Friday, May 18, 2012

Study: OECD countries terrible at secrecy. Plus new Saudi scandal

. . . . as we have been saying for a very, very long time, and we have long called big countries such as the UK, USA, the Netherlands and other OECD countries tax havens, or secrecy jurisdictions. See our ranking, with a secrecy score and weighting, here. Now, from Cayman News Service:
The early findings of Professor Jason Sharman of Griffith University in Australia, whose work focuses on offshore centres, reveal that . . . when it comes to secrecy OECD countries, in particular Britain and the United States, are far worse offenders in relation to global standards mandating financial transparency than the small countries usually labelled as ‘tax havens’.
The story continues:
"He believes that, contrary to conventional wisdom, in reality when it comes to secrecy OECD countries, in particular Britain and the United States, are far worse offenders in relation to global standards mandating financial transparency than the small countries usually labelled as ‘tax havens’."
We aren't surprised by these findings, although could it be true that the UK and US are worse even than Panama? Anguilla? Antigua? Gibraltar? Dubai, for goodness' sake? We haven't seen the full Sharman preliminary study, but it really would be shocking if any of those jurisdictions came above the OECD giants in his study.

Cayman and the Isle of Man came top in his survey; for these jurisdictions:
"every single corporate service provider he contacted came back asking for the full suite of information as required by the global financial rules."
The Cayman news story is, of course full of puff and misleading spin from the local authorities. Due diligence, of course, is only one part (albeit an important part) of the secrecy game - as a journalist or researcher, or representative of a weak developing country's government, try getting information out of Cayman about what all those private equity or hedge funds are up to, for example, and you will get nowhere. Under Cayman's Confidential Relationships (Preservation) Law, you can go to prison for up to four years not just for disclosing confidential information, but merely for asking for it (yes, really!). There are various 'gateways' through that confidentiality law, but they are very limited in scope.

On the various other secrecy indicators that TJN has compiled, on as objective basis as possible, Cayman does rather less well, with a secrecy score of 77, placing it at the dirtier end of the spectrum. We did praise the Isle of Man for particular improvements, notably adopting automatic information exchange under the EU scheme (Cayman has, too).

But still, in Sharman's due diligence study, these jurisdictions have done rather well.

And there is one other thing. Tax havens, we are told by people in the know, apply stringent money laundering rules for the 'little people' - but when it comes to Big People who are known and trusted in the secrecy world, then these rules fall away: there are ways to get around them. And that is the whole point. (We hesitate to call Sharman one of the 'little people' as he is a serious researcher and an extremely nice person, but you get the point)

And in this context, check out this news just in. A taster:
Details of secret payments linked to a £2 billion defence deal with Saudi Arabia and made to two offshore accounts are exposed today.
"Exaro reveals a schedule that shows transfers worth £14.5 million that went to two companies in the Cayman Islands. Our investigation sensationally revives allegations of massive bribes to secure Saudi defence sales."
Now there is a scorcher.

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