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Corruption and Illicit Financial Flows: A take on the 2016 London Anti-Corruption Summit

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Yesterday, 12 May 2016, a landmark international Anti-Corruption Summit hosted in London by the UK government sought to spur a global response to tackle corruption – a cross-cutting theme in our Institute’s program of work since 2013. The underlying rationale is simple: with corruption having gone global, the justice response should be as well.

The Summit aimed to bring together world leaders, business and civil society who would develop practical steps to: expose corruption so there is nowhere to hide; punish the perpetrators and support those affected by corruption; and drive out the culture of corruption wherever it exists. Topics on the agenda included corporate secrecy, government transparency, the enforcement of international anti-corruption laws, and the strengthening of international institutions.

As this agenda alludes to, the Summit focused not only on corruption but also illicit financial flows. Issues such as corporate secrecy, government transparency, and the strengthening of international institutions are relevant for the prevention and combat of corruption and illicit financial flows as well as their interconnections – see Policy Brief #8 on Curbing Illicit Financial Flows: The Post-2015 Agenda and International Human Rights Law. This commentary builds on suggestions that were made at a time when the Global Goals for sustainable development had not yet been adopted. In particular, these suggestions can build on Goal 16 which was adopted in September 2015 and seeks to promote peace, justice and strong institutions. Key commitments include substantially reducing corruption and illicit financial flows, developing effective, accountable and transparent institutions, and strengthening access to information and participation in public decision-making.  This commentary explains how the Summit can help to prevent and combat corruption and illicit financial flows as well as their interconnections, and how it can improve the Global Goals.

Corruption is normally defined as abuse of entrusted power for private gain. Illicit financial flows are illegal movements of money or capital from one country to another. Such movements are illicit financial flows when the funds are illegally earned, transferred, and/or used. These two phenomena are often interconnected because corruption can be both a cause and a consequence of illicit financial flows. As a cause, corruption often “generates” illicit money, derived from fraud, or trafficking of persons, drugs, weapons, or other illegal goods. Corruption can also be a consequence, because illicit financial flows can lead to corruption in cases where illegal money is laundered via the regular financial system or when local authorities negotiate tax concessions and incentives for investment for states, companies, or individuals. Whether in developed or developing countries, corruption and illicit financial flows divert financial resources from what might otherwise be invested in public goods such as health, agriculture, infrastructure, and education. Consequently, the Summit was right to address both corruption and illicit financial flows, because they are often mutually reinforcing, and can have a negative spiraling effect on a country’s economy, governance, and the rule of law.

Improvements to the Global Goals to which this Summit can contribute, is a full integration of international human rights law into international finance and development. For example, the International Bar Association’s Human Rights Institute (IBAHRI) has laid out existing obligations and responsibilities for States, business representatives, and “facilitators” of illicit financial flows, such as lawyers and accountants, under international human rights law. If the London Summit can contribute to adherence to international human rights law by the audiences invited (States, leaders, business and civil society), this will go a long way to achieving the aspirations of the Global Goals. For example, if State recipients of the sustainable development agenda’s funding have to abide by the yet existing human rights obligations, this can help to mobilize the domestic resources lost to illicit financial flows. Countries can then use that capital to enforce the institutions that uphold civil and political rights and the programs that promote and provide social, economic, and cultural rights. Ultimately, this can help these states which might no longer need international development finance. Under such conditions, the Summit will have a long term global beneficial effect.

Therefore, it is hoped that the Summit’s practical steps will encourage sustainable development efforts through a coalition of public-private and state/non-state financiers under the Global Goals with full integration of international human rights law into international finance and development. When existing human rights obligations for States and responsibilities for businesses, including law and accountancy firms, and “facilitators” of illicit financial flows are taken into account, the Summit will really help to promote peace, justice and strong institutions, echoing the aspiration of Goal 16.

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