A/HRC/28/60 I. Introduction 1. In its resolution 25/9 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, particularly economic, social and cultural rights, to undertake a further 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, and to present an interim study to the Human Rights Council at its twenty-eighth session. 2. The Independent Expert welcomes the request to analyse the human rights implications of illicit financial flows, which may endanger the stability and security of societies, undermine the values of democracy, morality and tax justice, 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 sustainable economic and social development, they also undermine the enjoyment of economic, social, cultural, civil and political rights and the right to development. 3. The present interim study updates earlier reports by the United Nations High Commissioner for Human Rights (A/HRC/19/42) and the previous Independent Expert (A/HRC/22/42 and A/HRC/25/52). It also complements a recent report on taxation policies by the Special Rapporteur on extreme poverty and human rights (A/HRC/26/28). II. Illicit financial flows and asset recovery A. Definitions 4. Illicit financial flows in a narrow sense are 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.1 The illicit nature stems from two distinct but overlapping causes: the first relating to the proceeds of crime, the second, initially deriving from legitimate economic activities that ultimately become illicit owing to the contravention of laws (A/HRC/22/42, para. 5). In a broader sense, illicit financial flows encompass in addition all kinds of artificial arrangements that have been put in place for the essential purpose of circumventing the law or its spirit, including certain legal “tax-optimization” schemes, making use of legal loopholes that allow for example transnational corporations to shift around profits to zero or low corporate tax jurisdictions, without undertaking any real economic activities in those jurisdictions.2 5. Activities related to illicit funds can also be clustered according to the illicit motivations involved.3 Those may be market and regulatory abuse, tax abuse, tax evasion, or abuse of power, including the theft of State funds and assets, and the profit from crime or 1 2 3 Dev Kar and Karly Curcio, “Illicit financial flows from developing countries: 2000–2009” (Global Financial Integrity, Washington, D.C., 2011), p. 3. United Nations Conference on Trade and Development (UNCTAD), Trade and Development Report 2014 (Geneva, 2014), p. 173. Alex Cobham, “The impacts of illicit financial flows on peace and security in Africa: Study for Tana High-Level Forum on Security in Africa” (April 2014), p. 5, available from http://bit.ly/tanastudy. 3