The Financial Secrecy Index is a ranking of jurisdictions most complicit in helping individuals to hide their finances from the rule of law.  

The Financial Secrecy Index thoroughly evaluates each jurisdiction’s financial and legal systems to identify the world’s biggest suppliers of financial secrecy. The index spotlights the laws and policies that governments can change to reduce their contribution to financial secrecy.   

Taking a jurisdiction’s Global Scale Weight into account when assessing its role in enabling financial secrecy allows the Financial Secrecy Index to go beyond “tax haven blacklists” and evaluate how much financial secrecy jurisdictions supply in practice, not just on paper.

Whereas “tax haven blacklists” usually only take laws into consideration and are susceptible to political lobbying, the Financial Secrecy Index more accurately identifies harmful jurisdictions by assessing how laws and offshore financial activity intersect in the real world to create financial secrecy risks. 

Financial secrecy operates inside an ever changing landscape of complex financial mechanisms, loopholes, and workarounds. While governments and international bodies may pass measures and legislation designed to combat secrecy, actors that are intent on avoiding their fiscal responsibilities and evading the rule of law are constantly searching for new and innovative ways to do so.

In order to continue to accurately measure financial secrecy and keep up with this dynamic environment, we evaluate our methodology and assessment logic for every index edition and adjust our criteria and our indicators to more accurately reflect the most updated world of financial secrecy and evasion. Times change and the Financial Secrecy Index needs to adapt to those changes.

You can read a more detailed summary of all of the changes we have made between the 2020 and 2022 versions of the Financial Secrecy Index in the full methodology

Jurisdictions are ranked by the FSI Value, which is a measure of how much financial secrecy they provide to the world. If a jurisdiction increases its supply of financial secrecy, its FSI Value goes up and vice versa.

A change in how much financial secrecy a jurisdiction supplies can be driven by two factors: a change in its Secrecy Score and a change in its Global Scale Weight.

Secrecy Score is a measure of how much scope for financial secrecy the jurisdiction’s legal and financial systems allow. A score of 0 out of 100 means full transparency and a score of 100 means full secrecy. An increase in Secrecy Score will result in an increase in the jurisdiction’s supply of financial secrecy, and vice versa.

Global Scale Weight is a measure of how much in financial services the jurisdiction provides to residents of other countries, like opening a bank account or setting up a company. A high or low Global Scale Weight is neither good nor bad, but the higher a jurisdiction’s Global Scale Weight is, ie the more its legal and financial systems are used by non-residents, the more its legal and financial system can be utilised for financial secrecy. If a jurisdiction’s Global Scale Weight increase without a change in Secrecy Score, the jurisdictions FSI Value will go up because more people are making use of the level of secrecy that already existed in the jurisdiction. If a jurisdiction’s Global Scale Weight goes down without a change in Secrecy Score, its FSI Value will go down because less people are making use of the level of secrecy that exists in the jurisdiction.

In most cases, countries will see a change in both their Secrecy Scores and Global Scale Weight. The Financial Secrecy Index gives more importance to Secrecy Score in this balance. A big drop (ie, improvement) in Secrecy Score and small increase in Global Scale Weight will result in a decrease in a jurisdiction’s FSI Value. A small increase (ie, worsening) in Secrecy Score and big drop in Global Scale Weight will result in an increase in a jurisdiction’s FSI Value.

Usually, when a jurisdiction’s FSI Value goes up, it moves up the ranking. When its FSI Value goes down, its moves down the ranking. In some cases, however, a jurisdiction’s increase in FSI Value won’t be big enough to overtake the jurisdiction above it, or its decrease in FSI Value won’t be big enough to move below the jurisdiction below it. It is often possible, too, for a jurisdiction’s ranking to be impacted by a change in another jurisdiction’s ranking. A jurisdiction might increase its FSI Value but move down in the ranking if another jurisdiction below it increases its FSI Value more sharply and overtakes it. And vice versa, a jurisdiction might in some cases decrease its FSI Value but move up the ranking if another jurisdiction above it decreases its FSI Value more sharply and drops below it.

This interplay in ranking makes it possible to contextualise a single jurisdiction’s changes to those of other jurisdictions across the rest of the world.

Financial secrecy refers to the use of complex financial mechanisms by wealthy individuals, multinational corporations and criminals to hide their assets for the purpose of abusing tax or evading the rule of law. Financial secrecy keeps tax abuse feasible, drug cartels bankable and human trafficking profitable.

The Financial Secrecy Index is the first ever comprehensive global effort to identify all the different mechanisms of financial secrecy.

All jurisdictions enable some degree of financial secrecy, whether knowingly or not. Unlike “tax haven blacklists” that use a binary approach to evaluating whether a jurisdiction is or is not harmful, the Financial Secrecy Index evaluates where on the secrecy spectrum jurisdictions fall. This means that all jurisdictions have a responsibility to reduce their contribution to financial secrecy, big or small. 

Secrecy jurisdictions are not a peripheral issue but one of the most important facets of globalised financial markets. 

The top six jurisdictions in the Financial Secrecy Index account for just over half of the global trade in offshore financial services. According to some measures, over half of banking assets and liabilities are routed through secrecy jurisdictions; more than half of world trade passes (on paper) through them; virtually every major multinational company uses secrecy jurisdictions for a variety of unspecified purposes, and $10 trillion of private financial assets are held in offshore structures worldwide, largely escaping taxes, criminal laws, financial regulation, and disclosure.

Secrecy distorts markets because it shifts investments and financial flows away from where they will be most productive and towards where the owners of capital can extract the greatest gains from secrecy. It hinders effective regulation and law-making, and enables rent-seeking, as insiders reap the gains from global markets while shifting the costs and risks on to the shoulders of others. The result of this distortion and corruption of markets is a world of steepening inequality, rampant financial crime, and impunity for elites in rich and poor countries alike. 

By identifying the providers of secrecy, the Financial Secrecy Index turns the spotlight on the jurisdictions that prevent international trade and markets from benefiting the majority of the world’s population. 

Global financial secrecy requires a large infrastructure of lawyers, accountants, bankers, trust and company formation agents, and other professionals. These are the intermediaries who make the whole system function. In many small secrecy jurisdictions, expatriate professionals constitute a significant share of the population.  

The market has thousands of players, yet the room at the top is surprisingly small.

Global accounting is still dominated by the “Big Four” firms of accountants, while a small number of “capital city” and haven‐based law firms in the so-called “Offshore Magic Circle” dominate the lawyering. As our report The Price of Offshore, Revisited makes clear, global private banking is dominated by fewer than 50 multinational banks.

These include both household names, such as HSBC and UBS, and lesser known companies.  

International rules seeking to tackle the problem of secrecy rarely target these private intermediaries, even in the rare cases where prosecutions can be brought against their clients. However, this is starting to change.  

Financial secrecy is a key facilitator of corruption. Without financial secrecy, many corrupt deals simply would not be able to happen.  

In the field of international governance and transparency, one of the most well-known rankings of corruption is Transparency International’s Corruption Perceptions Index. The Corruption Perceptions Index ranks poor countries in Africa and elsewhere – predominantly the victims of an estimated US$1 trillion-odd in annual illicit financial outflows – as the ‘most corrupt’. But all these outflows must be received somewhere. So the Financial Secrecy Index examines the enablers: those jurisdictions that encourage and facilitate illicit financial flows, by providing an environment of secrecy that allows these outflows to remain hidden, and largely untaxed.

As a comparison of the two indices shows below, the Corruption Perceptions Index ranks jurisdictions by perceptions (see here for a critique of this methodology that focuses mainly on so-called experts and local elite views) where local corruption is the worst. In this way, as Alex Cobham wrote in Foreign Policy, the Corruption Perceptions Index “embeds a powerful and misleading elite bias in popular perceptions of corruption, potentially contributing to a vicious cycle and at the same time incentivizing inappropriate policy responses”.

In contrast, the Financial Secrecy Index uses objective measures (not perceptions!) to examine which countries are the worst offenders in enabling corruption and illicit financial flows from other countries. What you see is that many countries perceived to be the least corrupt by their citizens are actually among the worst offenders in enabling corruption and illicit financial flows in other countries.

As long as tax havens and secrecy jurisdictions keep offering banking secrecy and the ability to hide other assets (real estate, gold, art), or the identities of criminals behind secretive companies, trusts, partnerships or foundations, it will be impossible – both for poor countries and for rich ones – to stop the suffering resulting from corruption, tax evasion, money laundering and other financial crimes.

As Transparency International itself acknowledges, “However, integrity at home does not always translate into integrity abroad, and multiple scandals in 2019 demonstrated that transnational corruption is often facilitated, enabled and perpetuated by seemingly clean Nordic countries”.

Businesses looking to invest overseas may find it useful to know that the Corruption Perceptions Index ranks Libya, say, as among the world’s most corrupt nations from the perspective of officials demanding bribes. But this is of little help to ordinary Libyans, who want to know more: where their country’s wealth has gone, how it left, and who helped it leave. This is where the Financial Secrecy Index comes in. We consider the former Libyan leadership to represent the demand side of corruption, while Zurich, London, and other secrecy jurisdictions that received illicit Libyan loot to be the suppliers of corruption services: the supply side.

The same challenge faces Angolans. The Luanda Leaks uncovered how former Angolan president’s daughter Isabel dos Santos bought state assets and made use of more than 400 companies, subsidiaries and accounts in 94 secrecy jurisdictions. This business empire benefited to the tune of many billions of dollars in consulting jobs, loans, public works contracts and licenses from the Angolan government. The Financial Secrecy Index ranking reveals what the Corruption Perceptions Index conceals. It exposes the hypocrisy that lies behind some of the finger-pointing at “highly corrupt” developing countries, and provides a basis for a new wave of understandings about corruption in a global context.

Many jurisdictions listed in the Financial Secrecy Index are commonly described as tax havens, and tax havens are often perceived to be small palm-fringed islands filled with sleazy law firms, motor yachts and numerous shell companies. Sunny places for shady people.  

The Financial Secrecy Index reveals a much richer and more complex political story. The world’s biggest players in the supply of financial secrecy are mostly not the tiny, isolated islands of the popular imagination. Instead they are some of the richest nations that are mostly either members of the Organisation for Economic Co-operation and Development (OECD) or ‘satellites’ of OECD countries, particularly Britain.

Misunderstanding geography

Quite often, when one country tries to crack down on another country’s predatory activities this is portrayed as a battle between two countries. For example, when the United States began arresting Swiss bankers in 2008, this framing of the problem was very helpful for Swiss bankers, who were able to rally most of the nation behind them by portraying an image of plucky Alpine defenders facing the big American bully. But this geographical view is misleading. It is important to change the frame of reference. This was most importantly not a battle about one country versus another, but about the politics of wealth. This particular fight is better understood as a struggle between wealthy US tax evaders and criminals and their financial enablers (in Switzerland and elsewhere) against ordinary US taxpayers and the rule of law. It is essentially the same story in all other countries.

The politics of secrecy is thus a fascinating and complex tale, then, about power struggles between rich nations and poor nations, and between wealthy, law-escaping elite and ordinary folk inside countries, and often a combination of the two.

Various OECD member states run satellite secrecy jurisdictions, but Britain’s network is by far the largest, accounting for between a third and a half of the global market in offshore financial services. Ten secrecy jurisdictions in our ranking are either British Crown Dependencies (Jersey, Guernsey, the Isle of Man) or British Overseas Territories (such as the Cayman Islands, the British Virgin Islands or Bermuda). These places, the last official remnants of the British Empire, are supported and controlled by the UK, though they each have different political systems and a measure of political autonomy. Outside this group lie a series of 15 British Commonwealth Realms and 53 British Commonwealth countries, which include some Overseas Territories but otherwise have a much looser relationship with the UK.

All these jurisdictions generally share British common law; deep financial penetration by British financial interests and enablers; they typically use British-styled offshore structures such as trusts; they usually have English as a first or second language; and most of them have their final court of appeal at the Privy Council in London: a legal bedrock that reassures investors and underpins their offshore industries.

The Queen is head of state in most of these territories and in the Crown Dependencies and Overseas Territories she appoints top officials including the governor; and her head appears on their stamps and banknotes. Britain has wide powers that allow it to disallow or change their secrecy legislation, though these powers are not straightforward, and Britain has generally chosen not to exercise its powers for political and economic reasons.

The British network has for decades served as a global ‘spider’s web‘ network capturing financial business from countries around the world and feeding it into the City of London. Jersey Finance, the official body representing that secrecy jurisdiction’s financial services industry, illustrates this with a statement that “Jersey represents an extension of the City of London.” This network, among many other things, allows the City to get involved in dubious financial businesses at arm’s length, and to avoid responsibility when scandal strikes.

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