After the formal launching of the Sustainable Development Goals (SDGs) in September this year, different parties are now examining the targets finally adopted. The examination process is part of the exercise required for finalisation of the indicators next year.
At the 70th session of the United Nations General Assembly on September 25 this year, 193 member states adopted the SDGs with a declaration titled 'Transforming our world: the 2030 Agenda for Sustainable Development.' The SDGs have 17 broader goals supported by 169 targets. Indicators to measure the achievement of the targets will be finalised by the UN Statistical Commission in March 2016. Without setting measurable indicators, it is not possible to quantify the targets and thus not possible to measure the status of the goals.
In the long and hectic process of finalising the SDGs, different organisations of the civil society played critical role so that the subjects or issues relevant for long-term development could be accommodated. It was a daunting task and there was strong resistance from some governments against inclusion of certain issues they considered 'uncomfortable' for them.
Nevertheless, some 'uncomfortable' elements were finally included in the SDGs. One such element is illicit financial flow or illegal transfer of financial resources. The declaration reads: "Sustainable development cannot be realised without peace and security; and peace and security will be at risk without sustainable development. The new Agenda recognises the need to build peaceful, just and inclusive societies that provide equal access to justice and that are based on respect for human rights (including the right to development), on effective rule of law and good governance at all levels and on transparent, effective and accountable institutions. Factors which give rise to violence, insecurity and injustice, such as inequality, corruption, poor governance and illicit financial and arms flows, are addressed in the Agenda."
This is the official endorsement of the problems. By making the 'illicit financial flows' one of the components of 169 targets of the SDGs, a global commitment has been made to curb the illegal transfer of financial resources, especially from the developing countries. Goal 16 of the SDGs says: "Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels." Fourth target (16.4) of the goal reads: "By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime."
In fact, between 2003 and 2012, the developing countries lost S$6.6 trillion in illicit outflows while the cumulative total of official development assistance (ODA) to these countries in this period was only $809 billion. Again, foreign direct investment (FDI) to developing countries in these 10 years stood at $5.7 trillion. The total amount of FDI and ODA combined during the period was $6.5 trillion, slightly lower than total illicit financial flows. However, this is a conservative estimation prepared by Global Financial Integrity (GFI) due to difficulty in calculation.
At a global conference on financial transparency, held in the third week of October in Jakarta, participants termed the inclusion of the illicit financial flows in the SDGs framework one big step forward to fight the problem at the global level. At the same time, they also agreed that it required united effort to curb illicit financial flows and increase transparency that can spur development.
REDEFINING IFF: Although illicit financial flows (IFFs) are now recognised as a big challenge for sustainable development across the world, there are some differences on defining the IFFs. There is no exact definition of IFFs. GFI, a Washington-based organisation working on this issue, pointed out that IFFs are different from capital flight, a term that includes both licit and illicit capital. "Licit capital flight is recorded and tracked, significantly lowering the probability that it has a corrupt or criminal source. In contrast, IFFs are by nature unrecorded, and cannot be used as public funds or private investment capital in their country of origin," it said.
The Organisation of Economic Cooperation and Development (OECD), in its report titled 'Illicit Financial Flows from Developing Countries: Measuring OECD Responses' last year, said that there exist various definitions of IFFs, mostly generated by methods, practices and crimes aiming to transfer financial resources out of a country in contravention of national or international laws. OECD broadly identified three types of illegal activities as origin of IFFs. These are: money laundering, bribery by international companies and tax evasion. It, however, acknowledged that IFFs may have arisen from illegal or corrupt practices such as smuggling, fraud or counterfeiting. Or, the source of funds may be legal, but their transfer may be illegal, like tax evasion by individuals and companies. Again, they may be intended for other illegal activities, such as terror financing or bribery, or for illegal consumption of goods.
In the real world, IFFs actually range 'from a private individual transfer of funds into private accounts abroad without having taxes paid, to highly complex schemes involving criminal networks that set up multi-layered multi-jurisdictional structures to hide ownership.'
The World Bank Group, in a brief on IFFs on July this year, suggested focusing on 'flows and activities that have a clear connection with illegality. This means that what constitutes "illicit financial flows" will vary from country to country, due to differences in national legal frameworks.' The Bank was of the view that instead of debating where to draw the line between legal and illicit flows, it would be better to address the flows.
To put it simply, IFFs are illegal transfer of illegally earned or accumulated financial assets from one country to another. It is also coined as `dirty money.'
Against this backdrop, the Jakarta meet, organised by Global Financial Coalition along with Transparency International Indonesia and Jakarta-based organisation Prakarsa, stressed for a set of definition of IFFs. A consensus of defining IFFs is crucial before finalising the relevant indictors in SDGs next year.
One of the major concerns for defining the IFFs lies in the interpretation of the term 'illicit.' According to Collins COBUILD Dictionary, illicit means activity or substance not allowed by law or the social customs of a country. Going beyond dictionary meaning, some proposed to interpret `illicit' as 'hidden' including both `legal and illegal' financial assets. Another opinion was the use of term 'iniquitous' as the meaning of 'illicit' to determine IFFs. The term 'illegitimate' also came into discussion.
No consensus, however, was reached in the conference. It is now the responsibility of all the concerned bodies, organisations and experts to reach a consensus on functional definition and scope of IFFs.
As Bangladesh is a victim of IFFs, the issue needs to be taken care of. Bangladesh is ranked 51st in the GFIs' 'Country Rankings by Largest Average Illicit Financial Flows, 2003-2012.' During the period, annual average outflow of dirty money from Bangladesh stood at $1.31 billion. Thus, the country should join global effort to fight IFFs.
© 2024 - All Rights with The Financial Express
