The United States of America (USA) is now at the top of the list of nations in the Financial Secrecy Index (FSI-2022), which was published on Tuesday. This is an improvement from its previous position, which was second on the list two years ago.
According to Tax Justice Network (TJN), which publishes this index on a biannual basis, the United States has significantly widened the gap that exists between itself and the rest of the world by enabling the greatest supply of financial secrecy ever recorded by the index. This is nearly twice as much as Switzerland, which is currently in second place and will be followed by Singapore, which is in third place. According to the previous index, FSI-2020, the Cayman Islands, the United States of America, and Switzerland were in the top three places.
The Tax Justice Network estimates that affluent people have secretly arranged to keep a total of ten trillion dollars in offshore accounts, which are beyond the reach of the law. At first look, the most surprising finding is that Cayman Island, which had placed first in the FSI-2020, is no longer included in the list of the top ten nations. This is a status that Cayman Island has typically held over the years.
The reason for this is because the extent of the financial services given by a nation to non-residents also has an influence on the ranking, and Cayman Island published data for the very first time that indicated the full scale of these services. This caused Cayman Island to rise to the top of the list. This was far lower than what had been anticipated, which is the reason why it has now fallen to the fourteenth position.
Despite a restriction in the amount of financial secrecy it can provide, Switzerland has managed to climb up one spot in the rankings and is now in the second place. Another unexpected development is that Singapore has moved up to third place, moving up from its previous position of fifth place two years ago.
This is due to the fact that it has raised the amount of financial secrecy it provides to the rest of the world by 14%, and also due to the fact that both Cayman Island and Hong Kong, who previously ranked higher than Singapore, have cut the amount of financial secrecy they provide.
Nations like the United States of America, Singapore, Japan, Germany, and the United Arab Emirates, which are in the top ten in FSI-2022 (and are seen as actively promoting secrecy in global finance), are also among the top ten FDI source countries for India (Refer table showing the analysis). Mauritius does not appear on the top ten list since its contribution to the overall volume of the global spectrum is negligible. In this measure, India comes in at number 36 out of 141 nations, while its neighbour China occupies the eleventh spot.
TJN is calling on the G7 to commit to a global asset register before the meeting of the G7 finance ministers, who are expected to recommit to enforcing sanctions on the hidden assets of Russian oligarchs. The goal of the global asset register would be to bring law and accountability to the trillions of dollars in ‘lawless wealth’ that is secretively held offshore.
Alex Cobham, the chief executive officer of the TJN, made the observation that members of the G7 such as the United States of America, the United Kingdom, Germany, Italy, and Japan contribute to the continuation of financial secrecy rather than working to combat it. By declaring their support for a worldwide asset registry, the G7 nations should make it quite clear where they stand with the battle against financial secrecy.
Ironically, despite the fact that the United States passed a historic transparency law in January 2021 that mandated the identification and registration of the beneficial owners of corporations, the law did not result in a significant secrecy score improvement for the United States on the index. In fact, the country’s financial secrecy has increased by 31 percent since 2020 as a result of the country’s larger role in the global sp. Despite this, the law was hailed as a significant step forward in the Due to the fact that the United States of America does not participate in information-sharing agreements with other nations, it is known as the “secrecy capital of the world.”
Because of an initiative called Automatic Sharing of Information, which was facilitated by the Organization for Economic Co-operation and Development (OECD), more than a hundred countries are now sharing information with respect to more than 75 million financial accounts all over the world. This information represents nearly 10 trillion dollars’ worth of assets. The attempts to enforce tax laws are helped by such information.
In its semi-annual Financial Secrecy Index (FSI), the Tax Justice Network (TJN), an independent worldwide network that advocates for openness, assigns a secrecy score to each country’s financial and legal system. It investigates the extent to which the nation’s legal and financial framework makes it possible for rich people as well as criminals to conceal and wash money.
The level of financial secrecy that each nation contributes to the global economy is calculated by adding each nation’s “secrecy score” to the number of non-residents for whom the nation offers financial services. Therefore, a higher rank on the index does not necessarily mean that a country has more secretive laws; rather, it indicates that the country plays a larger role globally in enabling financial secrecy, which in turn enables activities such as money laundering, tax evasion, and the evasion of sanctions.