Symposium on systems of financial secrecy summary report

  • Publication date: 06 March 2024
  • Author: Open Ownership

Session one

Setting the scene: Context and background for discussing systems of financial secrecy

This introductory session covered some key aspects of global systems of financial secrecy, including international progress and reforms to date.

  • Mary Ongore, Legal Manager Sustainable Finance, International Lawyers Project

Mary opened the first session with her presentation Financial institutions that make rules on illicit financial flows and their impact on developing countries.

Mary is carrying out research at the University of Nairobi on illicit financial flows. Her presentation was focused on some financial institutions that set standards and norms for the financial sector related to transparency and secrecy, including the Financial Act Task Force (FATF), the Bank of International Settlements, the Basel Committee on Banking Supervision (BCBS), the Financial Stability Board (FSB), the International Accounting Standards Board, and the International Organisation of Securities Commissions.

She notes that only 8 of FATF’s 36 permanent member countries are from the Global South. The BCBS has 45 members from 28 jurisdictions, but only one African country is a member; likewise, the FSB has only one African country as a member. Because of its small number of members in Africa, Oceania, and the Americas, the BIS makes decisions with very little input from Africa and developing countries more broadly.

Overall, her research highlights the significant power held by decision-making bodies in which developing countries lack representation, over the international financial system. She foregrounded the economic and practical challenges that result from global standards that are agreed upon by these actors often being codified into national laws in many developing countries which have no voice in the standard-setting processes. She noted the need for more global representation within the decision-making bodies.

One question in the Q&A at the end of session 1 reflected how the limited representation from the Global South within such bodies is a clear issue which was raised in several of the session’s presentations, and asked how it might be corrected. Mary responded: “Rules will hopefully evolve in the global tax architecture, but the current structures still mean that a small number of countries are involved in standard-setting at the global level. Given the economic disparity between Global North and Global South countries, truly representative global tax bodies are necessary to ensure that the rules take these differences into account. Some jurisdictions in Africa, for example, have small transfer pricing units, if at all, and need a lot of capacity building to ensure the rules are effectively applied.”

When asked about FATF grey- and blacklisting during the Q&A session, Mary said: “The use of blacklists is very politically driven. More often than not, some large or powerful jurisdictions which are not compliant don’t get added to blacklists.”

Full research from Mary Ongore will be forthcoming.

  • Angus Barry, PhD researcher at the Blavatnik School of Government, University of Oxford

Angus presented Exploring patterns of beneficial ownership reform. Some of his points are also outlined in this Open Ownership blog post.

Angus began by outlining the four ways in which academic research suggests that countries react to new global standards, through:

  • coercion (countries adopt policies to avoid punishment, e.g. blacklisted and greylisted countries);
  • mimicry (countries adopt policies for legitimacy, e.g. to signal governance maturity);
  • competition (undercutting other countries); and,
  • Learning (policy makers replicate successful policies from other countries).

His research has found that FATF greylisting may incentivise beneficial ownership transparency (BOT) reforms – where a country has been greylisted for 10 years, they are more likely to implement beneficial ownership (BO) reforms. He presented the results of analysis using the Global Data Barometer data on implementation of corporate ownership transparency policies, focusing in particular on low and middle income countries.

His work finds that countries that are more democratic, even those with high levels of corruption, are also more likely to implement BOT reforms. The effects of local political issues (e.g. fighting corruption, procurement reform, extractive sector transparency) also have an impact. Additionally, countries with a high level of corruption are less likely to implement BOT reforms. There are also correlations between BOT reforms and governance/legal capacity, including after controlling for GDP per capita.

This year, Angus will continue his research through producing in depth case studies of factors influencing BOT reforms in Indonesia and South Africa. Full methods and the working paper will soon be published.

  • Tyehimba Salandy, Atlantic Fellow for Social and Economic Equity, University of the West Indies

Tyehimba presented Invisible wealth, elites and global inequalities: Coloniality and the case for reparations.

“We have to be bold about naming structures and systems that have devalued people.” – Tyehimba Salandy

Tyehimba introduced his presentation with a background on Trinidad and Tobago, where there are expansive corruption problems, particularly with secrecy around the transferral of public resources and goods to private interests. Despite gaining independence in 1962, Trinidad and Tobago has a “saving” clause, tying it to retain laws passed under British colonial rule, which holds back the country’s ability to change earlier laws and foundations.

Tye presents that secrecy is a central part of coloniality and the global economic system. “The invisibility of colonialism”, as Tyehimba explains, is the history shrouded in secrecy, which is not fully recognised. It is the intersection of injustices – who holds power; the international organisations that have legitimacy despite being ideological, having emerged from systems of colonialism, classism, genderism, and racism. These macro processes interact with the micro choices and processes we are all engaged in in our daily lives.

Former colonial powers are now leading producers of knowledge on democracy and economic affairs, but this excludes thinkers from the Global South. This also affects the issues that international standard-setting organisations focus on. Colonial powers have minimised effects of rule: Operation Legacy was the British act of destroying thousands of colonial records, exposed by investigative journalists such as Ian Cobain, creating “bundles of silence”.

Given all of this, Tyehimba encourages the case for reparations. In the Q&A session, a representative from King’s College London asked who should “pay the bill” for these reparations. Tyehimba explained that “Reparations doesn’t just include money.” He said: “We need to take into account artefacts. We have information about transfers made to certain organisations or even families. Britain has been shown to have drained 45 trillion US dollars from India, for example, so there are ways that we can work out what needs to be paid. We have to be bold about naming structures and systems that have devalued people.”

  • Daniel Haberly, Senior Lecturer, School of Global Studies, University of Sussex

Daniel presented The Regulation of Illicit Financial Flows (RIFF) dataset: A new world map of 30-years of financial secrecy and anti-money laundering reforms.

Daniel introduced the RIFF dataset, developed with the Tax Justice Network, which covers 61 jurisdictions and 23 policy indicators over 30 years (1990–2020). By looking at illicit financial flows (IFF) regulatory reform over the last 30 years, he highlighted that great improvements can be seen since the 1990s. By 2010-2015, pressure on offshore jurisdictions meant that they began to catch up and AML regulations improved, but they are still lagging behind on transparency today. He pointed out that this dataset focuses only on the existence of laws and regulations, not the effectiveness of their implementation.

Most countries that have statutory banking secrecy have signed up to the Organisation for Economic Co-operation and Development (OECD)’s Common Reporting Standard (CRS), but journalists and civil society remain excluded from accessing the information, and banking secrecy laws are used to criminalise journalists. As for BO registers, offshore jurisdictions are more likely than onshore ones to have implemented a register, but are less likely to make it public or to extend them to trusts and other non-corporate vehicles. Although the IFF regulatory framework is state-centric, accountability is led by non-state actors: he argues therefore that there is a need to enable broad, public access to support accountability.

Daniel noted that offshore jurisdictions were not the worst offenders: bad anti-money laundering and countering the financing of terrorism (AML/CFT), as well as secrecy, were the worst in China and the US. Daniel said that “The most powerful economies need to lead by example”.

“The scope of the international IFF regulatory framework needs to be redefined to acknowledge and enable the broad public foundations of government accountability,” Daniel said.

Next page: Session two