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Financial Secrecy Index - news coverage

October 21, 2011

When we launched the 2011 FSI we published some links on early news coverage. Since then, media coverage has continued, around the globe. Here is a list of some of the relevant links. We’ll add more as they arise. Our blog posts from the FSI launch are here and here, and our responses to the (predictable) counter-arguments made against our FSI are here and here.

Articles are grouped by country of publication. Some of the headlines here have been roughly translated using Google.

International:

Trouble island - Public anger and shareholder unease threaten tax havens’ tranquillity The Economist Oct 15

Havens above The Economist Oct 7 (We blogged this here)

Switzerland tops list of tax haven nations: network Reuters Oct 4

Where the Money Can Hide: The New Financial Secrecy Index was published today Transparency International - Space for Transparency Blog Oct 4

Ghana: Time to Dismantle Tax Haven Secrecy Jurisdictions allAfrica Oct 10

And the prize for most secretive tax haven goes to… Christian Aid Oct 4

Tax haven secrecy worsening, index reveals Christian Aid Oct 4

Switzerland Leapfrogs U.S. to Top Financial Secrecy List Bloomberg Businessweek Oct 4

Algeria:

Bank Secrecy - US$ 850 billion stashed abroad by Africans Le Matin DZ Nov 1

Argentina:

Uruguay
 put on the list ’gray’ of countries with smallerbanking transparency
 diario uno Oct 6

Austria:

Austria’s bank secrecy attracts money launderers Die PresseOct 4

Ranking: Austria amongst the least transparent Financial Centres in the World APA-OTS Oct 4

Little transparency in the Austrian Financial Centre Der Standard Oct 4

Austria as a stronghold of the shadow financial system Wiener Zeitung Oct 4

Privacy? Transparency? Cheating is protected nachrichten Oct 5

Financial Secrecy Index: Austria is a haven for tax evaders news Oct 4

Switzerland is THE tax haven kurier Oct 4

Taxes: Austria is a secrecy jurisdiction Kleine ZeitungOct 4- also reported in ORF news

Belgium:

Financial Secrecy Index: Belgium improves its position Le VifOct 4

Canada:

Tax Justice Network says Canada must do more to address financial secrecy National Union of Public and General Employees Oct 5

Cayman Islands:

Cayman 2nd in TJN’s new secrecy index Cayman News ServiceOct 3

Colombia:

Financial secrecy and legitimate confidentiality El Tiempo Oct 9

Costa Rica:

Costa Rica is in the middle of the ranking of tax havens El Financiero Oct 5

Denmark:

Denmark on the list of tax havens tv2 Oct 4

Denmark on tax haven blacklist The Copenhagen Post Oct 6

Finland:

TJN: The G20 has failed to address tax havens kepa Oct 5

France:


Protesters engage in the battle for financial transparency Secours-Catholique Oct 4

Campaigners for financial transparency point the finger at Switzerland Les Echos Oct 4

Financial secrecy: Switzerland, USA and Germany in the top 10 La Tribune Oct 10

Tax Justice Network published its list of tax havens novethicOct 17

Tax Havens: The Swiss poses as a victim of G20 Le Point Nov 5

No, the tax havens are not finished L’Humanité Oct 31

Germany:

Germany is a haven for money launderers Der Westen Oct 7

Tax haven Germany: Secrecy and lax controls KOPP Oct 7

Germany in the top 10 tax havens epo Oct 4

Germany in the top 10 of the world’s shadow financial centres soz Oct 7

Germany in the network of money launderers taz Oct 5

Disclosure requirements in shadow financial centre Germany are criticized Frankfurter Allgemeine Oct 5

Tax Haven Germany German Foreign Policy Oct 18

Germany’s Fiscal Secret Trumpet Oct 28

Economic crimes: Germany, the money launderer’s paradise? ARD/Plusminus Nov 2

Ghana:

Ghana ranked 3rd haven for illegal fiscal deals GhanaWeb Oct 6

Illegal fiscal deals; Ghana ranked 3rd The Mail

Greece:

Tax havens Switzerland, USA and Germany tovima Oct 4

Hong Kong:
 
Switzerland still ranked first in the world’s tax havens sina Oct 4

Switzerland ranks among the highest tax havens Yahoo Hong Kong Oct 4

Hungary:


A new list shows where Hungary is lagging behind napi Oct 4

Hungary ranks 56th on Financial Secrecy Index Portfolio Oct 10

Financial Secrecy Index: Hungary 56th fn24 Oct 10

India:

Financial Secrecy: Blame these 20 nations! rediff business Oct 7

Switzerland ranked at top in terms of fin secrecy Hindustan Times Oct 4

Ireland:

Ireland Ranks 31st Out of 73 Secrecy Jurisdictions in the Financial Secrecy Index Irish Left Review Oct 4

Italy:

Financial secrecy: Switzerland first, Cayman second, Germany ninth tempi Oct 5

Tax havens: three European countries in the top 10 Wall Street Italia Oct 11

Israel:

Switzerland leads the list of tax havens worldwide The Marker Oct 4

Liechtenstein:

Liechtenstein in the middle of the field Volksblatt Oct

In the shadow of the big havens Liechtensteiner Vaterland

Luxembourg:

Luxembourg continues to be popular for money launderers Privat Oct 5

Macau:

Macau not transparent enough: index macaubusiness Oct 11

Government slams financial secrecy report Macau Daily TimesOct 18

OECD urges MSAR to improve legal framework Macau Daily Times Oct 28

Netherlands:

Tax haven: Dutch hypocrisy in times of crisis Radio Netherlands Worldwide Oct 4

Norway:

Here are hidden billions Aftenposten Oct 4

Romania:

Top tax havens worldwide imopedia Oct 11

Russia:

Evading taxes will always find a refuge in the Alps BFM Oct 4

Swiss banking: the best offshore gazeta Oct 5

Switzerland has agreed to disclose the accounts of Russians on request for tax information Mail Oct 7

San Marino:

Tax havens: San Marino appears on the Financial Secrecy Index libertas Oct 7

Spain:

A study points to Switzerland, Cayman Islands and Luxembourg as the most active tax havens El Pais
 Oct 4


Switzerland:


New List of Tax Havens: Switzerland in 1st place Tages Anzeiger Oct 4 - same story also reported in Basler Zeitung

Swiss score the worst on financial secrecy index World Radio Switzerland Oct 4

Switzerland tops global tax haven ranking The Local
 Oct 5

Swiss banking secrecy is the best ticino news Oct 7

Taiwan:

Switzerland ranks among the highest tax havens  Radio Taiwan Oct 4

United Kingdom:

Bureau Recommends: Report names and shames global tax havens The Bureau of Investigative Journalism Oct 4

Tax haven network makes UK the top ‘secrecy jurisdiction’, says TJN Tax Journal Oct 17(We blogged this here)

Tax havens: G20 has failed to crack down, says campaign group Guardian Oct 4

Tax haven activity ‘rife’, despite G20 crackdown promise The Telegraph Oct 4

Isle of Man drops down secrecy league iomtoday Oct 7

Isle of Man drops down Financial Secrecy Index BBC Oct 12

Jersey slams financial secrecy index as ‘nonsensical’ The Telegraph Oct 4

Luxembourg is the ‘Death Star’ of tax havens The First Post Oct 4

World leaders have broken promise to smash tax havens - report The Mirror Oct 4

Tax haven secrecy worsening, UK research shows Ekklesia Oct 3

Activists expose tax dodgers’ Cayman Islands paradise Morning Star Oct 5

USA:

The Top 10 Tax Havens: Tax Justice Network The Huffington Post Oct 5

Uruguay:

Uruguay in the list of countries with least financial secrecy El Observador Oct 5

Uruguay is on the grey list Entorno Inteligente Oct 27


Financial Secrecy Index 2011: Focus on Switzerland

October 4, 2011

For the 2011 Financial Secrecy Index we have compiled a series of special reports on some of the biggest players, looking at the history of their emergence as financial centres. Today we publish on the blog our report on Switzerland.

Overview: under fire, Swiss bankers circle the wagons

Switzerland is the grandfather of the world’s tax havens, one of the world’s biggest financial centres, and one of the world’s biggest secrecy jurisdictions or tax havens. About a third of the world’s cross-border invested private wealth is managed in Switzerland, amounting to around US$ 2 trillion, according to the Swiss Bankers’ Association. Swiss banking is historically based on two main foundations: secrecy, and political stability.

With total banking assets recently estimated at 820 percent of Swiss GDP (compared to ‘just’ 460 percent in the UK), banking looms larger in Switzerland as a share of the economy than in almost any other country. Given this dominance, with UBS and Credit Suisse accounting for about half of all Swiss banking assets, it is hardly surprising that the Swiss state is significantly ‘captured’ by the financial sector. However, although the Swiss state generally defends the interests of Swiss banks and bank secrecy, many Swiss – though probably a minority – oppose it.

In the face of tremendous international pressure in the past six or seven years to relax its strict bank secrecy laws, Switzerland has adopted a ‘circle the wagons’ mentality, making incremental concessions here and there (often in exchange for reciprocal concessions) but generally fighting at every step. For decades Switzerland has used clever divide-and rule (and other) strategies to successfully fox its international foes and advocates of transparency. In general terms, Switzerland has recently made some (limited) concessions to near neighbours in Europe and to powerful countries like the United States, while largely rebuffing efforts for greater transparency by weaker, smaller and developing countries. This strategy of ‘white’ money for neighbours, and ‘black money’ for others, is what Swiss campaigner Andreas Missbach calls the “Zebra” strategy.

Along with secret Swiss banking comes a stridently anti-tax and anti-government world view, quite prevalent in Swiss banking circles, which sees criminal tax evasion as a ‘legitimate’ way of rejecting and thwarting democratic government and society itself, in the name of individual freedom. Konrad Hummler, then head of the Swiss private bankers’ association, encapsulated this in 2009 when he lashed out against France, Germany and Italy as ‘illegitimate states’ and defended criminal tax evasion by their wealthiest citizens as a ‘legitimate’ defence against ‘excessive’ tax.

Despite some limited penetration of its fabled bank secrecy in recent years, and widespread fanfare about how ‘transparent’ Switzerland has become, this is mostly window-dressing. Swiss bank secrecy remains largely intact and secret Swiss banking remains in robust health. While Switzerland boasts of having identified and blocked in early 2011 huge sums originating from Egypt, Libya and Tunisia, the truth is that the money has gotten there without questions being asked. In addition, at this stage there is no way of knowing if the wealth that has been blocked so far represents, a quarter, a tenth, a thousandth, of the total assets stolen from these countries over the last 40 years.

Secrecy, the cornerstone of Swiss private banking for decades, even centuries, is complemented by a wide array of other services provided by the Swiss financial centre: investment banking, wealth management, insurance and reinsurance, corporate tax avoidance structures, and plenty more. KPMG calls it the ‘perfect headquarter location for international companies’ because of its tax laws, political stability, quality of life, educated workforce, extensive network of tax treaties, and strategic position in Europe. Its corporate tax laws, which saw over 250 mostly European and U.S. companies shift headquarters to Switzerland in 2003-9, have also generated considerable antagonism overseas.

History
Swiss banking secrecy has very old roots. French kings, among the earliest known clients of Geneva banks, insisted on secrecy partly because they did not want to be seen to be dealing with ‘heretical’ Protestant bankers. In 1713 the Great Council of Geneva adopted banking regulations that prohibited bankers from revealing details about their clients.

Swiss banking has gone hand in hand Switzerland’s tradition of political neutrality, and in a sense it can trace its roots back to Switzerland’s own political and linguistic structure. Centuries of conflict in Europe saw wealthy European élites seeking a stable, unconflicted, unthreatening and neutral place to put their money – and that was Switzerland. Swiss neutrality was formalised at the Congress of Vienna in 1815, and its close neighbour and fellow secrecy purveyor, Liechtenstein, followed in 1868.

This neutrality, a bedrock of Swiss banking, was itself rooted in Switzerland’s geographical and political constitution. Neutrality was partly a matter of self-preservation. Divided between its French, German and Italian (and a small number of Romansh) speakers, and with further religious and other cross-cutting divisions, any taking of sides in a European war would have risked civil war in Switzerland. The potential for internal conflict also saw the nation develop a complex and intricate form of direct democracy, based on a large degree of autonomy for local units, and this served as a highly effective mechanism for resolving and dissolving conflict until today. As the historian Jonathan Steinberg put it, Swiss communities

“are in a curious sense bottom-heavy, rather like those dolls which spring up no matter how often the child pushes them over. The weight is at the base. The communities have a deep equilibrium, to which, as the point of rest, the social and political order tends to return.’

In addition, the Swiss Private Bankers Association, involving a large section of the Swiss banking community (but excluding the likes of UBS and Crédit Suisse), requires that one or several partners face unlimited liability – that is, they are unprotected from bank losses and lose their shirts if the bank collapses. This involves extra caution when making investment decisions.

This stability based on neutrality and stable politics continues to underpin Switzerland’s ‘safe haven’ status, as evidenced just recently when severe global financial stresses in August 2011 saw massive and sudden financial inflows into the Swiss Franc.

During the colonial era Swiss élites, jealously watching other European countries building colonial empires, began to see their alternative: a secret financial empire, reaching across Europe and beyond, dealing with the continent’s wealthiest and most powerful citizens as equals. As time went on, Swiss bankers increasingly pushed their wares downmarket, spreading out beyond the very top aristocracies. The Swiss scholar Sébastien Guex describes a major Swiss bank openly advertising its ‘utmost discretion’ in France in 1910; soon afterwards a Swiss economy minister had to press Swiss banks to tone down their messages overseas, for fear of retaliation by angry tax authorities.

Successive European wars over the centuries boosted Swiss banking, rooted in this island of stability in a turbulent region. Commercial interests in belligerent countries frequently used it as a turntable where they could keep doing business with the enemy, in secret. In the First World War, as governments hiked taxes to pay for their respective war efforts, many wealthy Europeans put personal wealth before patriotism and took their money to Switzerland: the French preferring Geneva, the Germans Zürich and Basel, and the Italians the southern Ticino, in an age-old pattern that endures today. Many others, of course, came too, and money poured in. Switzerland’s role as a top financial centre was further underpinned by a decision to site the headquarters of the Bank for International Settlements in Basel in 1930.

Switzerland enacted its famous banking secrecy laws in 1934, entrenching de facto banking secrecy by making it a criminal offence to divulge information. A widespread and false myth (see box) has emerged that this was done to protect German Jewish money from the Nazis; in fact, Swiss bankers enacted the law for very different reasons.

 

Box: The myth of 1934
Many defenders of Swiss bank secrecy assert that it was put in place in 1934 as a way to protect German Jewish money against the Nazis. This is utterly false: the story first emerged in the 1960s and is believed to have first appeared in the November 1966 Bulletin of the Schweizerische Kreditanstalt (which became today’s Credit Suisse). The main reason bank secrecy was strengthened in 1934 was a scandal when police in Paris in October 1932 caught the Basler Handelsbank red-handed facilitating tax evasion by members of French high society, among them two bishops, several generals, and the owners of Le Figaro and Le Matin newspapers. Before that, there was professional secrecy (such as exists between doctors and their patients), and violation was a civil offence, not a criminal one as it is today. For more on the 1934 law see Sébastien Guex, The Origins of the Swiss Banking Secrecy Law, 2000.

In the Second World War, despite widespread antipathy among the wider Swiss population towards Nazi Germany, Swiss bankers collaborated widely and deeply with the Nazis. The Swiss supplied Nazi Germany with electricity and supplies – not to mention financial credit – and facilitated the delivery of strategic equipment. They stashed the proceeds of Nazi loot without question, including gold ingots made from the dental fillings of murdered Jews, and even helped fleeing Nazis hide their loot after the end of the War. Wealthy people from many other countries banked in Switzerland too, for the same old historical reasons, and the War marked another step-change in growth for Swiss banking.

Since the Second World War, foreign countries have made numerous attempts to get Switzerland to relax its banking secrecy. In general, Switzerland has played divide and rule tactics, and adopted delaying tactics, often pressing to sign tax treaties or deals with countries when they are in a a position of weakness. Immediately after the war, amid negotiations with the Allies over war reparations and the identification of secret Nazi loot, Switzerland granted large loans to war-shattered UK and France: the Swiss ambassador in London described the purpose of the British loan as being to “ensure the indulgence of the English (sic) government” in the negotiations. The loans appear to have had considerable success in blunting the Allies’ demands.

This divide-and-rule approach is still employed today, as Switzerland signs deals with countries facing large fiscal deficits amid the global financial crisis. Bilateral tax deals initialed with Germany and the UK in mid-2011, which would see Switzerland attempt to extract some tax revenue from British and German tax evaders’ accounts, in exchange for an agreement to protect the account holders’ anonymity and protect Swiss bank secrecy, reflect financial crisis-hit British and German governments’ weakness and short-term desperation to get hold of tax revenue from any source. These particular deals are also explicitly Swiss efforts to play a divide-and-rule game to head off wider European efforts on automatic information exchange inside the EU.

Often European governing classes themselves have themselves been directly implicated in criminal tax evasion via Switzerland, so some have effectively served as powerful Swiss allies in hampering crackdowns. (It is a problem that afflicts rich and poor countries today, as they struggle with the problem of financial secrecy.)

Switzerland only started making real concessions in 2008, most notably when the United States began actively to investigate and prosecute Swiss bankers, with high-profile criminal cases against UBS and other banks (see pp14-15 here). Caught in flagrante helping wealthy Americans evade tax, and under tremendous pressure from the global financial crisis, UBS eventually reached a Deferred Prosecution Agreement with the U.S. Department of Justice in February 2009 – but it had to persuade the Swiss government to undergo strange legal contortions to allow it to infringe banking secrecy and hand over data under the deal. This was followed with an August 2009 agreement whereby Switzerland agreed to hand over data on over 4,000 UBS clients. One lesson from this deal is that countries seeking to change Swiss behaviour generally have more success when they target Swiss banks, rather than targeting the country itself. The Swiss cultivate a self-image of being a plucky Alpine nation standing up proudly to big bullies, and attacks on Switzerland itself tend to cause the Swiss to close ranks in support of the banking sector, even among those who would normally oppose banking secrecy.

Elsewhere, Switzerland has recently agreed to information-sharing arrangements with some other jurisdictions, though only under massive international pressure, and only under a woefully inadequate OECD-inspired ‘on request’ model that effectively requires countries to know the information it needs before it requests it (see more on that here). Usually, developing countries have been left out of such deals and in the very rare cases where Switzerland has agreed to strike a deal on exchange of information, they have extracted major concessions in return (see pp1-2 here for more details.) Switzerland has agreed to levy taxes as a participating country in the EU Savings Tax Directive, but this initiative is currently full of holes and has raised relatively little money to date: just CHF324m paid to EU countries in 2010.

Read more

- For a longer history of the emergence of Swiss banking secrecy, and see the chapter on Switzerland (Chapter 2) in the UK Edition of Treasure Islands.

- For more details on Swiss bankers in the Second World War, see Tom Bower’s book Blood Money and reports from Switzerland’s Independent Commission of Experts.

- For a fairly recent overview of Swiss tax and secrecy controversies and more, see this edition of Tax Justice Focus.

This text, above, is taken from a longer report on Switzerland which also examines its place in the Financial Secrecy Index and the reasons for its relatively high secrecy score. Click here.

More technical details on the Swiss financial centre, tax system and more can be found in Sections 30 and 44, in the database report here.

In the coming days on this blog we will be publishing full versions of our special long reports on


The full reports are already available; click on the link above to read them now.


Financial Secrecy Index - news coverage

October 4, 2011

There are plenty of stories out there this morning about our FSI, as there were last time.

Particularly good reports from The Guardian (and note this too), Reuters, and Bloomberg.

Predictably, some of those fingered near the top of our index are in full denial mode.


TJN launches 2011 Financial Secrecy Index

October 3, 2011

Financial Secrecy Index – the G20’s broken promise

October 4, 2011. Today we launch our 2011 Financial Secrecy Index, the biggest investigation of global financial secrecy in world history. It combines a secrecy score with a weighting to create a ranking of the countries that most aggressively provide secrecy in global finance.

The new FSI, which follows our inaugural index of 60 jurisdictions published in 2009, considers 73 jurisdictions to reveal a world where most of the biggest suppliers of secrecy are either OECD countries, EU members, or their dependencies. Britain plays an especially prominent role.

Secrecy is alive and well

World leaders at a G20 summit meeting in April 2009 promised that “the era of banking secrecy is over” and put the OECD, a club of rich countries, in charge of implementing its wishes. Many people hoped this marked the start of a serious crackdown on tax havens, or secrecy jurisdictions.

But they have let us down. The rhetoric is trillions of dollars away from reality. The Financial Secrecy Index (FSI) reveals that financial secrecy is as entrenched as ever.

Why are things still so bad?

Secrecy jurisdictions, popularly known as tax havens, have been frantically signing information-exchange agreements with other jurisdictions, to qualify for a ‘white list’ put together by the OECD. Nearly all are on the white list now, and each proclaims itself to be co-operative, respectable, transparent, clean and well-regulated. But the OECD’s standards are woefully inadequate. To squeeze information out of a secrecy jurisdiction, you must already know the information for before you ask for it! This is not effective information exchange. G20 leaders asked the OECD to drain a swamp – and the OECD has been handing out drinking straws.

Many jurisdictions, while merrily signing up to these information-exchange agreements, have quietly been adding stronger and more devious new secrecy facilities to their already ferocious offshore arsenals.

Moves by the likes of Jersey and Guernsey to allow the use of foundations, for instance, constitute just one of many areas of concern. Recent deals between Switzerland, on the one hand, and Germany and the UK on the other, that will entrench Swiss banking secrecy in exchange for highly uncertain (and probably very small) short-term tax revenues, demonstrate that politicians in all three countries are prepared to protect a secrecy industry that operates in the service of criminal elites. Hong Kong and Singapore have welcomed huge inflows of tax-evading and other criminal money as they cash in on those limited attempts in the United States and Europe to track down illicit funds. Luxembourg continues to play an especially pernicious and aggressive role undermining European efforts to promote financial transparency. The United Kingdom remains as committed as ever to its global network of secrecy jurisdictions that feed vast assets, and the business of handling those assets, through to the City of London.

Some bright spots

There have been occasional bright spots since 2009, though these are often less important than they appear.

  • A path-breaking initiative in the United States to push forwards country-by-country reporting in the Dodd-Frank Act has reduced its secrecy score. The United States also deserves credit for seriously cracking down on tax evasion facilitated by Swiss banks. It remains a massive secrecy jurisdiction in its own right, however.
  • There has been some penetration of Swiss banking secrecy – though only in very limited ways. Switzerland has adopted a ‘circle the wagons’ approach, making incremental concessions here and there, but keeping its core secrecy model firmly intact.
  • Belgium, Guernsey and the Isle of Man improved their secrecy scores after they decided to adopt a model of automatic information exchange with the European Union: an approach that represents the basis for the gold standard of information exchange.
  • Although the OECD’s model of information exchange does not effectively deter tax evasion and other crimes, the OECD’s Global Forum peer review process has, despite its political weaknesses, delivered some useful pressure on jurisdictions to shape up.
  • Some jurisdictions, such as Denmark and Spain, stand out as being “moderately secretive” — the cleanest on our 2011 rankings – though even these are very far from being clean.
  • More than anything, a general public mood amid economic crisis and austerity is changing the political culture for the better, across the world. Tax evasion, for instance, is far less tolerated than it was just a few years ago.


Why has my own country’s ranking changed since 2009?

The Financial Secrecy Index ranking is significantly different from the one we published in 2009. Several factors lie behind the changes, but two are dominant.

First, we have added 13 new jurisdictions, including some of the world’s biggest financial centres. Many people will be surprised to see the likes of Germany and Japan coming in the top 10 world secrecy jurisdictions, but this is where the analysis leads us. (See which countries we have added here.)

Second, we have changed the way we calculate the FSI. A jurisdiction’s ranking is built on two components: a secrecy score, based on the secrecy facilities it offers, and a weighting, based on the size of its financial sector. After long deliberation, we decided this year to mathematically enhance the importance of the secrecy score relative to the weighting. So jurisdictions with big financial centres such as the United States, United Kingdom and Ireland have moved down, while those with a high secrecy score, such as Switzerland, Cayman, Jersey and Panama, have moved up. We think this shift in emphasis helps focus attention where it is needed.

Now go to the Financial Secrecy Index.

Note on October 3 - not all of the links from this site are live yet. Some still point to reports from the 2009 Financial Secrecy Index, which will go live on October 4th. This includes the (massive) database behind the report, a separate project entitled Mapping Financial Secrecy, replacing the previous Mapping the Faultlines.


New League Table of World’s Most Secretive Tax Havens

November 1, 2009

A league table of the world’s most secretive tax havens has been compiled by campaigners seeking greater transparency about the operation of ‘offshore’ finance centres.

The Financial Secrecy Index (FSI) analyses the level of secrecy each haven offers, and the extent of their reluctance to co-operate with other countries tax authorities.

These factors give each haven an ‘Opacity Score’ which is then combined with a weighting that reflects the scale of the cross-border financial activity the haven hosts, to determine its ‘financial secrecy’ ranking.

According to the index, the most secretive havens are: (1) USA (Delaware)i; (2) Luxembourg; (3) Switzerland; (4) Cayman Islands; (5) United Kingdom (London).

Full list here

The index has been drawn up by the Tax Justice Network, an international, non­aligned coalition of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens, and Christian Aid, a leading UK development NGO.

John Christensen, director of the Tax Justice Network’s International Secretariat, said: ‘Secrecy is a core feature of the global financial system. Jurisdictions compete with each other to provide it in order to attract financial flows.

‘But this comes at a price. Financial secrecy provides cover for all manner of crimes and abusive practices: money laundering, tax evasion and avoidance, insider trading, terrorist financing, embezzlement, Ponzi schemes, illicit financial flows, fraud and much more.

‘The Financial Secrecy Index shows just how entrenched the problem of financial secrecy is. The index is an important tool that highlights the desperate need for new rules in international finance that would make the disclosure of information between different tax jurisdictions automatic.’

Mr Christensen added that Swiss-style bank secrecy is just one of many facilities that jurisdictions offer to provide confidentiality in international finance. In Anglo-Saxon countries, trusts and certain kinds of companies are often used to provide deeper, more devious forms of secrecy than can be achieved with bank privacy alone.

‘Many other barriers to the flow of information exist, ‘he said. ‘None of this would be possible without the legal framework the havens provide.’

In popular imagination, tax havens are palm fringed island idylls with luxury yachts, shady law firms and expensive offices festooned with the brass name plates of anonymous shell companies.

The FSI reveals a much broader picture. The main global suppliers of financial secrecy are in fact rich nations operating specialised enclaves like Delaware, often with links to smaller ‘satellite’ jurisdictions that are conduits for illicit financial flows into the mainstream capital markets.

The research identified one country in particular – the United Kingdom – with political and other links to a huge global network of tax havens. With half the world’s secrecy jurisdictions located in Commonwealth Countries, Crown Dependencies or British Overseas Territories, the UK’s historic support for financial secrecy globally has been substantial. Read more here…

Mr Christensen said Delaware in the US was particularly poor at disclosing information, although it was a hub of corporate activity. Luxembourg and Switzerland specialised in ‘traditional bank secrecy’, while the Caymans are now the fifth largest financial centre in the world because of the huge amount of corporate activity they attract from the Americas, as well as the large number of personal investment corporations based there.

Meanwhile London sits at the centre of a web of satellite jurisdictions. It is the most transparent of the jurisdictions in the index, but its importance in global offshore finance means that the secrecy it does provide has the potential to do more damage than, for example, small island havens which are less transparent but play a smaller role in global offshore finance.

The FSI uses twelve key financial secrecy indicators, identified in the Tax Justice Network’s Mapping the Faultlines project, in order to identify the provision of secrecy in each jurisdiction.

The indicators produced some striking statistics. For example, only one of the 60 jurisdictions reviewed - Monaco - requires all types of companies to disclose their beneficial ownership (see: http://www.secrecyjurisdictions.com/PDF/Monaco.pdf)

In other words, in 59 of the 60 havens, it is impossible to find out who owns the companies located within each. Not a single one has a central register of trusts and foundations that is publicly accessible via the internet. Read more here…

One of the routine uses of tax havens is to facilitate illicit financial flows. The World Bank has endorsed estimates by Raymond Baker, director of Washington-based Global Financial Integrity (GFI) in 2005 that illicit financial flows across borders ranged between $1trillion and $1.6 trillion per year, with half the money coming from developing and transitional economies.

In a 2009 update, GFI estimated annual illicit cross-border flows out of developing countries alone at about $850 billion -$1 trillion. In testimony before the U.S. House of Representatives, Raymond Baker compared these figures to the size of foreign aid flows, which have ranged up to just $100 billion annually.

He noted: ‘For every dollar Western governments have been handing out across the top of the table, crooked Western banks, businesses and middlemen of various descriptions have been taking back up to ten dollars of illicit proceeds under the table’.

The FSI’s authors consider the main global initiative against tax havens -efforts being led by the Organisation for Economic Co-Operation and Development (OECD) to achieve greater transparency -woefully inadequate.

In April 2009, following the London G20 summit, the OECD announced a list would be established of financial centres which fail to co-operate with other jurisdictions on tax and transparency issues.

‘Unfortunately, the OECD system is based on extremely weak standards of transparency and information exchange,’ said Alex Cobham, policy manager at Christian Aid.

‘All a haven has to do to get its name removed from the list is to sign bilateral disclosure agreements with 12 other countries. Even if that number is increased, the problems will remain insurmountable -these agreements are riven with loopholes which make them virtually impossible to implement.

‘Such flaws are perhaps unsurprising because, as the FSI shows, the biggest secrecy providers are in fact OECD members. The global body mandated to lead the fight against secrecy is therefore deeply compromised and conflicted in its aims.

‘Nonetheless, the meeting of G20 Finance Ministers in St Andrews on 7 November has the chance to impose a level playing field among all jurisdictions, by mandating the creation of a multilateral agreement for the exchange of tax information, with effective sanctions against those jurisdictions providing offshore financial services which do not sign up – whether they are OECD members or not.

‘Tackling secrecy in international finance requires a range of strategies, and a long-term approach. Crucially, we need to effect significant cultural change, so that the world becomes less tolerant of secrecy.

‘In addition, international accounting standards need to be changed to force companies trading internationally to disclose the profits made, and taxes paid, in every country where they operate. That way abuses could be quickly spotted.’

Clear international standards are needed, Mr Cobham added, for collecting and providing information on beneficial and legal ownership related to corporations, trusts, foundations, and a range of other facilities that secrecy jurisdictions provide.

And the economics profession should start researching how secrecy shapes and distorts international financial flows, and how secrecy in one jurisdiction can have an impact on other jurisdictions.

###

For further information please contact:

John Christensen on 07979 868302 or Alex Cobham on 0798 2236863

Email: info@taxjustice.net

Notes to Editors:

1) The FSI is designed to identify the key contributors to global financial secrecy, on a jurisdiction-by-jurisdiction basis. However, in some important cases, different levels of secrecy prevail in different sub-jurisdictional entities. Since financial flow data are only systematically and comparably available at a jurisdictional level, this creates a potential problem. To deal with this, and recognising the impact that even marginal secrecy differences can have on the volume of illicit flows, we treat the most secretive sub-jurisdictional entity as representative of the potential for opacity of the whole jurisdiction, and therefore base its Opacity Score on this. The most obvious case where we have applied this technique is with the US state of Delaware, which is taken as representative of the maximum secrecy available within the whole jurisdiction.


USA #1 in Ranking of World’s Most Secretive Financial Jurisdictions

November 1, 2009

Contact: Monique Danziger
mdanziger@gfip.org
202-293-0740

WASHINGTON, DC — According to a new analysis of financial jurisdictions prepared by UK-based civil society group Tax Justice Network, the state of Delaware is the most secretive financial jurisdiction in the world. Based on the laws and practices of 60 financial jurisdictions the Financial Secrecy Index (FSI) ranks jurisdictions according to their level of secrecy and the extent to which they cooperate with tax authorities in other countries.

The top five most secretive jurisdictions behind Delaware are: (2) Luxembourg; (3) Switzerland; (4) Cayman Islands; (5) United Kingdom (London). The full rankings are available at www.financialsecrecyindex.com.

Global Financial Integrity has compiled the following statistics on U.S. banking secrecy and related financial indices:

  • According to the Delaware Secretary of State’s office their operating budget was $12 million in 2007 and they made $24 million in the fees for expedited incorporation filings alone.
  • There are currently some 695,000 active entities registered in Delaware, including 50 percent of the corporations publically traded on the U.S. stock exchange.
  • New business formations in Delaware are currently running at about 130,000 per annum.
  • The growth of private individual deposits by non-residents was most robust in the United States outranking other popular financial jurisdictions such as the Cayman Islands, United Kingdom, and Luxembourg with total non-resident deposits equalling $2.6 trillion in 2007.

The Task Force on Financial Integrity and Economic Development will hold a press briefing Monday, November 2nd, at the National Press Club at 9am to discuss the Index and implications of U.S. policy initiatives including the Foreign Account Tax Compliance Act and Incorporation Transparency and Law Enforcement Act.

To R.S.V.P. contact Monique Danziger at mdanziger@gfip.org or 202-293-0740.

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Exclusive First-look at Financial Secrecy Index: A Ranking of Tax Havens

October 27, 2009

Premiere of Tax Justice Network’s Financial Secrecy Index: A Ranking of Tax Havens

What: Breakfast Briefing with presentations by:

  • Jack Blum, Tax Justice Network, USA
  • Jim Henry, Tax Justice Network, USA
  • Sarah Lewis, Tax Justice Network, USA
  • Raymond Baker, Global Financial Integrity

Where: The National Press Club (Winners Room), Washington, DC, USA
When: Monday, November 2, 2009
(Food served at 8:45, Briefing 9:00am-10:00am)

R.S.V.P. to Monique Danziger, + 1 (202) 293-0740 mdanziger@gfip.org

The Financial Secrecy Index (FSI) is a first-of-its-kind ranking of the most secretive and uncooperative jurisdictions—tax havens— in the world.  Based on intensive research and analysis the index ranks 60 jurisdictions according to their degree of opacity and the scale of their cross-border financial services activity.

Join us for an exclusive first-look at the Financial Secrecy Index and discussion of such topics as:

  • Is the United States a tax haven?
  • What are the next steps for the G20 on tax havens and tax evasion?
  • Legislation pending in Congress on the issues of tax evasion, banking secrecy, money-laundering, and other illicit financial practices.
  • How can the United States be a leader in international efforts to combat tax evasion and banking secrecy?
  • Impact of tax havens on the developing world.

For more information, visit www.financialsecrecyindex.com.

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Coming soon: the Financial Secrecy Index

October 21, 2009

Two weeks ago we launched our new website for the Mapping the Faultlines project, which explores the furtive world of secrecy jurisdictions where furtive types get up to all sorts of monkey business.

Now we launch another site, www.financialsecrecyindex.com which takes you step-by-step into the details of our new ranking of secrecy jurisdictions. The ranking results will be published at the start of November, but we the know the results already and we can confidently say that they will turn many people’s pre-conceptions on their head.

We are also fairly confident that the rankings we publish in the Financial Secrecy Index will replace the failed OECD black / grey / white lists which came out in April 2009 and immediately fell flat on their faces.


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