US Ranked World’s Most Secretive Financial Jurisdiction for Illegal Money

Ndubuisi Francis

The United States of America (US) has emerged the most secretive financial jurisdiction to hide illegal money in the world, according to the 2022 Financial Secrecy Index (FSI), a comprehensive study from the Tax Justice Network.
Other countries in the top five included Switzerland, Singapore, Hong Kongi and Luxembourg, according to FACT Coalition’s FSI report.
The US ranking is deteriorating from prior Financial Secrecy Indices, in part due to unaddressed loopholes and lax rules in the country’s anti-money laundering and tax laws, it stated.
Its emergence as the world’s top destination of illegal money came on the heels of the recent declaration by the global financial watchdog, the Financial Action Task Force (FATF) that it would assess its member countries more frequently to assist them further in tackling money-laundering and combating terrorism financing.
The US emerged top on the list even as it continued to implement sanctions on Russia and some of its wealthiest elite following Russia’s invasion of Ukraine.
While it is collaborating with governments around the world to locate and freeze Russian oligarch assets, this task is made more difficult by existing systems of financial secrecy that allow people, including kleptocrats and criminals, to hide their financial assets from authorities and investigators.
It is not clear how much money is illegally hidden in the US, although the Treasury Department had estimated around two per cent of the nation’s gross domestic product (GDP)- about $480 billion was hidden, according to CBS News.
The process of setting up a shell corporation, a corporation without active business operations or significant assets in the US is an easier process than getting a library card due to applicants not needing to verify their identity, a terrorist-financing expert at Washington think tank Global Financial Integrity, Lakshmi Kumar said.
The US was identified as the second most secretive country for hiding money in 2020. Later in the year, Congress passed the Corporate Transparency Act, requiring corporations and companies to report who owns the corporations and companies to a central directory maintained by the Financial Crimes Enforcement Network at the Treasury Department.
Commenting on the new FSI report, the Executive Director of the FACT Coalition, Ian Gary said: “At a time when the world is being confronted by the very real and tragic consequences of enabling global corruption, these findings point the finger at U.S. secrecy and should be a rallying cry for financial transparency.
“The Biden administration has already committed to making a number of necessary anti-corruption reforms to make sanctions more effective and to close the U.S. financial system to corrupt and criminal actors whose actions are destabilising global markets and democratic institutions.
“This ranking underscores that while the U.S. is joining with global governments to locate and freeze Russian oligarch assets, kleptocrats and criminals are still able to hide and grow their financial assets with relative ease in the U.S.
“Enforcing sanctions is difficult when we don’t have the tools necessary to know how and where oligarchs are invested in the United States.”
“The U.S. simply cannot afford to slide backwards in the fight for financial transparency.
“To fight corruption, we need to implement the Corporate Transparency Act, and to implement the Corporate Transparency Act, we need to fully fund FinCEN now,”said Congresswoman, Carolyn B. Maloney, the co-author of the CTA.
Financial secrecy undermines national security, democracy and the rule of law globally, while enabling tax avoidance and evasion which robs governments of resources they need to fight inequality and address the climate crisis.
The 2022 FSI highlights other reforms necessary to assist with sanctions enforcement and to reduce the US role as a haven to hide and grow ill-gotten or other illicit financial gains. These include, among others: “Bringing greater transparency to the $50 trillion US real estate market; engaging in more reciprocal automatic information exchange of financial account information for tax purposes and sharing the very information that the US has required from foreign financial institutions since 2014; introducing consistent anti-money laundering due diligence and reporting requirements to the $11 trillion dollar U.S. private investment fund industry,” among others.

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