The Cayman Islands has been ranked as biggest enabler of financial secrecy in the world surpassing the United States and Switzerland, which held the unenviable distinction for the better part of a decade.
The country was deemed the most complicit in helping people to secret their finances in the Financial Secrecy Index 2020, compiled by The Tax Justice Network and released last week.
The country’s rise to the top is a contrast to the performance of other nations which have implemented measures to improve their contribution to global financial secrecy, which decreased by seven per cent since the previous publication in 2018.
“The growth of Cayman’s global role points to major risks emanating from its hedge fund industry, which uses companies, trusts and limited partnerships that are cloaked in secrecy.”– Financial Secrecy Index 2020
A second Caribbean territory, the British Virgin Islands, also ranked in the top tier at ninth.
Regarding Cayman’s climb to the top of the list, the report said the country has increased its supply of financial secrecy to the world by 24 per cent, which saw it move from third to first in the biennial index. “The deterioration is a result of Cayman increasing the volume of financial services it provides to non-residents by 21 per cent. It is also partly due to Cayman’s secrecy score increasing by 4, from 72 to 76 out of 100, after Cayman failed to keep up with methodological updates to the Financial Secrecy Index that reflect the evolving nature of the financial secrecy landscape.”
Additionally, “the growth of Cayman’s global role points to major risks emanating from its hedge fund industry, which uses companies, trusts and limited partnerships that are cloaked in secrecy.”
However, the report notes that, generally, a higher rank does not necessarily indicate that a jurisdiction is more secretive but rather it “plays a bigger role globally in enabling secretive banking, anonymous shell company ownership, anonymous real estate ownership or other forms of financial secrecy, which in turn enable money laundering, tax evasion and huge offshore concentrations of untaxed wealth.”
To encourage greater transparency and drive meaningful progress in this regard, the Tax Justice Network recommends:
The top 10 enablers of financial secrecy, in descending order, are the Cayman Islands, United States, Switzerland, Hong Kong, Singapore, Luxembourg, Japan, the Netherlands, British Virgin Islands and United Arab Emirates.