Harrington Asks Banks to Stem Illicit Transactions

Harrington Investments, Inc. (HII), a socially responsible investment advisory firm filed shareholder resolutions at Citigroup, Bank of America and JP Morgan Chase, calling for the adoption of principles to stem illicit financial transactions which is the result of government corruption and bribery, tax evasion, money laundering, illegal arms deals and the movement of money by drug cartels. (download resolution in pdf)

The resolutions also request that the banks support broad public policies aimed at creating greater accountability for the identification of criminal money by significant non-bank actors in the financial system.

“According to Global Financial Integrity (GFI), the U.S. financial sector, especially international bankers, are under increasing pressure from government regulators to respond to the growing illicit movement of money throughout the financial system,” said Harrington.  “Shareholders, as principals, need to make sure that our agents, corporate executives and bank boards of directors, respond as responsible fiduciaries to protect our banks’ integrity and reputation by developing industry-wide standards.”

Heather Lowe, Legal Counsel and Director of Government Affairs for Washington, D.C. non-profit advocacy group Global Financial Integrity, commented that “These resolutions are all about reducing the risk that illicit funds even get to the banks, and if they do, making it easier for banks to identify the bad actors.  They are based on recommendations put forward by the Senate Permanent Subcommittee on Investigations earlier this year and recognize that banks need support in their efforts to root out illicit money.  We hope that shareholders also recognize the value of making a bank’s partners part of the solution to this global problem.”

Harrington and his corporate counsel have been working with GFI and the Task Force on Financial Integrity and Economic Development in an effort to evaluate policies of banks owned by HII to prevent illicit financial flows.  This resulted in the introduction of shareholder resolutions at the banks to encourage management to adopt principles for national and international reforms to prevent illicit financial flows based upon the following four principles:

  • That there should be established by governments or other third parties an international, publicly administered database  of politically exposed persons so that all financial institutions can access it, and be privy to the same information,  to  enable consistently rigorous due diligence across the industry.
  • That other actors in financial market transactions, such as realtors and escrow agents, attorneys and their client accounts, should be subject by public policy to strict anti-money laundering safeguards.
  • That all privately held corporations that seek access to US financial markets should be obliged by public policy to disclose the names of natural persons having a substantial economic interest in such entity or exercising de facto control over its policies or operations.
  • That the United States government should implement these principles through its policies, and by advocating for appropriate international mechanisms.

In December 2009, Harrington Investments became a signatory on the New Haven Declaration on Human Rights and Financial Integrity following a two-day conference at Yale University focusing on how illicit financial flows and the shadow banking system increase global poverty.  The declaration was delivered to the G8 and G20 diplomats, international financial institutions and NGOs around the world.

New Haven Declaration On Human Rights and Financial Integrity

Human rights and international financial integrity are intimately linked. Where poverty is pervasive, civil, political, and economic rights often go unrealized. Today, large outflows of illicit money – many times larger than all development assistance – greatly aggravate poverty and oppression in many developing countries.

Illicit money leaves poorer countries through a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money-laundering techniques. Much of this money is permanently shifted into western economies.

Reducing these illicit outflows requires greater transparency and integrity in the global financial system. Achieving this is a prerequisite to creating an economic framework that is open, accountable, fair, and beneficial for all.

We call upon the United Nations, the G8, G20, WTO, IMF, World Bank, and other international fora, as well as on national governments, world leaders, faith groups and civil society organizations to recognize the linkage between human rights and financial transparency. We further call for decisive steps to ensure that developing countries can retain their resources for sustainable growth and poverty alleviation, which they must achieve if the human rights of all people are to be realized.

Initial signatories include:

Amnesty International
Human Rights Watch
Basel Institute on Governance
European Network on Debt and Development (Eurodad)
Global Financial Integrity
Center for Applied Philosophy and Public Ethics
Open Society Institute Justice Initiative
Asia Initiatives
Task Force on Financial Integrity and Economic Development
Tax Justice Network
Global Witness
Christian Aid
National Council of Churches
Center for Economic and Social Rights
Center for Concern
Harrington Investments, Inc.
Asociación Civil por la Igualdad y la Justicia
Centre de recherche en éthique de l’Universite de Montréal (CREUM)
Thomas Pogge, Yale University
Robert Hockett, Cornell University
Frank Pasquale, Seton Hall

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