How countries ‘secretly’ move money around – including Africa

The Tax Justice Network (TJN) has published its Financial Secrecy Index for 2020, highlighting the most secretive countries when it comes to their offshore financial activity – either hiding funds overseas, or opening their banking system to offshore financial flows.

The index markets itself as a ‘politically neutral’ ranking, to be used as a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight.

In its 2020 report, the TJN estimates that between $21 trillion to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world.

“Secrecy jurisdictions – a term we often use as an alternative to the more widely used term tax havens – use secrecy to attract illicit and illegitimate or abusive financial flows,” it said, adding that illicit cross-border financial flows have been estimated at $1 trillion to $1.6 trillion per year.

An example of how harmful these practices are can be seen in Africa, it said.

“Since the 1970s, African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion.

“So Africa is a major net creditor to the world – but its assets are in the hands of a wealthy elite, protected by offshore secrecy; while its debts are shouldered by broad African populations,” the group said.

The scope of secrecy goes beyond just tax, however.

“In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency.

“The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more,” it said.

Globally, the Cayman Islands are ranked first on the 2020 Financial Secrecy Index, based on a secrecy score of 76 and a large global scale weight for the size of its offshore financial services sector, which comprise 4.58% of the world total.

The Financial Secrecy Index https://fsi.taxjustice.net/en/

What happens when you compare the Financial Secrecy Index with the Corruption Perceptions Index? Our analysis

Last month, Transparency International launched the 2019 Corruption Perceptions Index(CPI), which captures perceptions of a variety of forms of corruption in a country’s public sector. The CPI sheds light on countries where bribes or political connections are often necessary to win government contracts or obtain a business license, for example. But it does not capture the full range of corrupt behaviours. The CPI does not consider transnational forms of corruption, money laundering or the role of the private sector in allowing the corrupt to safely hide and enjoy the proceeds of corruption.

The recent Luanda Leaks investigation shows that a myriad of shell companies incorporated in different jurisdictions — from Malta to Mauritius — were used to disguise ownership and gain contracts or subcontracts with the Angolan government and state-owned oil company. Anonymous bank accounts in different jurisdictions — from Portugal to UAE — were allegedly used to pay bribes and to launder stolen funds. Similar mechanisms were used by Odebrecht: the company relied on at least 42 offshore accounts to pay bribes to public officials across Latin America and two African countries.

Continue reading... https://voices.transparency.org/what-the-financial-secrecy-index-tells-us-that-the-corruption-perceptions-index-doesnt-6c8d4bf5c06d

Sources: Tax Justice Network | Transparency International | Business Tech | JIC Media