Delaware named most secretive

Cayman ranks fourth; City of London fifth

The US state Delaware is the world’s most secret financial location, a study by the Tax Justice Network, a tax advocacy group, has found.

The findings come at a time when the US government is attempting to rein in banking secrecy jurisdictions such as Switzerland.

The UK, another vocal critic of alleged secrecy jurisdictions in the past, appeared in fifth place of the financial secrecy index with the City of London.

The Cayman Islands were ranked fourth in the index behind Luxembourg in second and Switzerland in third place.

Anthony Travers, chairman of Cayman Finance, was quoted by the UK Observer as critical of the report saying: ‘Anybody who claims to have evidence that Cayman is opaque hasn’t read the IMF and Financial Action Task Force reports nor the US version from the General Accountability Office… [This] report [has a] selective bias and [is] totally discredited, and will be seen as such by everybody in the financial world.’

The report was particularly critical of Delaware, home to half of the US’ quoted firms and some 700,000 companies.

The east-coast US state provides high levels of banking secrecy and does not make information on trusts and company accounts or share ownership publicly available. In addition Delaware offers a large number of measures and opportunities to protect the identity of the beneficial owners of businesses.

Delaware is an attractive financial jurisdiction because it does not require companies to be physically present and it does not tax profits realised outside the state, according to the Tax Justice Network.

While the index results will be seen as ironic by some victims of US efforts to curb tax evasion and banking secrecy, it is unlikely that US authorities will change the regulatory environment for businesses in Delaware.

Although the UK did not have the majority of characteristics of a secrecy jurisdiction, it was included in the list due the scale of the City of London as a financial hub and its potential for facilitating money laundering and terrorism financing report.

The International Narcotics Control Strategy Report found last year that despite improved anti-money laundering measures drug traffickers and other criminals are able to launder substantial amounts of money in the UK.

As part of the Tax Justice Network academics, accountants and investigators compiled the 1,800-page report over the course of 18 months.

The secrecy jurisdictions index was calculated on the basis of an opacity score derived from laws, regulations, tax information exchange processes and reports on money laundering and terrorism financing.

The opacity score was composed of 12 secrecy indicators such as banking secrecy rules, trust laws or the disclosure of beneficial ownership.

The opacity score was then weighed according to the size of the offshore financial services activity to arrive at a financial secrecy index, reflecting both the level and scale of secrecy, the authors of the index wrote.

According to the report, secrecy jurisdictions with the highest opacity scores are more opaque in their operations, less engaged in information sharing with other national authorities and less compliant with international norms relating to combating money-laundering.