So it’s official, the US is the biggest enabler of financial secrecy in the world. The 2022 Tax Justice Network’s Financial Secrecy Index (FSI) is out and paints a rather grim picture of the current state of affairs.
As a reminder, the FSI measures how much a country’s financial system promotes money laundering and the obscuring of assets.
But in a nutshell, what it means is that if you are looking to hide your wealth, look no further than the United States.
The US was already sandwiched at No.2 in the 2020 ranking between the Cayman Islands, and Switzerland, but here it takes the top spot.
Why is the US ranking so horribly, despite having an advanced rule of law, and seemingly being at the forefront of financial crime enforcement?
1-The US refuses until this day to share information about non-residents’ financial accounts with foreign tax authorities, whilst it imposes this obligation on other countries.
2-The Corporate Transparency Act, has yet to see the day of light and is majorly behind schedule. But even if implemented today, it is still holy as Swiss cheese, as it won’t technically be public, and exempts certain types of trusts from the beneficial ownership registry. I cover more about this subject in this earlier post.
3-the ICIJ’s Pandora Papers leaks revealed the extent of which some states were used as a tax haven. The Pandora Papers notably exposed numerous trusts linked to foreign entities and individuals in South Dakota (81), Florida (37), Delaware (35), Texas (24), and Nevada (14).
Investigative journalists have alleged that almost 30 of 206 U.S.-based trusts holding combined assets worth more than $1 billion are linked to foreign individuals and companies that have been accused of wrongdoing.
If you are looking for a good read on the subject, Casey Michel’s American Kleptocracy offers an explosive investigation into how the US has gotten to this point by building the largest illicit offshore finance system the world has ever known.
I sincerely hope the US, with its profusion of compliance and financial crime professionals, vigorous media and civil society, have a snapping moment and do something about this, as what happens in the US, not only affects its National Security, but to some extent affects the rest of the world.
Also noteworthy: Singapore is the new No. 3! Not hearing much in the media to that effect? Is this a case of Singapore operating discreetly in the shadows? The UAE is also slowly climbing up the list going from No.10 to No.8 this year, but that’s almost expected given the amount of negative media we have read on that subject in the last couple of years.
In the meantime, the Cayman Islands, which ranked first in 2020, dramatically dropped to No. 14 this year, after engaging in a series of disclosures in the past couple of years.
So I guess well-done to the Caymans.