Launch of the FACTI Panel’s Interim Report

1 October 2020 –

On 24 September 2020, the High-Level Panel on International Financial Accountability, Transparency and Integrity (the FACTI Panel) published its Interim Report highlighting and analysing the gaps and weaknesses of existing international systems regarding financial accountability, transparency and integrity. The Report and the Panel’s work were presented and discussed during a virtual event, co-chaired by Ibrahim Assane Mayaki, former president of Niger, and Dalia Grybauskaite, former president of Lithuania. 

Although estimates should be treated carefully, the Report gives an idea of the scale of the loss of resources worldwide. Their estimates show that around $20 to $40 billion are received as bribes every year, while approximately $7 trillion of private wealth are concealed in haven countries, and $500 to $600 billion in corporate tax revenue are likely to be lost every year through profit-shifting by multinational companies. 

This spectacular drain of resources directly affects the capacity of states to achieve the Sustainable Development Goals (SDGs), especially in developing countries. The Report stresses the systemic nature of shortcomings linked to the loss of resources. Challenges are interlinked and should be addressed globally, in an inclusive, coordinated, and transparent way. The Panel aims to find solutions to engage positive change through the improvement of tax cooperation, beneficial ownership transparency, asset recovery processes, and the fight against bribery and corruption.

Improving the UNCAC Review Mechanism

“While recognizing that the [Implementation Review Mechanism] of the UNCAC remains an important achievement, the mechanism is not yet robust enough to ensure comprehensive and effective implementation of UNCAC provisions by States parties.”

The UN Convention against Corruption (UNCAC) is central in the fight against illicit financial flows. It revolutionised the global architecture to address corruption-related crimes as the first comprehensive and international legally binding instrument to fight corruption. The Convention initiated a significant change in domestic and international anti-corruption frameworks. Some provisions, such as the establishment of national strategies against corruption, are extensively implemented. Technical assistance in connexion to the UNCAC Review Mechanism has been increasingly important to address the shortcomings associated with the implementation of the Convention on the national level.

However, the Interim Report identified weaknesses in the Review Mechanism, despite its crucial role in the implementation of the UNCAC. The review process should be an instrument to assess both a state’s legal compliance with the Convention, as well as its level of implementation in practice. The Panel found that this has not been done effectively. The dissemination of results seems limited compared to other mechanisms – only the publication of an executive summary is mandatory, the publication of the self-assessment checklist and the full country report, both more extensive documents, remains optional. The FACTI Panel recognises that, to be effective, reviewing mechanisms should be comprehensive, inclusive, impartial, transparent and include a follow-up. States Parties to the UNCAC are not subjected to any follow-up mechanism, which makes the assessment of the measures taken after the completion of their review difficult. Other instruments, such as the OECD Working Group on Bribery, the FATF Recommendations or the Global Forum on Transparency and Exchange of Information for Tax Purposes, have established follow-up processes to monitor the implementation of measures covered by their agreements. 

The inclusion of civil society

“At the domestic level, and at the international level through global networks, CSOs are critical to promoting financial accountability, transparency and integrity.”

The Interim Report also highlights a lack of inclusivity in the UNCAC review process. States Parties are encouraged to engage with non-state stakeholders during their review. However, the reviewed countries ultimately decide whether or not to include them. The lack of transparency in the information contained in the executive summaries rarely provides indications on what kind of stakeholders were involved, if any,  and to what extent. The Panel recognises that the inclusion of civil society in the review process would contribute to the impartiality of the Mechanism. It furthermore acknowledges the essential role of civil society in fighting illicit financial flows, raising public awareness, stimulating political will, monitoring and promoting transparency, as well as advocating for integrity – all in order to achieve the 2030 Agenda. The Report recognises the important advocacy role of global organisations such as the UNCAC Coalition to enhance international frameworks. 

Civil society was represented during the virtual discussion around the Interim Report by Gillian Dell, Head of Conventions Unit at Transparency International (and a member of the Coalition’s board), who stressed that “the knowledge that we gained shows that a common agenda is necessary.” She emphasised the valuable experience and expertise held by CSOs to fight illicit financial flows. Civil society should be given a proper space to monitor, detect fraud, expose non-compliance, file complaints, and contribute to the elaboration of tools such as public beneficial ownership registries. Gillian Dell called for the establishment of global standards for asset registries, beneficial ownership registries, and a quick and transparent return of stolen assets. She suggested that the Panel’s final report should complement the preparation of the UN General Assembly Special Session against Corruption and encourage it to take into more serious consideration the victims of corruption, highlight the protection of whistleblowers, and adopt a gender-sensitive approach to corruption.

Grand corruption, beneficial ownership transparency and asset recovery

“Greater transparency and information exchange are not enough: in many countries the details of serious corruption are public knowledge but knowledge does not translate into accountability. As long as powerful, corrupt people control the government or sabotage investigations, they can enjoy impunity.”

The FACTI Panel acknowledges the major role of grand corruption (in UNCAC discussions referred to as “corruption involving vast quantities of assets”) and its enablers in the weakening of legal frameworks to fight illicit financial flows. Grand corruption undermines the power of the judiciary, strips anti-corruption agencies from their independence, threatens whistleblowers and silences independent media. Transparency and accountability are two key elements to ending corruption involving vast quantities of assets. With corruption techniques constantly evolving, the role of whistleblowers, investigative journalists and NGOs is crucial to expose large-scale financial crimes and initiate durable social change within a given country. However, the Interim Report highlights a worrying lack of protection for whistleblowers among the States Parties to the UNCAC.

“Identification of the natural persons who ultimately own, control or benefit from legal vehicles is an important tool in investigating and eventually prosecuting financial crimes and other abuses.”

Beneficial ownership transparency is one of the main strategies to end impunity and prosecute individuals involved in money-laundering and other financial crimes, the report highlights. Secrecy exacerbates illicit flows of money, making the source of suspicious assets hard to identify and obstructing the investigation of people involved. The FACTI Panel recognises certain efforts towards making beneficial ownership registries publicly accessible. Nevertheless, there are still many gaps to be addressed to make beneficial ownership transparency efficient in the fight against illicit financial flows. For instance, governments should make sure that the information published is up-to-date and accurate, that all legal vehicles susceptible to being used to hide ill-gotten gains are covered by their beneficial ownership legislation, and that gaps between jurisdictions are addressed to efficiently exchange information between countries.

Finally, the lack of cooperation in asset recovery was strongly highlighted in the Interim Report. Asset recovery is one of the fundamental principles of the UNCAC, however, only a very small amount of the total money stolen and hidden abroad has been returned to their origin countries since the UNCAC’s entry into force. Mutual legal assistance requests from countries wishing to recover stolen assets are often lengthy and laborious. The Panel aims to find innovative solutions to make the global asset recovery processes speedier, more transparent and easier to increase the amount of assets recovered. Still, mistrust between jurisdictions is a great challenge to overcome. 

Going forward

The FACTI Panel will release its final report in February 2021 and aims to propose feasible and concrete recommendations addressing the systemic nature of the current challenges to achieving the 2030 Agenda for Sustainable Development. 

The UNCAC Coalition welcomes the example set by the FACTI Panel in leading an inclusive process while writing the Interim Report by including the contributions of several civil society organisations and academics with relevant expertise on transparency, illicit financial flows, and integrity. Civil society is looking forward to continuing its collaboration and giving input for the elaboration of the final report.

Find the report below: