“The City of London uses a web of satellite secrecy jurisdictions based on British crown dependencies and overseas territories to channel huge illicit flows..." the index's author said
LONDON (Thomson Reuters Foundation) - Britain controls either directly or indirectly a web of financial jurisdictions that makes it “the most important player in the financial secrecy world”, according to an index by a financial secrecy watchdog released on Thursday.
Although Switzerland is the worst-ranked country, coming first in the Tax Justice Network’s 2013 Financial Secrecy Index and Britain 21st, when Britain’s overseas territories and crown dependencies are taken into account, it easily tops the index, the watchdog said.
“Our index reveals that Britain plays a key role in the global market for financial secrecy,” John Christensen, director of the Tax Justice Network said in a statement.
“The City of London uses a web of satellite secrecy jurisdictions based on British crown dependencies and overseas territories to channel huge illicit flows which feeds London’s mad property boom,” Christensen added.
“Despite Prime Minister David Cameron’s encouraging commitments to tackle Britain’s tax havens, little has been done so far to rein in the menagerie of offshore trusts, foundations, shell companies, loopholes and subterfuges that make up the global secrecy system,” Christensen said.
Financial secrecy jurisdictions harm the developing world by enabling corrupt regimes to stash their money abroad under numerous hidden identities, often obscured by shell companies and trusts. They allow rich individuals and multinational companies in both developed and developing countries to avoid or reduce their tax bill.
A recent study of 33 African countries found that they lost over $1 trillion in capital flight since the 1970s, of which $640 billion came from 16 Commonwealth countries, Christensen said in an open letter to Queen Elizabeth in her role as head of state of the United Kingdom and head of the Commonwealth.
“These losses dwarf the external debts of ‘just’ $190 billion for the 33 countries, meaning that Africa is a major net creditor to the world, contrary to what is widely believed,” the letter added.
The Commonwealth comprises 53 independent countries, and the queen is the head of state of 16 of them.
While Prime Minister David Cameron was praised by transparency campaigners last week for his pledge to create a public registry of the beneficial owners of British companies, those same campaigners urged him to include trusts and foundations in the registry and also to ensure that Britain’s crown dependencies and overseas territories did the same.
The ranking is created by combining a secrecy weighting with the jurisdiction’s share of offshore financial services activity as a global total. Consequently, a small Caribbean island may be less transparent and therefore have a higher secrecy score than Luxembourg (ranked 2nd in the index) but, because Luxembourg accounts for over 12 percent of the global market for offshore financial services, the tiny European state is ranked higher.
The index ranks 82 separate financial jurisdictions of which 10 are connected to Britain. The overseas territories of the Cayman Islands (ranked 4th), Bermuda (ranked 14th) and the British Virgin Islands (ranked 20th) are all in the top 20 most secretive jurisdictions in the ranking, as are the crown dependencies of Jersey (ranked 9th) and Guernsey (ranked 15th).
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