On the same day that the European Union added the Caymay Islands to its tax haven blacklist, international independent organisation Tax Justice Network revealed that it is the “worst offender” when it comes to financial transparency.
In its Financial Secrecy Index 2020, the British Overseas Territory topped the list for the first time, followed by US and Switzerland.
It took the dubious honour from the alpine country, which has ranked as the “biggest enabler of financial secrecy in the world” in previous lists.
But, on average, countries have improved their contribution to financial transparency, the network found, with a 7% reduction in secrecy, overall.
The top 10 in the index are:
- Cayman Islands
- United States
- Switzerland
- Hong Kong
- Singapore
- Luxembourg
- Japan
- Netherlands
- British Virgin Islands
- United Arab Emirates
Room for improvement
The list ranks each country on how their legal and financial systems allow wealthy individuals and criminals to hide and launder money.
Scores range between zero and 100, with the latter meaning full financial secrecy.
Cayman took the top spot with a score of 76, up from 72 two years ago.
For the first time since the list’s inception, the US ranked higher than Switzerland.
In the previous edition, in 2018, it had a secrecy score of 60, which rose to 63 in the 2020 edition.
But the US said it is taking steps to improve its potion.
“As the data clearly demonstrates, financial secrecy remains a major problem in the US — enabling crimes like human trafficking, tax evasion, and corruption both at home and abroad,” said Clark Gascoigne, interim executive director of the Financial Accountability and Corporate Transparency (Fact) Coalition.
“Fortunately, there is reason for optimism. Research like the financial secrecy index has fostered bipartisan recognition of the problem.
“The house of representatives passed a bipartisan measure — the Corporate Transparency Act — in October [2019] to end the abuse of anonymous companies.
“Similar legislation, known as the Illicit Cash Act, is now being considered by the senate banking committee.
“After more than a decade of debate, 2020 should be the year that the US finally enacts major transparency reforms to better protect our financial system from abuse,” he added.
UK reverses progress
Things did not look so bright for the UK, which score has worsened to 46/100 from 42/100 in the previous list.
According to the network, the country increased its “overall supply of financial secrecy to the world by a whopping 26%, catapulting from 23 on the 2018 index, to 12 on the 2020 index”.
John Christensen, a director and founder of the Tax Justice Network, said: “The UK showed the world true leadership in 2016 by being the first country to adopt a public beneficial ownership register – now that progress has been thrown in reverse.
“The UK’s surge up the financial secrecy index raises serious concerns about the UK’s post-Brexit strategy to turn the City of London into a ‘Singapore-on-Thames’.
“This should be particularly concerning for EU countries, which collectively reduced their supply of financial secrecy to the world by 8% while the UK escalated its supply by 26%.
“A more secretive and poorly-regulated City of London is bad news for everybody, including people in the UK.
“Evidence shows that the UK’s oversized financial sector cost the UK economy £4.5trn ($5.8trn, €5.4trn) in lost economic output between 1995 and 2015 – equivalent to £67,500 for every person in the UK.
“A post-Brexit ‘Singapore-on-Thames’ strategy would see more money extracted from people in Britain and the rest of world to the pockets of the very wealthiest,” he added.
Rest of the world on upward trend
Alex Cobham, chief executive at the Tax Justice Network, said that countries around the globe have “started to win the fight against financial secrecy”.
“Creating a fair world that treats all members of society as equals means re-programming our financial and tax systems to run on transparency, not secrecy, making it impossible for criminals and elites to go uncounted and making sure countries are well-resourced and well-governed to support everyone to lead a meaningful and fulfilling life,” he continued.
“We still have a lot of work to do ahead – our governments must keep their foot to the pedal.”
But Cobham was very critical of both the US and UK’s rankings.
“It is deplorable, however, that in the face of this progress, an Anglo-American axis of secrecy has actively chosen to double down on the practices that exacerbate corruption, tax abuse and global inequalities.
“Polling shows that people in the US and UK favour greater transparency and progressive taxation – but if their governments are unwilling to deliver this, then responsible policymakers elsewhere must actively consider countermeasures,” he added.
