A/HRC/28/60 enterprises.27 Where both the incentives for and the opportunities to export illicit wealth are significant, it is likely that the damage to the rule of law will be exacerbated. It has been pointed out that “the potential to hide illicit capital securely in tax havens is a direct stimulus to corruption and other illicit activities like transfer mispricing. It decreases the chances of detection and therefore increases the likely returns”.28 If parts of the political elite are able or willing to accumulate wealth through illicit outflows, economic inequalities are exacerbated and incentives to strengthen tax agencies, the investigatory powers of police services, the independence of the judiciary and public audit services are low. That is a problem in particular in developing countries that face resource constraints in establishing well-equipped and independent institutions to address such complex issues as transfer mispricing. C. Responsibilities of business enterprises 33. Illicit financial flows should not be a human rights concern for States only. While States have the primary duty to respect, protect and fulfil human rights, business enterprises are also required to “avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur” as set out in the Guiding Principles on Business and Human Rights (guiding principle 13). Business enterprises have to respect human rights throughout their operations. They can demonstrate respect for human rights through appropriate policies and due diligence procedures. Multinational enterprises, as well as their advisers and financiers, need to understand that their tax planning strategies have potential negative impacts on human rights. 34. Business enterprises that contribute through transfer mispricing, tax evasion or corruption to significant illicit financial outflows cause adverse human rights impacts by undermining the abilities of States to progressively achieve the full realization of economic, social and cultural rights. This is particularly the case when they operate in States that have difficulties in meeting the minimum core human rights obligations. One obvious way for business enterprises to show responsible behaviour and demonstrate compliance is to embrace a greater degree of transparency, in particular by publishing on a country-bycountry basis their sales, profits and taxes. 35. The same applies to trust and company service providers and commercial banks that do not meet basic due diligence standards when they provide services or help launder and hide illicit funds in offshore financial centres. Most illicit financial flows are facilitated by tax havens, secrecy jurisdiction, shell companies that cannot be traced back to their owners, anonymous trust accounts, bogus charitable foundations, money-laundering techniques and questionable trade practices. There is evidence that banks play a key role in facilitating illicit financial flows when they do not exercise due diligence with their customers (A/HRC/22/42, para. 11). It is the responsibility of States to ensure that their banking regulations comply fully with international recommendations against money-laundering and to take action against structures facilitating illicit financial flows. 27 28 See Theodore S. Greenberg and others., Politically Exposed Persons: Preventive Measures for the Banking Sector (Washington: Stolen Asset Recovery Initiative, 2010); see also Emile van der Does de Willebois et al., The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It (Washington: Stolen Asset Recovery Initiative, 2010). Mick Moore, “The practical political economy of illicit flows” in Peter Reuters (ed.), Draining Development, p. 474. 13