A/HRC/22/42 I. Introduction 1. In its resolution 19/38, the Human Rights Council requested 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, to present to the Human Rights Council at its twenty-second session, a comprehensive study on “the negative impact of the nonrepatriation of funds of illicit origin to the countries of origin on the application by States of the maximum available resources to the full realization of all human rights, in particular economic, social and cultural rights, with special attention paid to developing countries and countries with economies in transition burdened by foreign debt”. 2. The Independent Expert welcomes the request to analyse the human rights implications of the transfer of funds of illicit origin, which may endanger the stability and security of societies, undermine the values of democracy and morality and jeopardize social, economic and political development, especially when an inadequate national and international response leads to impunity. Corruption, the transfer of illicit funds and legal and other barriers to their repatriation not only divert resources away from activities that are critical for poverty eradication, the fight against hunger and economic and sustainable development, they also undermine the enjoyment of economic, social, cultural, civil and political rights. 3. He takes this opportunity to thank the Government of Guatemala for providing information on its legislative and institutional framework for combating illicit financial flows. 4. In order to formulate effective strategies for tackling the problem of illicit funds and ensuring their repatriation to the countries of origin, it is important to understand the different types of illicit financial flows, from which countries such funds originate and where they are held, as well as current initiatives to curb illicit financial flows. This interim report provides an overview of these issues. The final report of the Independent Expert on the subject will discuss in detail the impact of non-repatriation of illicit funds on development and the realization of human rights and will make recommendations concerning strategies to combat illicit financial flows so as to ensure the application of the maximum available resources to the realization of all human rights in the countries affected by these flows. II. Illicit funds: overview of the problem 5. Financial flows may be illicit for two distinct although overlapping reasons. First, they may relate to proceeds of crime, such as corruption, embezzlement, drug trafficking or illegal arms trade. The proceeds are subsequently laundered often through offshore deposits in secrecy jurisdictions1 and shell companies designed to hide illicit financial flows. Second, although most illicit financial flows derive initially from legitimate economic 1 4 The Tax Justice Network, an independent organization that conducts research, analysis and advocacy in the field of tax and regulation, defines secrecy jurisdictions as “places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use, secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so”. See Tax Justice Network, “Identifying Tax Havens and Offshore Financial Centers”, Briefing Paper (2007).