Cayman 1st on fin secrecy index

MUMBAI: Switzerland no longer retains the top position in the newly released financial secrecy index (FSI-2020) — a slot occupied by it since 2011. Cayman Islands is ranked first, moving up two slots from the 2018 ranking. The US continued to retain its second position.

Tax Justice Network (TJN), an independent international entity that pushes for transparency, ranks countries on the size and secretiveness of their financial sectors every two years. It examines how intensely the country’s legal and financial system allows wealthy individuals and criminals to hide and launder money.

Parameters used in the ranking include automatic exchange of information and registration of beneficial ownership. According to TJN, an estimated $21-32 trillion of private financial wealth is located, untaxed or lightly taxed in secrecy jurisdictions (tax havens) around the world.


Switzerland’s reduced role in financial secrecy is partly due to the increasing number of countries with which it automatically exchanges information under the ‘Common Reporting Standard’.

It is also partly owing to a reduction in the volume of financial activity conducted in Switzerland by non-residents, states TJN.

India is among the 75-plus countries with which Switzerland’s Federal Tax Administration has shared information on financial accounts under the automatic exchange route. The first tranche of such information was made available to India in October last year, which will help tax authorities here to take action against black money stashed overseas.

The US is yet to sign up on the Common Reporting Standard. Primarily, an increase of 21% in the volume of financial services provided to non-residents has pushed Cayman Islands to the first slot. In its release issued late night (India time) on Tuesday, TJN is quick to point out that the ranking is about the present. Its goal is to draw attention to the top countries who are currently the largest contributors to global financial secrecy.

The fact that a country is no longer in the top 10 does not mean that it got any better, perhaps other countries got much worse, adds TNJ. A quick comparison of the top 10 countries in the last and current index shows that Japan, Netherlands and British Virgin Islands (BVI) are now among the top 10 in the FSI. On the other hand, Germany, Taiwan and Guernsey have dropped off the top 10 indices.

Countries such as the US, Singapore, Japan, the Netherlands and the UAE — which figure in the top 10 list of FSI-2020 (and are perceived as actively promoting secrecy in global finance) — are also among the top 10 FDI investors to India (see graphic).

TJN’s FSI ranking is based on a combination of a country’s secrecy score and a scale-weightage based on the country’s share in the global market for its offshore financial services. Thus, for instance, even though India’s top FDI investor Mauritius has a secrecy score of 72, it is ranked lower at 51 as compared to Singapore since Mauritius accounts for less than 1% of the global market for offshore financial services.

Singapore is India’s second-largest FDI investor and has a lower secrecy score of 65 points, but is ranked at fifth position in the secrecy index as its financial services account for over 5% in the global market.

In 2017, Mauritius signed the multilateral instrument (MLI) under the OECD-led ‘Base Erosion and Profit Shifting’ (BEPS) project, aimed at preventing treaty abuse. However, it kept its treaty with India outside the MLI, stating that it will engage in bilateral negotiations.

While the UK, which is the sixth largest FDI source for India, is not in the top 10 FSI-2020, it has increased its secrecy score more than any other country, catapulting it from 23rd on the 2018 index to 12th on the 2020 version. Additionally, Cayman Islands and BVI are also British Overseas Territories where the UK has full powers to impose or veto law-making.