ISLAMABAD ( STAFF REPORT )
Trillions of dollars flow out of developing countries each year. Seven trillion dollars in stolen assets are parked in the financial “haven” countries. The flight of these vast resources from the developing countries is a principal cause of their under-development, poverty, inequality and political instability. Prime Minister Imran Khan said in his speech while addressing on launch the Final Report of the High-Level Panel on Financial Accountability, Transparency and Integrity.
He said When my Government took office, two and a half years ago, the country’s coffers were empty, denuded by huge and accumulated trade and fiscal deficits, but more than that, by illicit financial outflows from our country. Your Interim Report confirmed that due to political and official corruption, as well as crime and tax evasion, trillions of dollars flow out of developing countries each year. Seven trillion dollars in stolen assets are parked in the financial “haven” countries.
The flight of these vast resources from the developing countries is a principal cause of their under-development, poverty, inequality and political instability. During the consideration of the Interim Report in September last year, I had suggested several global policy actions including:
– Immediate return of stolen assets;
– Penalties on the financial institutions, lawyers and accountants, and other “enablers” of corruption, crime and tax evasion;
– Disclosure of the “beneficial ownership” of companies;
– A global minimum corporate tax;
– Fair digital taxation;
– Review and revision of unequal investment treaties; and
– A coherent mechanism for monitoring illicit financial flows set up under the United Nations.
I am glad that these proposals have been reflected in the Final Report of the Panel.
As the FACTI Report states, this is a systemic problem, embedded within the international financial architecture. It requires a systemic solution. It cannot be resolved by piecemeal or cosmetic actions.
The magnitude of the illicit financial flows is staggering. If recovered and returned, they can have a transformational impact on the development prospects of the developing countries.
As the Report says: “This could enable the developing countries to eradicate poverty, reduce inequalities, build back better after the COVID crisis, address climate change and strengthen human rights.”
Prime Minister endorse the three-point plan proposed by the Panel:
One, apply international “values” of honesty and integrity to all financial transactions;
Two, strengthen policy frameworks; and Three, reform and reinforce the relevant institutions dealing with these illicit financial flows.
These responses could form part of a Global Pact for Financial Integrity.
National and cross-border financial transactions should be regulated under a “values-based” system, encompassing accountability, transparency, legitimacy, fairness, inclusion and equity.
These “values” should be reflected in all national and international financial instruments, institutions and transactions – and particularly in those bodies which address illicit financial flows. All such activities should conform to rules and standards that are compatible with, and contribute to sustainable development.
And, global financial governance must improve. Policies on illicit flows must be implemented in a coordinated and coherent way by national and international institutions and bodies. International bodies dealing with tax matters, corruption and illicit financing should be inclusive and representative. They should not be used as instruments of pressure and coercion against developing countries.
A global forum, under the United Nations, should coordinate all bodies dealing with the technical, legal and political aspects of illicit financial flows. It should incorporate a mechanism to adjudicate and mediate disputes on issues relating to illicit financial flows.
Imran khan said that It’s now time to act on the recommendations of the FACTI Panel. Pakistan will be happy to join in proposing the adoption of the FACTI Panel Report by the United Nations Economic and Social Council and the General Assembly.
We must also take some quick concrete actions:
First, a commitment by “haven” countries to immediately and unconditionally return all foreign assets that are shown to be stolen or whose “legitimacy” cannot be explained. The OECD’s proposal to freeze and return the unexplained assets of foreign “Politically Exposed Persons” is worthy of consideration.
Secondly, the UN should initiate several steps, including:
– Initiate negotiations on the new international tax cooperation and anti- money laundering legal instruments, like the Convention on Corruption;
– Adopt common principles identified by the FACTI Panel that would apply to all financial transactions; and
– Establish a UN Coordination, Adjudication and Mediation mechanism on illicit financial flows. Pakistan will work actively with all like-minded countries to realize these vital objectives.