aspx, as well as Human Rights Council resolution 31/22, submitted
on behalf of the Group of African States.
29 See his response to the questionnaire.
would have won the money back by default in 2002 when the statute of limitations expired,
had Switzerland not invoked constitutional powers which allow it to freeze assets in order
to safeguard national interests. A 2011 Swiss law which reverses the burden of proof and a
court decision have paved the way for the return of the money to the country of origin. The
Foreign Illicit Assets Act 2015, which allows for the repatriation of funds held in
Switzerland by foreign dictators has also been helpful in this regard.30 However, several
provisions of the law are open to entirely subjective interpretation that may be construed as
derogating from the rights and interests of the countries of origin.31 Equally problematic are
article 15 of the law, which sets out criteria for “a presumption that assets are of illicit
origin”, 32 and article 17, which prescribes conditions for the repatriation of funds. 33
Accordingly, such pro-repatriation laws merit the introduction of appropriate and
objectively determined safeguards that will protect the interests and rights of the countries
20. Adequate training and funding of law enforcement officers. The forensic audit skills
required to trace monies held by multiple shell companies and parked in special purpose
vehicles across multiple jurisdictions are not easily available, particularly in developing
countries. While some developed countries are trying to build domestic capacity, effective
asset recovery requires sufficient investment, both financially and in terms of staff (training
for law enforcement officers, dedicated staff with sufficient expertise and funding to carry
21. Greater transparency and exchange of information. To combat illicit financial
flows, law enforcement authorities must be able to access and exchange relevant
information about activities, assets or incomes of individuals, companies and legal entities
and arrangements in foreign jurisdictions. In the specific area of anti-money-laundering and
counter-terrorism financing efforts, the Egmont Group, comprising 152 financial
intelligence units, is an example of a global platform whereby expertise and financial
intelligence are shared with a view to combating both crimes.35
22. Robust, issue-specific and cross-jurisdictional institutional and professional
networks. Restricting the ambit of their anti-illicit financial flow operations to specific
issues allows such networks to focus on the details, leverage their specializations and learn
from each other’s successes and failures and reduces the potential for politically motivated
conflict in large groups. One such example is found in the Russian Federation, where the
Office of the Prosecutor General, located in the Office of the Federal Prosecutor, promotes
practicable international cooperation through formal and informal patterns of interaction
between various national contact centres. This cooperation extends to the identification,
arrest, confiscation and restitution of assets accumulated as a result of corruption.
30 The first beneficiary of the December 2015 law was Nigeria, which stands to receive $321 million of
the monies stolen by Sani Abacha. See www.reuters.com/article/us-swiss-assets-idUSKCN0YG29Z
31 The section regarding when an asset freeze is admissible reads as follows: “[where] the government
or certain members of the government of the country of origin have lost power, or a change in power
appears inexorable; the level of corruption in the country of origin is notoriously high; it appears
likely that the assets were acquired through acts of corruption or misappropriation or other crimes; the
safeguarding of Switzerland’s interests requires the freezing of the assets” (art. 3 (2)). Available at
www.newsd.admin.ch/newsd/message/attachments/44109.pdf, p. 2.
32 The presumption will follow if “the wealth of the individual who has the power of disposal over the
assets or who is the beneficial owner thereof increased inordinately, facilitated by the exercise of a
public function by a foreign politically exposed person; [and] the level of corruption in the country of
origin or surrounding the foreign politically exposed person in question was notoriously high during
his or her term of office”.
33 “The restitution of assets is made in pursuit of the following objectives: (a) to improve the living
conditions of the inhabitants of the country of origin, or (b) to strengthen the rule of law in the
country of origin and thus to contribute to the fight against impunity.”
34 OECD, Better Policies for Development 2014: Policy Coherence and Illicit Financial Flows.
Available at www.oecd.org/pcd/Better-Policies-for-Development-2014.pdf.
35 See www.egmontgroup.org/en/content/about.
23. Harmonization of global tax strategies. Base erosion and profit shifting refers to
aggressive tax avoidance strategies practised by multinational corporations. By exploiting
gaps and mismatches in tax rules, these corporations artificially shift profits to no- or low-
tax jurisdictions, thereby eroding the tax base of the host country, which inhibits a
country’s ability to guarantee the enjoyment of human rights to its people.36 Often, these
host countries are poor countries in the South. The harmonization of tax strategies across
the globe, anti-abuse clauses in all tax treaties and enhanced disclosure requirements and
transparency in both source and destination countries would eliminate the incentive for
multinational corporations to shift profits from one jurisdiction to another, 37 for if all
jurisdictions offered the same or similar tax rates, there would be no incentive to move
revenues around as a tax evasion/avoidance strategy. Similarly, if all national tax
administrations worked together to ensure effective compliance, i.e., taxpayers pay the
correct amount to the right jurisdiction, the opportunities for multinational corporations to
engage in base erosion and profit shifting (and to thus author illicit financial flows) would
be severely diminished. A few steps in this direction are already under way, including
efforts by the G-20 leaders, who have called for the implementation of an inclusive
framework for base erosion profit shifting;38 a new joint IMF-World Bank initiative on
strengthening tax systems in developing countries; and the Addis Tax Initiative, designed to
dramatically increase donor support for building tax capacity in poorer countries.39
24. Promotion of global anti-corruption and tax reform initiatives through greater civil
society participation. 40 The United Nations Convention against Corruption, adopted in
2004, is a high-profile example of the mobilization of States as well as civil society, non-
governmental organizations and grass-roots communities to a common end: the combating
of corruption. Significantly, while the Convention holds States primarily responsible for
rooting out corruption and effective international cooperation, it also places similar
responsibility on individuals and groups comprising civil society to provide the support
States require to achieve such ends.
V. National legislation: Switzerland
25. The case of Switzerland is very illustrative, as it shows that having an adequate
domestic legal arsenal and political will do not necessary lead to the effective repatriation
of stolen assets.41
26. With approximately 26 per cent of the world market for offshore private assets under
management, the country is one of the major global financial centres. With particularly
favourable national legislation on banking secrecy and lax anti-laundering laws, for many
years Switzerland was a commercial paradise for the banking sector. Illicit financial flows,
including the personal fortunes illicitly amassed by foreign dictators, indiscriminately
flowed into Swiss banks. Banks acted with complete impunity and managed to avoid any
kind of public control or scrutiny.42
27. Today, in theory, Swiss national anti-money-laundering laws oblige the banking
sector to systematically scrutinize the origin of funds of dubious origin and to report any
suspicious cases to the Swiss intelligence financial unit.43 Regulations also provide for an
enhanced control of politically exposed persons suspected of having enriched themselves
by illicit means.
36 See www.oecd.org/ctp/beps/.
37 See Human Rights Council resolution 34/11 submitted by Tunisia (on behalf of the Group of African
States) and other countries.
38 See www.oecd.org/tax/concept-note-platform-for-collaboration-on-tax.pdf, p. 4.
39 Ibid., p. 3.
40 This demand is endorsed by both Juan Pablo Bohoslavsky and the Egyptian Initiative for Personal
Rights in their responses to the questionnaire.
41 In many other cases, there is a manifest lack of political will to repatriate stolen assets.
42 Swiss Info, “The complex case of Tunisia’s blocked funds”, 6 April 2015.
43 Financial intermediaries have the obligation to report to the Money-laundering Reporting Office
28. However, major obstacles to enforcing anti-money-laundering legislation still
remain in practice. Regulations are poorly respected and major international scandals
involving the Swiss financial market continue to come to light. In the opinion of many
experts, the Swiss bank reporting system simply does not work: “It is quite obvious that the
rules exist, but they are applied with insufficient care. This also means that regulators are
not doing their job.”44 Thus, Swiss banks continue to benefit all too often from judicial
A. Compliance of Swiss banks with anti-money-laundering legislation
29. Swiss banks have traditionally been granted the autonomy to set their own operating
rules. 45 The Swiss Financial Market Supervisory Authority, FINMA, is in charge of
monitoring all institutions holding a banking licence in Switzerland. Despite being a public
control body, FINMA does not belong to the federal administration. Its action is apparently
independent from external interferences but not from the banks. The Board of Directors is
composed mainly of former bank managers, as is most of its staff.46 Furthermore, FINMA
is financed by the very same institutions that are under its supervision: the banks.47
30. By law, FINMA is endowed with a great margin of discretion. This includes the
capacity to refuse collaboration with criminal prosecutors or any other national authorities
when it is considered to be incompatible with a procedure under way or with the aims of
surveillance of financial markets. FINMA can also deny information not available to the
public or refuse to handle any documentation to preserve its own supervisory procedure.48
31. The Authority’s annual reports do not provide full information on cases of violation
of the bank’s due diligence, particularly regarding politically exposed persons. Even when
sanction procedures are considered, information on the entities under investigation, the final
outcomes of such procedures or the sanctions imposed are only partially released.49
32. A 2016 evaluation report on Switzerland by the Financial Action Task Force
concluded that the process of reviewing existing customers in the banking sector “is
unsatisfactory overall”. 50 More specifically, sanctions imposed by the supervisory
authorities were considered insufficient to prevent further violations.51 Doubts about the
efficacy and credibility of the whole anti-laundering dispositive have also been raised by
33. In fact, lack of transparency on accountability procedures undertaken against the
banks may lead to the conclusion that they are still accepting “dirty money” “below the
radar” and that such activities continue to go unnoticed by the general public. 52 This
situation may demonstrate that the financial sector has gained such great power and
lobbying capacity as to allow it to avoid taking seriously its obligations to undertake
preventive measures and cooperate with public authorities in this field.
44 O. Longchamp and M. Herkenrath, “Money-laundering, liability and sanctions for financial
intermediaries — the issue of having the assets of politically exposed persons in Switzerland”, in
Fenner Zinkernagel, Emerging Trends in Asset Recovery, p. 128; “Banks scrutinize regimes’ assets”,
Wall Street Journal, 23 February 2011.
45 In 2015, the Swiss Financial Market Supervisory Authority, FINMA, approved the Swiss banks’ code
of conduct with regard to the exercise of due diligence, drafted by the Swiss Association of Bankers.
46 The current FINMA Director, Mark Branson, is a former Director of UBS and was previously in
charge of UBS Japan, involved in the scandal of the manipulation of the Libor rate.
47 The Authority’s costs are borne by the supervisory fees and levies paid by those institutions.
48 See article 40 of the Loi sur l’Autorité fédérale de surveillance des marchés financiers (Loi sur la
surveillance des marchés financiers).
49 Longchamp and Herkenrath, “Money-laundering”, p. 133.
50 Anti-Money-laundering and Counter-Terrorist Financing Measures: Switzerland: Mutual Evaluation
Report, December 2016, pp. 91 and 105.
51 FINMA sanctions are particularly painless for banks; see “Trois banques épinglées pour leur gestion
de fonds”, 24 Heures, 21 October 2013.
52 O. Longchamp, report on Switzerland’s experience of assets recovery, working document, Public Eye
B. Return of stolen assets
34. The situation is absolutely striking in relation to the return of stolen assets. Hundreds
of millions of dollars of illicit provenance remain frozen in Switzerland.53 The Government
claims that it is seeking — honestly and vigorously — to return these funds to the countries
of origin.54 It also claims that the lack of restitution is eroding the good reputation and
integrity of the Swiss financial centre. There is a similar willingness at the cantonal level. In
Geneva, for example, the millions of dollars in illicit financial flows laundered through the
housing market have led to a housing crisis that disproportionally affects the working class
and the poorest sectors of the society.
35. A number of legal matters relating to the return of stolen assets are currently
pending before the Swiss courts. National legislation provides means to appeal at all stages
of the proceedings. Procedures are protracted and lawyers are making huge profits from
assisting criminals to hide and benefit from illicit financial flows. In the case of the former
dictator of Nigeria, for example, those assisting Sani Abacha in avoiding the restitution of
the stolen assets took a total of $17 million.55 They are competent and efficient in delaying
tactics, which partially explains why the assets stolen by the Ben Ali-Trabelsi and Mubarak
clans in 2011 have not yet been returned to the countries of origin.
36. The Foreign Illicit Assets Act 2015 was passed to facilitate the restitution of illicit
assets also in cases where mutual legal assistance is not feasible or fails. However, the
impact of this specific regulation remains to be seen in practice. The law may facilitate the
release of illicit assets frozen when a solution of compromise is reached between the
affected State and the person suspected of misappropriation. Such arrangements are
controversial, since they also preclude any legal proceedings initiated in the country of
origin as well as anti-money-laundering investigations taking place in Switzerland.56
VI. Case studies on the repatriation of illicit financial flows
37. The following examples show the role financial institutions play by blatantly
accepting suspicious funds. Banks and law professionals profit from these protracted and
complex processes to make huge profits at the expense of the affected countries, which
need the money for development and the enjoyment of all human rights.
38. This is one of the exceptional cases in which a looted State managed within a
reasonable period of time to successfully repatriate much of the illicit financial flows
transferred outside its shores. As is well known, the former dictator, Sani Abacha, and his
entourage managed to misappropriate over $2 billion of State funds. 57 Money was
systematically diverted from the Central Bank to banks in Austria, Liechtenstein,
Luxembourg, Switzerland, the United Kingdom of Great Britain and Northern Ireland and
Jersey, and the United States. In Switzerland alone, the Abacha clan had a total of 130 bank
53 The country has returned $2 billion in the past 30 years. However, hundreds of millions of dollars are
54 Switzerland has recently published the booklet No Dirty Money: The Swiss Experience in Returning
Illicit Assets, December 2016.
55 S. Besson, “La fin de l’affaire Abacha enrichit deux études d’avocats genevois”, Le Temps, 17 March
56 O. Longchamp and Herkenrath, “Money-laundering”, p. 136.
57 The looted funds were transferred directly to bank accounts abroad held by offshore companies
belonging to members of the Abacha clan or foreign businessmen, who then remitted the same sums
to members of what were characterized as “a criminal organization”. See E. Monfrini and Y. Klein,
“The Abacha case”, in M. Pieth, ed., Recovering Stolen Assets (2008), pp. 10-11.
39. In 2000, investigations opened by the Swiss authorities resulted in a report
incriminating 14 banks for lack of compliance with their due diligence duties under anti-
money- laundering legislation. The authorities, however strikingly concluded that the
existing regulatory framework was in principle sufficient and even extensive if compared
internationally and that the Swiss financial centre had appropriate rules designed to avoid
40. In 2004, thanks to the action of the Geneva Public Prosecutor, Bernard Bertossa, the
greater part of the frozen assets were repatriated to Nigeria. Switzerland responded
favourably to Nigeria’s request for mutual legal cooperation. In addition, criminal
investigations into money-laundering were opened pursuant to articles 305 ff of the Swiss
Criminal Code. By considering that the structure set up by Abacha and his accomplices
constituted a “criminal organization”, the Swiss courts confirmed that the illicit origin of
the assets may be presumed under certain circumstances.59
41. In 2016, Nigeria tried to recover another $321 million that had been confiscated in
Switzerland. However, after an extrajudicial agreement reached between the Government
of Nigeria and the family of the former dictator, Switzerland agreed to return part of the
funds to the Government while simultaneously dropping criminal proceedings against Abba
Abacha, the son of the deceased dictator, who waived all further claims to the assets.60
42. For more than 20 years, the former dictator of Tunisia diverted public funds and
public properties for his own benefit. According the World Bank, more than 21 per cent of
the profits generated by the Tunisian private sector were controlled by the dictator’s clan.61
Zine El Abidine Ben Ali and his accomplices used public institutions as tools to favour
their private businesses and manipulated the law to serve their personal interests and punish
those who opposed them.
43. In 2011, mutual legal assistance proceedings to clarify the origin of the $61,750,000
blocked in Switzerland were immediately undertaken. FINMA also announced sanctions
and stated that the identity of the banks involved in the looted Tunisian public treasure
would be made public. The list was never released, nor was information on any eventual
sanction imposed on any of the banks suspected of accepting and hiding the money of the
Ben Ali and Mubarak clans. In 2013, FINMA concluded that only in 4 of the 22 cases
examined was it necessary to initiate a binding “administrative” procedure to secure
information on the role played by the banks in “grave wrongdoings”.62
44. In March 2015, Tunisia filed a civil action against HSBC claiming SwF 114 million
plus interest for having accepted the fortune of Ben Ali’s brother-in-law. The funds of illicit
origin would have transited through HSBC accounts in the period when corruption was
particularly notorious in Tunisia. Reportedly, the bank’s own compliance body had pointed
out this fact to the managers.63
58 Commission fédérale des banques, “Fonds Abacha auprès des banques suisses”, 30 August 2000, p.
59 Swiss Federal Office of Justice, “Abacha funds to be handed over to Nigeria: majority of assets
obviously of criminal origin”, 18 August 2004.
60 “Nigéria : Genève clôt en catimini le dossier du dictateur Abacha”, Le Monde, 17 March 2015.
61 B. Rijkers, C. Freund and A. Nucifora, All in the Family: State Capture in Tunisia, World Bank,
Policy Research Paper No. 6810 (2014).
62 FINMA, Obligations de diligence des banques suisses en relation avec les valeurs patrimoniales de
«personnes politiquement exposées», 10 Novembre 2011, pp. 7-10 (subsequently updated).
63 The bank charged management commissions of 2 per cent, amounting to a total of SwF 8.3 million.
“La Tunisie réclame 114 million de francs à HSBC pour avoir accueilli l’argent du clan Ben Ali”, Le
Temps, 19 March 2015.
45. After six years of proceedings, only a quite paltry sum ($250,000) has been
repatriated.64 An early order to return to Tunisia $40 million whose criminal origin had
been sufficiently established was, however, overturned on appeal by a court which found a
violation of the accused’s right to be heard.
46. The repatriation of the funds will be possible once final and enforceable judgments
confirming the illicit origin of the frozen assets have been issued or concluded in Tunisia.
The Tunisian Government has to prove the acts of embezzlement and corruption committed
by Ben Ali and his accomplices. But freezing orders have a limited duration, legal
procedures are too slow and the crimes that are at the origin of the requests for repatriation
are subject to statutes of limitation.
47. The case involving Malaysia refers to the alleged misappropriation of $4 billion
from a State-owned investment fund set up in 2009 to promote economic and social
development projects. Dozens of interconnected people, companies and Governments have
been identified as having a connection with the fund, which operates mainly from the
Cayman Islands. Malaysia has rejected the Swiss offer of legal assistance, claiming that
criminal investigations are being conducted by its own authorities.65
48. In Switzerland, criminal investigations into bribery and money-laundering revealed
that about $800 million were illicitly deviated through three Swiss banks (reportedly, BSI
SA, Coutts & Co. Bank and Falcon Private Bank).66 FINMA has withdrawn the banking
licences of all of them for flagrant violations of anti-money-laundering obligations and has
confiscated the illicitly gained profits from Falcon (SwF 2.5 million) and Coutts & Co.
(SwF 6.5 million). Only in the case of Coutts were criminal proceedings also opened for
suspected deficiencies in the bank’s internal organization and FINMA is reportedly
considering opening enforcement proceedings against the responsible employees.67
VII. Negative impact of the non-repatriation of illicit financial flows on the enjoyment of human rights
49. The non-repatriation of illicit financial flows not only contributes to increasing the
gap between developed and developing countries; it also hinders the socioeconomic
development of the developing countries in particular, as well as their capacity to deliver
basic social services to their citizens. As a consequence, citizens’ confidence in the
Government and the rule of law is eroded, and corruption and poverty perpetuated.
Non-return jeopardizes the enjoyment of economic, social and cultural rights
50. Illicit financial flows reduce the resources to be committed to social and economic
investment and infrastructure, jeopardizing the State’s ability to fulfil economic, social and
cultural rights to the maximum of its available resources. Diversion of funds through
corruption particularly impacts on the socioeconomic rights of the population of the poorest
States, which may encounter difficulties in fulfilling their minimum core obligations with
respect to the most basic rights: the right to food, the right to an adequate standard of living,
and the rights to health and education.68
64 “Switzerland to return over USD 250,000 of Ben Ali’s money to Tunisia”, Africanews, 1 June 2015.
In addition, Tunisia managed to recover $28.8 million held by Ben Ali’s wife in a Lebanese bank.
65 See www.admin.ch/gov/en/start/documentation/media-releases.msg-id-60510.html.
67 FINMA, “FINMA sanctions Coutts for 1MDB breaches”, 2 February 2017; “Falcon sanctionné pour
ses manquements en lien avec 1MDB”, 11 October 2016.
68 See, for example, African Commission on Human and Peoples’ Rights, communications Nos. 25/89,
47/90, 56/91 and 100/93, Free Legal Assistance Group and others v. Zaire.
51. The negative consequences for the affected population derived from the non-
repatriation of illicit financial flows are evident. When the population is deprived of the
minimum quality standards indispensable for survival, not only the civil and political but
also the economic, social and cultural rights of the population are violated. Such violations
undoubtedly have a direct impact on the dignity of the citizens, whose most fundamental
rights are deliberately curtailed.
52. In Tunisia, the return of the assets frozen in several countries would contribute to
alleviating the effects on the population of the increasing fiscal pressure caused by the
country’s deteriorating economic situation. The repatriation of the looted money to Yemen
would certainly contribute to ameliorating the extreme living conditions of the population
in a country with one of the lowest rates of human development.69
Non-return hinders the realization of the right to development
53. The non-repatriation of illicit financial flows deprives countries of origin of the
much-needed additional resources for public investment, jeopardizing its development
prospects. Developing countries lose billions of dollars every year through illicit financial
flows. In Africa, it is estimated that over the past 50 years, the continent has lost $1 trillion
in illicit financial flows. This amount is equivalent to all the official development assistance
received in the same time frame.70
54. Furthermore, non-repatriation of illicit financial flows creates immense human
suffering and clearly undermines development. Countries lose capital for investment and
revenue that could have been used to finance development programmes. These outflows
pose a particularly serious concern to countries with high levels of poverty and increasing
resource needs due to population growth. Reduction of official development assistance due
to the global economic and financial crisis is compelling even more developing countries to
look to their own resources to fund their development agendas.71
55. Deprived of important monetary assets and of the revenues of their natural
resources, developing countries are forced to reduce investment in key development sectors
or to increase their debt burden in order to introduce the necessary policies at the domestic
level. Lack of public policies and investment in social and economic programmes
disproportionately affects the weakest sectors of the population.
56. Illicit financial flows also undermine State capacity and governance. The people and
corporations behind illicit financial flows usually become involved in acts of corruption in
order to transfer the proceeds of bribery and abuse of power. By preventing the proper
functioning of regulatory institutions, they compromise State officials and institutions. This
situation may reverse all efforts to reinforce State structures and to consolidate the rule of
57. Countries which are rich in natural resources and countries with inadequate or non-
existent institutional architectures particularly attract illicit financial flows. In a
memorandum of understanding on the modalities for the return to Nigeria of stolen assets
confiscated by the United Kingdom of Great Britain and Northern Ireland, it was
acknowledged that the embezzlement of large amounts of State funds considerably reduced
the resources available to the Government of Nigeria to provide social services or invest in
infrastructure and economic development in order to move the country to greater
69 Yemen ranks 168 out of 188 countries on the Human Development Index. In 2013, 4 per cent of the
population was considered by the United Nations Development Programme as suffering from
multidimensional poverty. Today, food insecurity affects 70 per cent of the population as a result of
the armed conflict. See H. Kodmani, “Guerre oubliée au Yémen : la famine menace”, Libération, 23
70 ECA, Illicit Financial Flows: Report of the High Level Panel, p. 14.
71 Ibid., p. 53.
prosperity. The plundering of national revenues may thus ultimately lead to a violation of
the right of the people to freely dispose of their natural wealth and resources.72
Non-return reinforces impunity and perpetuates corruption
58. The non-repatriation of stolen assets sends the wrong message: that cases of grand
corruption will remain unpunished. Impunity must be avoided, particularly where national
resources and public funds have been systematically plundered, or such actions have been
tolerated, by those in the Government or in powerful positions.73
59. Although the concept of crimes against humanity has traditionally been linked to
grave or systematic violations of civil and political rights, there is no doubt that the
international community also has a great interest in putting an end to impunity for
economic and financial crimes, particularly those that can be qualified as grand corruption.
There is no doubt that criminal organizations emerging from kleptocratic regimes, i.e. those
whose only objective is the pillage of the State’s resources, cause direct damage to the State
and affect the fundamental rights and freedoms of the population.74
60. It is therefore not audacious to affirm that there is a connection between crimes
against humanity and the systematic pillage of the public resources of a country. Corruption
and abuse of power, when systematically orchestrated from the Government, lead to an
unjustified increase of the debt burden and curtail the socioeconomic progress and
sustainable development of the country.
61. Economic crimes must be an integral part of transitional justice frameworks.
Amnesties, immunities or statutes of limitation should not serve to guarantee impunity to
those responsible for violations of economic, social and cultural rights which may amount
to crimes against humanity. Accountability for serious human rights violations and
economic crimes committed under past regimes must be prosecuted, as amnesty in cases of
grand corruption contributes to the weakening of processes of transition to democracy.
VIII. Main challenges inhibiting the return of illicit funds
62. As noted earlier, attempts to return illicit funds expatriated mostly from developing
countries have too often been difficult or ineffective. The main challenges that inhibit the
return of these funds are described in the following paragraphs.
Lack of political will
63. Repatriation involves the return of funds that have, over time, become imbricated in
the economies of the countries to which they have been transferred. Some of these
destination countries have adopted lax financial regulation in a deliberate attempt to
compete with offshore financial centres for illicit funds, and the negative discourse
surrounding such centres is intended to skew competition.75 The withdrawal of these funds
thus would require the destination countries to take action against powerful domestic
72 In a complaint filed with the African Commission on Human and Peoples’ Rights by the Asociación
Pro Derechos Humanos de España against Equatorial Guinea, the organization considered that the
Government’s plundering of national oil revenues violated the right of the people of Equatorial
Guinea to freely dispose of their natural wealth protected by the African Charter on Human and
Peoples’ Rights. See www.opensocietyfoundations.org/sites/default/files/
73 For a definition of grand corruption, see E. Hava, “Strategies for preventing international impunity”,
Indonesian Journal of International and Comparative Law, vol. II, No. 3 (July 2015), p. 520.
74 See E. Monfrini and Y. Klein, “L’État requérant lésé par l’organisation criminalle: l’exemple des cas
Abacha et Duvalier”, in Etat de droit et confiscation international, Sandrine Giroud and Alvaro
Borghi, eds. (Edis, 2010), p. 135.
75 See, generally, Donato Masciandaro, ed., Global Financial Crime: Terrorism, Money-laundering and Offshore Centres (London, Ashgate, 2004) and J.C. Sharman, The Money Laundry: Regulating
Criminal Finance in the Global Economy (Ithaca, Cornell University Press, 2011).
interest groups such as financial institutions76 and real estate developers; this is far harder
than blaming island nations far away for their lax financial practices.
64. Benefits of illicit financial flows to local property markets. Illicit funds are now key
to shoring up real estate markets in many places, including London, New York and
Vancouver, Canada. The impact of their repatriation would not be limited to construction-
and property finance-related industries, but would also be manifest in decreased spending
power available to most consumers in economies of these destination countries.
65. Benefits of illicit financial flows to local financial markets. In 2009, the Executive
Director of the United Nations Office on Drugs and Crime revealed that at the height of the
2008 financial crash, drug money was pumped into the global financial system to keep it
afloat.77 Foreign funds, including illicit financial flows, have also been key to shoring up all
too many credit-driven, developed economies due to their lack of domestic savings that
would finance their economic growth.78 Thus, the hasty withdrawal of any funds, licit or
illicit, due to the need to repatriate them to their countries of origin would severely affect
the economies of many developed countries.
66. Benefits of illicit financial flows to local professional service providers. Many
jurisdictions have specialized in the provision of financial and legal services to those who
are involved in the generation and facilitation of illicit financial flows.79 However, the list
of illicit financial flows-friendly countries/jurisdictions includes Switzerland, Hong Kong
and Singapore, as well as Delaware, Nevada and Wyoming in the United States.80 Thus, the
hasty repatriation of the illicit funds which are “banked” in these jurisdictions would
threaten the stability and prosperity of the economies of these jurisdictions.
Difficulty of establishing a nexus between illicit financial flows and crime and/or civil
67. In the case of illicit flows resulting from criminal conduct, establishing a clear link
between crime committed in the country of origin and the proceeds of crime in the
destination jurisdiction is inordinately difficult.81 This difficulty is compounded by the fact
that the link — the proof — needs to be incontrovertible if repatriation is to be ordered.
Where the illicit financial flows stem from activities which qualify as civil wrongdoings,
repatriation is all the more difficult since there is no clearly established international
convention for doing so. As noted in section V, while instruments such as the United
Nations Convention against Corruption urge States to “consider” cooperating in such cases,
this provision remains of advisory — and thus limited — utility.
Difficulty of establishing beneficial ownership and/or piercing the corporate veil
68. Whether illicit financial flows stem from crime, corruption or tax abuse, many — if
not most — transactions are conducted behind several corporate veils and routed through
76 Jack Smith, Mark Pieth and Guillermo Jorge, “The recovery of stolen assets: a fundamental principle
of the UN Convention against Corruption”, U4 Brief No. 2, Chr. Michelsen Institute, February 2007.
Available at www.u4.no/publications/the-recovery-of-stolen-assets-a-fundamental-principle-of-the-
un-convention-against-corruption/. Malaysia picks up this point in its general observations in
response to the questionnaire.
77 Rajeev Syal, “Drug money saved banks in global crisis, claims UN advisor”, Observer, 13 December
2009, available at www.theguardian.com/global/2009/dec/13/drug-money-banks-saved-un-cfief-
78 See www.forbes.com/sites/mikepatton/2014/10/28/who-owns-the-most-u-s-debt/#20e0d1141907.
79 See Shaxson and Christensen, “Tax competitiveness”.
80 Jana Kasperkevic, “Forget Panama: it’s easier to hide your money in the US than almost anywhere”,
Guardian, 6 April 2016. Available at www.theguardian.com/us-news/2016/apr/06/panama-papers-us-
81 Cynthia O’ Murchu, “Follow the money”, Financial Times, 14 August 2014.
multiple jurisdictions to extinguish traces of ownership.82 As such, it is too often very hard
to conclusively identify the beneficial owner of a company.
Debates over conditionality or the human rights-based approach
69. This is rapidly shaping into one of the most divisive issues in the repatriation of
illicit funds. Advocates of conditionality — particularly in the destination countries in the
global North — insist that the return of funds be conditioned on promises that the country
of origin will use them to satisfy human rights obligations.83 Predictably, countries of origin
in the global South are vehemently opposed to the idea of conditionality being attached to
the use of their own funds.84 Further, they contend that they should be able to design and
fund development projects based on their national priorities, not on Western notions of
“appropriate” human rights projects. The notion is thus highly problematic.
IX. Importance of international cooperation in the return of funds of illicit origin
70. Illicit financial flows carry serious economic and human rights consequences that
cannot be redressed without concerted international cooperation, and even solidarity. For
example, the African Commission on Human and Peoples’ Rights notes that both
multinational corporations and individuals from Africa drain billions of dollars every year
from the continent.85 Unless all countries commit to significantly more coordinated global
action to address loopholes, weak laws and monitoring across jurisdictions, many such
countries will continue to be drained of their revenue potential.
71. The return of illicit financial flows derived from tax abuse, criminal activity and/or
corruption depends in part on the forensic audit skills and strong State prosecution services
that some countries of origin, particularly developing countries, lack. This need is
exacerbated where law enforcement authorities lack the ability to prosecute transnational
crime86 and where criminal syndicates and politicians control or have significant influence
over the legal and State authorities in the source countries. Finally, repatriation is also
exceedingly difficult where the underlying wrongful act is civil in nature rather than
72. In many cases where illicit financial flows are routed via multiple jurisdictions to
their eventual destination, repatriation also requires engagement with multiple legal
regimes. Without greater international cooperation, it will be even more difficult for many
countries of origin to trace illicit financial flows and meet the standards of proof required to
effect repatriation. There will also be a host of procedural issues. In Jamaica, for example,
domestic courts necessarily address the issue of restitution under local statutes. However,
the procedural law does not differentiate between residents and non-residents when it
comes to victims and third-party claimants, thus creating problems regarding witness
attendance and the taking of admissible evidence. 87 Further, the criminal networks and
politicians who control State and legal authorities in some of the countries of origin will
continue to facilitate illicit financial flows unless destination countries recognize their
82 Emile van der Does de Willebois and others, The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What To Do About It, Stolen Asset Recovery Initiative
(Washington, D.C., World Bank, 2011) available at http://documents.worldbank.org/curated/en/
assets-and-what-to-do-about-it; and OECD, Better Policies for Development 2014, p. 27.
83 See the response of the European Union to the questionnaire.
84 See, for example, the response of Juan Pablo Bohoslavsky to the questionnaire and Human Rights
Council resolution 31/22.
85 Resolution 236 adopted by the African Commission on Human and Peoples’ Rights on 23 April 2013,
available at www.achpr.org/sessions/53rd/resolutions/236/.
86 Response of Jamaica to the questionnaire.
87 Response of Jamaica to the questionnaire.
primary responsibility in preventing such crimes against humanity and divert illicit
financial flows from their countries.
73. In their ostensible competition for foreign investment, speculative financial flows
and/or individual wealth, poor countries are increasingly pitted against each other in
needless “tax wars” that do little more than eventually shrink almost all of their tax bases,
distort markets and lead to a regulatory race to the bottom. 88 Greater international
cooperation can allow poor countries to resist the temptation to institute such “beggar-thy-
neighbour” policies and maintain a common minimum standard to protect all of their
respective markets and tax bases.
74. In order to prevent illicit financial flows, all stakeholders need to be equally
committed to both South-South and North-South cooperation. The necessity of North-South
cooperation stems from the fact that the final destinations of almost all illicit financial flows
are either rich Western countries or their satellites. 89 This point is picked up by the
Independent Expert in his final study, in which he noted that “many of the world’s most
important secrecy jurisdictions are developed countries, which have historically been
overlooked in their role in facilitating tax evasion” and illicit financial flows (see
A/HRC/31/61, para. 9). Further, in a 2014 report, OECD noted that “without action, OECD
countries are at risk of becoming safe havens for illicit assets from developing countries”.90
Unless secrecy jurisdictions and destination countries commit to doing all that they can to
prevent illicit financial flows landing on their shores, the “safe haven” charge is likely to
75. South-South cooperation is also critical as it will, first, arrest regional beggar-thy-
neighbour taxation and anti-corruption policies by enhancing cooperation, presenting a
common front and reducing harmful competition. Second, this kind of cooperation could
conceivably lead to the formation of regional economic blocs focused on this issue that
would tend to strengthen the negotiating positions of the poorer countries vis-à-vis the
relevant multinational corporations and their countries of origin.91 This will address the
fundamental imbalance of wealth and power between these actors.
X. Conclusions and recommendations
76. Without effective repatriation of the stolen assets, developing countries and
countries in transition to democracy are deprived of very much needed resources, and
the opportunity to take advantage of the momentum for undertaking the economic
and social reforms necessary for bolstering development, is being missed. The
delaying tactics of Governments and banks as well as attempts to justify hindrances to
the effective return of illicit financial flows are not only reproachable from a moral
point of view but also politically and economically unacceptable.
77. The fact that the countries that struggled for democracy during the Arab
Spring had not been able to recover the money looted by their former dictators is
scandalous. Stolen assets must be effectively returned not only because those resources
are urgently needed, but also because of their highly symbolic value. The international
community must urgently send a strong message: corruption promoted by the highest
levels of the State cannot be tolerated and will not go unpunished.
78. States must cooperate in good faith to facilitate the repatriation of illicit
financial flows. They must enact proactive legislation and promote policies and
practices aimed at facilitating the smooth and prompt return of the assets to the
88 Shaxson and Christensen, “Tax competitiveness”.
89 OECD reports on illicit financial flows; J. Henry, “How to respond to the Panama Papers”, Foreign
Affairs (April 2016), available at www.foreignaffairs.com/articles/panama/2016-04-12/taxing-tax-
havens; and Shaxson and Christensen, “Tax competitiveness”.
90 OECD, Illicit Financial Flows from Developing Countries, p. 3
91 Krishen Mehta and Erika Dayle Sui, “Ten ways developing countries can take control of their own
tax destinies”, in Pogge and Mehta, Global Tax Fairness, p. 353.
countries of origin. The international community must struggle to curb predatory
financial practices which lead to human rights violations and contribute to erosion of
the rule of law.
79. The Advisory Committee of the Human Rights Council recommends that
(a) Ensure the prompt and unconditional repatriation of funds of illicit
origin to the countries of origin. A renewed, decisive and pro-active global
commitment is needed to tackle the phenomenon of illicit financial flows and their
ensuing negative impact on human rights and the right to development. States must
take urgent action to push forward the procedures aimed at the recovery of stolen
assets. They must adopt all measures needed to prevent the plundering of public assets
to the benefit of private individuals or entities. Corruption and other practices that
tend to maximize profits by circumventing the spirit of the law must be curtailed.
Policies to end corruption and money-laundering must be decisive, and preventive
measures must be effective and implemented in practice;
(b) Ensure that the crimes that are at the origin of illicit financial flows and
grand corruption are adequately sanctioned and do not remain unpunished or subject
to statutes of limitation. Impunity for those who systematically and massively plunder
public resources is unacceptable. Those responsible for grand corruption must be held
accountable and amnesty laws should not be misused to avoid justice. Under certain
circumstances, financial crimes with transnational implications should be prosecuted
at the international level and not be subject to statutes of limitation. States should
consider ways to characterize as punishable international crimes, i.e., as crimes
against humanity, acts of corruption that are carried out systematically and have a
genuine impact on the social and economic well-being of the population, i.e., acts that
lead to the dismantling of social services, thereby hindering economic and social
(c) Ensure that the banks and financial intermediaries involved, notably
those specialized in asset management, are held accountable for their involvement in
illicit financial flows. States must urgently ensure that banks and other financial
intermediaries operating in their jurisdiction conduct their business with due
diligence. States should monitor their compliance with all preventive measures
envisaged at the national level effectively and hold banks and banks managers
accountable in cases of violation. Criminal sanctions must be envisaged and they must
be proportional to the gravity of the case. States must ensure that financial
intermediaries proactively take actions to fight corruption and money-laundering.
Banks must provide proof of the actions that are being taken to avoid “dirty money”.
States must ensure that regulatory authorities undertake all necessary measures to
guarantee banks’ due diligence and accountability and that those measures are
implemented in practice; the authorities must also effectively demonstrate
impartiality and independence in their functioning;
(d) Support the suppression of tax havens and the regulation of offshore
companies. The problematic surrounding asset recovery processes should be
addressed as part of a broader international dialogue on the reform of the
international financial system. States should actively support global initiatives aimed
at curtailing those practices in the financial sector that favour illicit financial flows.
More specifically, they must join the struggle undertaken by OECD against tax
havens and offshore companies by supporting the setting up of a publicly available
international register of offshore companies; prohibiting anonymous shares in limited
liability companies; and making the ultimate beneficiary nominee of shares publicly
(e) Support action by the Security Council on the freezing of illicit financial
flows and encourage the extension of similar measures to other cases. Council
resolutions 2140 (2014) and 2216 (2015) on the situation in Yemen, by means of which
individuals or entities designated by the 2140 Sanctions Committee are listed and
sanctioned, are particularly welcome. Analogous measures should be considered in
other similarly blatant cases, notably to support judicial cases dealing with the non-
repatriation of public money stolen by means of grand corruption.