The Hitchhiker's Guide to Secrecy Jurisdictions
As the project brief notes, it is intended to complement work by Global Financial Integrity in Washington, D.C., looking at the magnitudes of these problems.
While putting together this material, which would run to more than 1,800 pages if printed, we have felt like explorers charting territory previously mapped in only the scantiest detail. Before we set off on this trip there was only a fragmented collection of partial studies conducted by various organisations, public and private, which, like the old Victorian explorers' maps, showed only distorted parts of a larger reality. Mapping the Faultlines brings all this information, and more, together into a coherent whole for the first time.
We knew from the outset of our research that the core selling point of what are popularly known as "tax havens" is not tax, but secrecy. Tax considerations are always secondary to the provision of secrecy. We therefore prefer the term "secrecy jurisdiction" instead of "tax haven."
What secrecy jurisdictions do, above all, is to provide facilities that enable people or entities to undermine the laws, rules or regulations of other jurisdictions, using secrecy as their prime tool.
The topography of secrecy jurisdictions has been heavily distorted by false images and supremely well-financed propaganda campaigns, leading to a popular perception that it is the small, palm-fringed islands like Cayman, or Alpine tourist destinations like Liechtenstein, which are the principal providers of financial secrecy in the global system. These places are important, of course, but one striking early result from this project (we will provide more on this in the coming weeks) is that the biggest sources of financial secrecy worldwide are to be found in major rich-world financial centres, especially in the OECD (and Britain plays an especially important role.)
This all helps explain why the OECD, which the G20 has tasked with leading the fight against the secrecy jurisdictions, has produced such a confused and inadequate initiative, and a "white list" of jurisdictions that looks more like a whitewash.
Our systematic and objective research project confirms more anecdotal evidence of this that was already available, such as from Jason Sharman in March 2009 who concluded that:
"The United States, Great Britain and other OECD states have chosen not to comply with the international standards which they have been largely responsible for putting in place."
The Ford Foundation funding has enabled us to look carefully at the secrecy arrangements of 60 jurisdictions around the world, based on research going back 30 years and drawn from the work of the OECD, the IMF, independent academics, and our own endeavours. Although the secrecy jurisdictions are deeply implicated in the currrent global economic crisis, this was not the main focus of our investigation. Our focus was on illicit financial flows -- see "Key Findings" on the Mapping the Faultlines home page.
Our research work led the project team eventually to select 12 key criteria of secrecy. This helps dispel widespread popular misconceptions, which hold that it is bank secrecy that is the touchstone of these places' opacity.
Bank secrecy is important, of course, but many other less well-known mechanisms are just as important, such as trusts, a British invention which potentially offer deeper and even more devious forms of secrecy with bank secrecy. Very often, different secrecy mechanisms are used in tandem with each other, to provide further veils of opacity. So we judge jurisdictions also by things such as their willingness to exchange information with other jurisdictions or to cooperate with international research, and, crucially, their ability to cooperate with information exchange: many jurisdictions, for example, are quite willing to sign up to information exchange treaties, but then they take steps so that there is no information available to exchange in the first place!
We are still populating this study: most of the information and data is already up there, including 60 individual jurisdiction reports for these places, but more details, and updates are steadily being included. With such a huge volume of material and data, we accept that errors may have crept in. If you find errors, please let us know - but read this first.
This is only the first stage of this project: assembling the research data. Our next steps will be to use it for other projects to analyse what is going on, and to propose policy measures. Over the coming weeks, months and years we will be rolling out startling new research, data and analysis based on this new data.