The Financial Times has reported that the Cayman Islands will join Oman, Fiji, and Vanuatu on the European Union's blacklist of foreign tax havens, making it the first overseas territory of the United Kingdom to be 'named and shamed' by Brussels.

We at the Tax Justice Network have lambasted Europe’s blacklists for years, which are based above all on political considerations. In particular, the EU does not seem to want to blacklist EU member states or powerful countries or any tax haven that really matters. At the time of writing, the list consists of these giants of global finance:

• American Samoa
• Fiji
• Guam
• Oman
• Samoa
• Trinidad and Tobago
• US Virgin Islands
• Vanuatu

The EU even has official excuses for this nonsense. For a more serious list, based on objectively verifiable criteria, see our 2018 Financial Secrecy Index (FSI) – the Caymans are at number three, below Switzerland and the United States. The all new Financial Secrecy Index 2020 will be published tomorrow – where will these three jurisdictions be? We can already reveal that there will be significant changes, up and down the index! (And some good news.)

The Cayman jurisdiction is no minnow in the world of tax havens, so this latest move by the EU, which has to be confirmed by EU finance ministers next week, is significant.

We also expect, from conversations we have had, that the forthcoming blacklist will include the current eight countries plus Palau, Botswana, Panama and the Cayman Islands. A question mark hangs over Turkey. This is an improvement; in 2018, we reckoned that the EU’s blacklist targeted just 1% of financial services that offered secrecy to customers while threatening the health of economies in the EU, but if our sources are correct, the new list is going to represent 7.3% or about one-fourteenth of the total problem.

It is notable, of course, that this comes just a few weeks after the end of Britain’s full membership of the European Union and the beginning of negotiations for a trade deal. The Cayman Islands and the British Virgin Islands werealready under review and on an EU 'grey list,' (a classification that gives jurisdictions time to improve themselves). Without a doubt, the appearence of the Caymans on the list would represent, as the Guardian puts it, "a clear indication of [Britain’s] loss of influence on the EU’s decision-making."

Britain has for years fought hard to protect the interests of the offshore financial industry in its Crown Dependencies and Overseas Territories and Brexit has certainly weakened their positions. The EU has also made it clear, repeatedly, that the UK will not be allowed to undercut it with lighter financial regulations if it wants full access to EU markets. British politicians might insist on their right to race to the bottom but they must realise that many Europeans want to punish the UK.

In the words of Sven Giegold, a leading member of the European Parliament: "The time for special treatment of the UK is over. The British government’s attempt to give its London financial centre permanent and comprehensive access to the European financial system for decades is audacious. The EU will not let the decision as to which British financial market rules are compatible with European rules be taken out of its hands."

Interesting times lie ahead.