Monday, October 01, 2012

New White Paper on the FSI 2011: Where to draw the line? Identifying secrecy jurisdictions for applied research

We published the last Financial Secrecy Index in October 2011. Since then it has been picked up by a variety of different organisations including the sustainability rating agency imug and the Basel Institute on Governance's Anti-Money Laundering Index.

TJN has now published a discussion paper outlining various approaches for identifying secrecy jurisdictions based on their FSI-secrecy score. The paper reviews current uses of the FSI and provides guidance for researchers on how to establish sensible thresholds for designating a list of secrecy jurisdictions.

The introduction begins as follows:
"The Financial Secrecy Index (FSI) provides a way to map and expose offshore secrecy and the global infrastructure that creates it by identifying the relevant jurisdictions and ranking them according to both their secrecy and the scale of their activities. The FSI uses the term ‘secrecy jurisdiction’ interchangeably with the term ‘tax haven’, and both refer to a jurisdiction which “provides facilities that enable people or entities escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool“.

A number of studies have used the FSI 2009 list of secrecy jurisdictions (or a modified version), for example for mapping the secrecy jurisdiction subsidiaries of multinational corporations. This list was compiled mainly by reviewing 11 lists of tax havens published by various organisations over the course of decades.

The FSI 2011 changed its methodology for selecting the jurisdictions under review. Instead of relying only on a review of prior lists, countries were added either because they were known to host a financial secrecy industry, or because of their large share in the global market for cross-border financial services. The outcome of this revision placed greater emphasis on the secrecy score for each jurisdiction, ranking them on a broad secrecy spectrum ranging from total secrecy to total transparency.

As a consequence, the sample of jurisdictions analysed by the FSI 2011 was no longer equivalent to a definitive list of secrecy jurisdictions. While there are good reasons to continue emphasizing the secrecy spectrum, it is also clear that there  are benefits in identifying a single set of jurisdictions for further research or policy making. This white paper seeks to provide guidance for taking a decision on how to define such a set of jurisdictions."
The full discussion paper will be permanently posted as a special report on our secrecy jurisdiction website.


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