After ‘Panama Papers’ leak, UN expert calls for end of financial secrecy to halt illicit fund flows – In the wake of last week’s leak of a trove of confidential financial documents from a Panama law firm, a United Nations human rights expert called on the international community to urgently put an end to financial secrecy.
“Tax evasion and the flow of funds of illicit origin undermine justice and deprive Governments of resources needed for the realization of economic, social and cultural rights,” UN Independent Expert on foreign debt and human rights, Juan Pablo Bohoslavsky, warned, as the documents, which have been dubbed the ‘Panama Papers,’ have shown how corporations, wealthy individuals and politically exposed persons have systematically hidden assets in more than 21 offshore jurisdictions.
“The clients may have had different motives for depositing their assets into more than 210,000 secret shell companies. But tax evasion, hiding corruption and criminal funds appear to be a prominent reason,” said Mr. Bohoslavsky, author of a recent study on illicit financial flows presented to the UN Human Rights Council.
The expert noted that shell companies have also been used in the past by groups and individuals busting sanctions, trafficking drugs, engaging in illicit arms trade, terrorism as well as by authoritarian rulers responsible for severe violations of human rights.
“Tax evasion destroys trust in public institutions and the rule of law, and shrinks the fiscal space for investing in public health care, education, social security and other public goods and services,” the expert explained. “Public funds that are essential to guarantee economic, social and cultural rights to all are robbed from the people,” he added.
The UN human rights office noted that the leaked documentation shows that many banks and financial intermediaries have failed to exercise due diligence with their clients. Some of them may actually have aided and abetted tax evasion, corruption and other criminal activities. According to the ‘Panama Papers’ more than 14,000 banks, law firms, company incorporators or other middlemen have set up companies, foundations and trusts for customers.
Mr. Bohoslavsky recalled that the UN Human Rights Council recognized that flows of funds of illicit origin deprive many States of resources required to progressively realize human rights. In a resolution adopted last month, the Council stressed the need for transparency and effective due diligence procedures of financial intermediaries.
Reducing substantially by 2030 illicit financial flows is an agreed target of the new UN Sustainable Development Goals (SDGs). Curbing such flows was also agreed to at the Third International Conference on Financing for Development held in July 2015 in Addis Ababa.
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Credit: UN News Centre