The Cayman Islands no longer holds the top spot in the Tax Justice Network’s (TJN) global financial secrecy ranking, after dropping to 14th position, following data disclosure which showed that the scale of financial services it provides to non-residents was lower than expected.
According to an analysis conducted last year by Cayman Finance, there were significant flaws in the Financial Secrecy Index choice of data and scoring when calculating a Global Scale Weight (GSW) for Cayman, as it chose to use portfolio liabilities instead of publicly-available data for financial services exports which made the GSW for Cayman nearly nine times the amount that it should have been.
The Financial Secrecy Index (FSI) is an assessment of the secrecy of financial centres and the impact of that secrecy on global financial flows, and grades each country’s financial and legal system with a secrecy score out of 100 where a score of 0 is full transparency and a score of 100 is full secrecy.
This is measured by 20 Key Financial Secrecy Indicators (KFSI) which include rules on transparency on ownership of companies, trusts and foundations, public access to annual accounts, and compliance with anti-money laundering standards.
In the Caribbean, St. Kitts & Nevis took the top spot for the highest FSI score of 77.2. Antigua & Barbuda ranked in second place, Curacao third, Turks & Caicos fourth, followed by Bahamas, Anguilla, Belize, Montserrat, Barbados and then Cayman, which received a financial secrecy index score of 72.6.
But while Cayman had the 10th highest FSI score in the Caribbean, and the 30th in the world, it had the second highest global score weight (GSW) in the region (after the British Virgin Islands) and 14th in the world, when taking into account the size of each jurisdiction’s share of the global market for financial services provided to non-resident clients, used as a measure of risk.
The country with the highest Global Scale Weight was the United States, which has increased its financial secrecy by almost a third since 2020, earning it the worst rating since rankings began in 2009, according to TJN.
The Tax Justice Network said the US’s worsening score was driven by its refusal to exchange information with other countries’ tax authorities.
Switzerland was ranked in the #2 position, followed by Singapore, Hong Kong and Luxembourg.
“A small club of rich countries setting global rules on finance and tax are found to be the ones most responsible for facilitating financial secrecy and tax abuses,” said Moran Harari, lead researcher at the Tax Justice Network. “For decades, rich G-7 countries courted billionaires, oligarchs and corporate giants with secrecy loopholes and eyes-wide-shut-regulations.”
But this does not mean that countries like Cayman have gotten away clean.
According to the report, UK overseas territories and crown dependencies are responsible for 8.9 per cent of all financial secrecy in the world. That rises to more than a tenth of the world’s total supply if the UK is included — a total almost double that of the US.
According to TJN, an estimated $10 trillion of wealth is held offshore. That is more than 2.5 times the value of all dollar and euro bills currently circulating the world.
Last year, TJN said that Cayman had inflicted $83,132,627,218 in tax losses each year on other countries.
Jude Scott, Chief Executive of Officer of Cayman Finance, responded to last year’s report:
We are confident in the leadership the Cayman Islands Government and our financial services industry have shown in adopting global standards for transparency and tax information sharing. While fraud is a global issue that we all have a continued role in tackling, both the EU and the OECD have recently reviewed the Cayman Islands tax neutral regime and found it to be transparent, consistent with good tax governance principles and without the existence of harmful tax regimes. Those are the kinds of internationally-recognised assessments that should be considered when assessing the Cayman Islands.