Financial secrecy

Financial secrecy keeps tax abuse feasible, drug cartels bankable and human trafficking profitable.

Financial secrecy is different from legitimate confidentiality. A bank won’t publish your account details on the internet, in the same way that a doctor won’t hammer details of your ailments on the surgery door. But financial secrecy occurs when there is a refusal to collect or share relevant information with the legitimate authorities and bodies that need it – for example to make sure an individual is paying the right amount of tax or abiding by the law.

Financial secrecy is harmful. And financial secrecy comes in different “flavours”.

The best-known flavour is plain vanilla Swiss-style banking secrecy, where bankers promise to take a client’s secrets to the grave.

A second flavour involves jurisdictions permitting the creation of entities and arrangements – whether trusts, corporations, foundations, anstalts or others – whose ownership, functioning and/or purpose is kept secret, and sometimes where the very legal basis of ownership becomes muddied. These structures hold assets – which may include, for example, a Swiss bank account, residential property in central London, a racehorse in Monaco, shares in a S&P 500 company, or a yacht – but steps are taken to make it hard to discover who has the power to enjoy those assets and associated income.

A third flavour of secrecy relies on jurisdictions putting up barriers to cooperation and information exchange between nations. This may be achieved through deliberately refusing to pursue and collect information held locally. Even impeccable information exchange agreements with other jurisdictions are worthless if the information isn’t available to exchange in the first place.

Financial secrecy can also be achieved through an unwillingness to share information with other jurisdictions – whether through a point-blank refusal after a request, or the erection of bureaucratic or other obstacles to information exchange. Many jurisdictions also make a business model out of selective non-compliance with their own laws.

All of those flavours have the potential to facilitate organised crime, fraud, theft, diverted government resources, illegal logging, bribes, blood diamonds, tax evasion, and so on.

Our Financial Secrecy Index provides the most comprehensive overview ever created of the offshore system of secrecy jurisdictions. Find out which jurisdictions are the most important providers of secrecy.