Ethics and governance in the European Financial centers

TJN has just published the Financial Secrecy Index i.e. secrecy jurisdictions that they have ranked according to both their lack of transparency and their scale of cross-border financial activity.

Number 5 is the City of London in the United Kingdom, the world's largest financial centre with a Financial Secrecy Index Value of 347.79.
Number 4 is the Cayman Islands with a Financial Secrecy Index Value of 403.48.
Number 3 is Switzerland with a Financial Secrecy Index Value of 513.40.
Number 2 is the Grand Duchy of Luxembourg with a Financial Secrecy Index Value of 1127.02.
Number 1 is  Delaware in the United States of America with a Financial Secrecy Index Value of 1503.80.

The average for the Financial Secrecy Index Value is 79.04 .

It is not a surprise for me to see Luxembourg with such score. I have been warning for years decision-makers in the jurisdiction to correct dysfunctions, lax behaviours. They did not that they thought that being a long-standing member of European Union, of the the Financial Action Task Force (FATF), of OECD... would provide both impunity and intouchability.

The censorship of Rainer Falk's report and the launch of LIGFI corroborate that the jurisdiction does not call itself into question.

I guess that as usual they will comment TJN's index by saying something like: Dubious index on financial secrecy: the ABBL responds. The ABBL deplores the fact that, behind a pseudo-scientific façade, this document calls into question thereputation and standards of the Luxembourg Financial Centre in general and of its members in particular. Luxembourg is a long-standing member of the Financial Action Task Force (FATF). Its efforts to preventmoney laundering have recently been highlighted by international organisations, such as the InternationalMonetary Fund (IMF). The ABBL has serious doubts about the methods used to draw up the study. The conclusions do not reflect a serious scientific approach. And blablabla.

TJN's work demonstrates to what extent OECD's work that is influenced by jurisdictions and political games is not relevant.

The BBC has reported that the UK's Overseas Territories and Crown Dependencies have been told to improve standards of regulation, and find new methods of raising tax.

A government-commissioned report suggests changes offshore centres need make to meet international standards.

Michael Foot, the report's author, said that several jurisdictions had "a good story to tell, but others had more to do on regulation and tackling financial crime".

As TJN observes, one useful thing the report does is to recognise that the OECD's standards on information exchange are inadequate. It states: "In the longer term, the trend for greater transparency is likely to result in pressure to move to a system of automatic exchange of information with the aim of combating tax evasion by individuals on a cross-border basis. . . . The jurisdictions within the scope of this Review must keep pace with international developments and move towards full automatic information exchange wherever possible. . . . The Review encourages (Guernsey and the Isle of Man) to announce a firm date for a move to automatic exchange. . . The UK should call on all EU Member States and third party countries which currently apply the withholding tax option to also make a similarly firm commitment."

The Wall Street Journal has reported that while the spotlight has been on the aggressive drive by the U.S. government to flush tax dodgers out of Switzerland, bankers here are instead grappling with the loss of a much richer clientele: Europeans

Read article