United States, Switzerland and Singapore, the countries with the most financial opacity | Economy

Facade of the New York Stock Exchange.
Facade of the New York Stock Exchange.MIKE SEGAR (Reuters)

Despite advances in the exchange of tax information and financial transparency, the amount of money that the wealthiest manage to hide throughout the globe remains overwhelming: some 9.5 billion euros hidden in third countries or jurisdictions through opaque legislation. It is an amount equivalent to almost eight times the GDP of Spain. These are the estimates of the British organization Tax Justice Network (TJN), which this Tuesday published the latest edition of its Financial Secrecy Indexin which the United States comes out as the worst off in terms of financial opacity, followed by Switzerland and Singapore.

The North American country has very attractive tax regimes, such as Delaware or Nevada, and has been particularly disadvantaged in the TJN classification for not being part of key information exchange agreements, such as the Common Reporting Standard of the Organization for the Economic Cooperation and Development (OECD). This mechanism, in which more than 100 countries participate, provided information in 2020 on 11 trillion dollars in wealth and assets that were hidden.

The Joe Biden Administration is no stranger to the problem. His Treasury Secretary, Janet Yellen, said in December last year that the United States might be “the best place to launder and hide ill-gotten gains.”

The Financial Secrecy Index, or SFI, reveals the extent to which countries allow money to be hidden and laundered offshore. The final score attributed to each territory ―141 jurisdictions have been analyzed in this report― depends both on the opacity of its legislation, that is, on the absence or scant transparency and exchange of information with other countries, as well as on the volume of services financial services offered to non-residents over the global total.

The US showed a deterioration in both variables compared to the previous edition, relating to 2020: the opacity increased due to returning “to breaching international standards and information exchange practices”, underlines the analysis, while the volume of financial services offshore grew by 21%, reaching 25.8% of financial services provided to non-residents worldwide by all jurisdictions.

“It is hypocritical that the United States, under the Foreign Account Tax Compliance Act (FATCA) and associated intergovernmental agreements (IGAs), does require all countries to share information information about the offshore financial accounts of US taxpayers, while the United States, for its part, shares little or no information with countries about its residents,” the report states.

He knows in depth all the sides of the coin.


Singapore enters the podium

After topping the previous ranking, the Cayman Islands – one of many British Overseas Territories to offer advantageous tax regimes – drop to 14th in this edition of the report. The improvement is due to the fact that they published for the first time data that indicated the real scope of the financial services that they provide to non-residents.

The one who remains at the top of the list is Switzerland, despite improving its score somewhat. The Swiss country, famous for many years for its unbreakable banking secrecy, comes in second place in the 2022 edition of TJN. Its rating in terms of opacity is worse than that of the US, but its weight on the total services provided to non-residents is much lower, below 4%.

In third place is Singapore, that goes up two positions and enters for the first time on the podium of the most opaque territories. Like the US, the city-state has seen both the opacity of its system deteriorate and the volume of financial services to non-residents increase.

Honk Kong is in fourth place, followed by Luxembourg, one of the founding members of the European Union, which, however, Brussels does not include in its list of tax havens. Germany is the other country of the community block that appears in the first 10 positions, in position number seven. Japan is in sixth place, the United Arab Emirates in eighth; the British Virgin Islands and Guernsey ―also dependent on the United Kingdom― complete the top ten

Globally, the Financial Secrecy Index is declining, thanks to more and more countries introducing or improving beneficial ownership registration laws and advances in international anti-money laundering cooperation and information sharing . Despite this, the report warns that the countertrend of five G7 countries —the United States, the United Kingdom, Japan, Germany and Italy—, which have increased their financial opacity, is holding back the global improvement.

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