The Tax Justice Network’s biennial Financial Secrecy Index 2020, published today, has revealed that financial secrecy around the world is decreasing as a result of the policies of the Organisation of Economic Co-operation and Development. The Cayman Islands, moreover, have leapt to the top.

On average, according to the crusading movement whose indices sometimes help money-laundering reporting officers (MLROs) determine country risk, the countries on the index reduced their contribution to global financial secrecy by 7%.

The Anglo-American axis of secrecy

However, a handful of jurisdictions that account for a large share of the world's financial services have bucked the trend, most notably the US, the Cayman Islands and the United Kingdom. With Switzerland finally improving enough to move off the top of the index, the TJN states: "an Anglo-American axis of secrecy now constitutes by far the greatest global threat of corruption and tax abuse."

The sixth edition of the biennial index marks the first time since 2011 when Switzerland did not occupy the top spot. This is the Cayman Islands' first premier ranking. The top 10 biggest enablers of financial secrecy in the world according to the TJN are:

1.          Cayman Islands
2.          United States
3.          Switzerland
4.          Hong Kong
5.          Singapore
6.          Luxembourg
7.          Japan
8.          Netherlands
9.          British Virgin Islands
10.        United Arab Emirates

In compiling its rankings the organisation looks at every country’s legal and financial system to see how well it allows wealthy individuals and criminals to hide and launder money. Each country’s legal and financial system receives a 'secrecy score' out of 100, with 100 representing full secrecy. The TJN then combines the country’s score with the volume of financial activity conducted in the country by non-residents.

Methodology

If a jurisdiction is, for example, ranked 10th on the index this does not mean that the TJN thinks that it is the 10th most secretive; instead, it means that it believes it to play the 10th most effective part in making banking secretive and promoting anonymous shell company ownership, anonymous real estate ownership or other forms of financial secrecy, which in turn help money launders and tax evaders. The TJN sees Samoa as a highly secretive jurisdiction that provides few or no financial services to non-residents (another of its bugbears), but ranks it below Japan (see above), a moderately secretive jurisdiction that is nonetheless a major financial force in the world.

The Cayman Islands have increased their supply of financial secrecy to the world by 24%, moving them up from third on the 2018 index to first today. This is because they have increased the volume of financial services that they provide to non-residents by 21%. It is also partly due to their secrecy score increasing by 4, from 72 to 76 out of 100, after they "failed to keep up with methodological updates to the Financial Secrecy Index that reflect the evolving nature of the financial secrecy landscape." The TJN particularly singles out the Cayman Islands' hedge fund industry for opprobrium.