The Financial Secrecy Index

Oh, my word, Ritchie Murphy has really outdone himself this time with his new Financial Secrecy Index.

It\’s simply a quite glorious fuck up even by his standards.

By his method of ranking the worst in the world is Delaware. So children, shall we see how they\’ve scored the place?


There are twelve measures used. The more negative scores you\’ve got the worse you are: plus, there\’s a weighting to see how many people use whatever naughty laws you\’ve got. So somewhere that was very secret indeed but only three people used would not be as high (or low if you prefer) on the index as somewhere that many people used but which was only mildly naughty.

That, as it happens, is about the only sensible part of this index that I can see.

So, one by one:

This weak opacity score arises because the USA (Delaware):
1. Provides banking secrecy;

So what is the definition of bank secrecy used?

1 Is legal banking secrecy banned (i.e. Is there no legal right to banking secrecy)?

Ah, now the two things are really not quite the same now, are they? It\’s entirely possible for there to be no law banning bank secrecy while there might be other laws insisting upon bank openness. Now I\’ll admit that I\’m not an expert on US law (as of course Ritchie is not) but there are myriad laws in the US where a bank should not only inform the Feds about movements in your accounts (for example, every cash transaction over $10,000) but I\’m similarly sure that there are myriad laws where the bank *must* inform the Feds about your bank transactions (that $10,000 cash one being one of them).

I would be absolutely astonished if under any reasonable test the US had anything approaching bank secrecy: that it doesn\’t have a law against it is not evidence that the US does indeed have bank secrecy.

We also seem to have something of a misunderstanding (which will come clearer later) of the US system, which is that it is a Federal one. Only some things are regulated at State level, many others at Federal. State chartered banks at State level for example, but all of the larger ones also have Federal oversight. So the test of whether there is bank openness or not is something which will depend upon Federal, not Delaware, law.

2 Does not put details of trusts on public record;

I have no idea: anyone else?

3. Does not comply sufficiently with international regulatory requirements

Again, dunno, their definition is: 3

Does the FATF rate 90% largely compliant and with no non-compliant ratings?

4. Does not require that company accounts be available on public record;

Well, not quite, the definition here is:

Are company accounts available for inspection by anyone for a fee of less than US$10?

Anyone know whether Delaware accounts are indeed publiclly accessible and if so, for what fee? I have a feeling our own dear Companies House would fail the £7.50 test…

5. Does not require that beneficial ownership of companies is recorded on public record;

Again, it\’s not quite what they say. Their actual test is:

Are details of the beneficial ownership of companies available on public record online for less than US$10?

Again, I have no idea about what happens in Delaware on this point but perhaps someone would like to tell us?

6. Does not maintain company ownership details in official records;

Similarly, does Delaware allow anonymous ownership? Dunno. Their test is:

Are details of the beneficial ownership of companies submitted to and kept updated by a competent authority?

7. Did not respond to Tax Justice Network requests for information;

Oh, that one must hurt. That the authorities do not respond to a survey sent by self-appointed puffed up egomaniacs.

8. Does not participate in the European Union Savings Tax Directive;

Hmm, that, under this Federal system of theirs, is something for Congress to deal with, not Delaware. Under the Constitution States are expressly forbidden from signing their own foreign treaties. no?

They pass number 9 because they have many tax information sharing agreements (because the US does).

10. Does not have adequate access to banking information;

Hmm, what does that mean?

Has the jurisdiction\’s authority effective access to bank information for information exchange purposes?

Again, that\’s Federal, not State.

11. Allows company redomiciliation;

Eh? You mean that thing which every corporate within the EU (and EFTA) has, the right to move jurisdictions? This is evidence of them being naughty boys? Plus, I would suspect (do not know, but would suspect) that redomiciliation to another US state is easy, but redomiciliation out of the US altogether would come up against some fairly stiff Federal tax laws.

12. Allows protected cell companies.

Who knows what this means?

But shall we also look at the \”other data\”? Yes, why not.

Financial services as a percentage of GDP
Not Available
Not Available
Number of multinational company subsidiaries in the jurisdiction
Not Applicable
Not Applicable
Number of Big 4 firms in the jurisdiction

Number of lawyers in the jurisdiction
Number of accountants in the jurisdiction
Not Available
Not Available

Wow, that really is something. Delaware has more lawyers than it has head of population. Quite incredible really. Of course, what they\’ve done is use the number for all lawyers in the US. The actual Delaware Bar seems to be around 4,000 people or fewer.

And the Big Four accountants are in Delaware (assuming they\’ve not made the same mistake about the US etc)? Well, that might just be because of the Delaware Court of Chancery. And if you don\’t understand the implications of that then you\’ve really no business at all commenting upon companies or incorporation in the jurisdiction. Absolutely none at all.

This data shows
1. That the USA (Delaware) may have a significant dependence8 upon financial services;
2. That the Big Four accounting firms do have a significant presence9 in the USA (Delaware), suggesting that it does host significant international activity;
3. That the USA (Delaware) does exhibit a significant number10 of lawyers accountants when compared to other secrecy jurisdictions, suggesting the relative significance of its activities.

Well, actually, no. The evidence does not show that Delaware has a significant dependence upon financial services*, the presence of the Big Four does not show significant international activity and the number of lawyers is so hoeplessly wrong that we can conclude nothing more than that this exercise has been put together by someone with absolutely no clue what they are doing.

But then that\’s our Ritchie, ain\’t it?

There\’s one small get out for Murphy\’s army here. That they are using some US wide information. However, the idea that the presence of the Big Four and lots of lawyers in the largest economy in the world is evidence of it being a secrecy jurisdiction is simply insane. Sorry, but it really is.

*Other evidence does most certainly show that Delaware makes good money out of being a centre for the law about corporate governance. But as the above doesn\’t even try to delve into that, let alone understand it, that can\’t be what they\’re referring to as part of their evidence, can it?

Today\’s Ritchie

Yes, it\’s our favourite retired accountant again.

It has been commonplace for tax to be charged in accordance with “law”. For example, it was decided in a legal opinion given in the House of Lords in the United Kingdom in 1869[1] that:

If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute what is called an equitable construction, certainly such a construction is not admissible in a taxing statute.

This principle remains enshrined in most British tax law (in particular)and appears to heavily influence taxation thinking in general.

OK, established principle of British law, been there a century and a half at least but Ritchie wants that to change. Got to say he doesn\’t lack ambition at least. But why? Why change it?

But the profession will hate it. They want certainty. We need principles to ensure tax is fair.

Well, apparently tax shouldn\’t actually be certain: shouldn\’t be about what the law says it is, it should be about whatever the taxman decides on the day it should be. Bugger all that rule of law stuff, that democracy (you know, the bit about having to go through Parliament?) shtick is simply too, too, old fashioned.

Tax should be what ever is demanded and pay up quick Sonny Boy.

Fuck that for a game of soldiers quite frankly. And the horse it rode in on.

Rather than that sort of dictatorship of the bureaucracy we\’d be better off scrapping corporation tax altogether (for of course the vast majority of all of this is about that very corporation tax). And there\’s no particular reason to think that there would be much revenue loss to the Treasury if we did as well: given tax incidence (yes, even St Cable of Vince is on board with this one) the money not collected in corporation tax would pop up elsewhere, almost certainly in dividends (and capital gains….and yes, part of the change here would be to equalize CGT with income tax rates at the same time as abolishing corporation tax) to shareholders and higher wages for workers: both of which are taxed and at or above the marginal rates of corporation tax (40% for higher rate payers for example).

But wait! There\’s more!

Yes, we should slap the banks with loads more tax so that they have less capital and thus can lend less! Truly, the work of a genius in the middle of a credit crunch, don\’t you think?

And I am quite convinced it is the right thing to do. Banks have to repay society. Banks are liquid now – using government money. If they need new capital they should raise it, not save it. And HMG needs the tax – plus to cost of doing business for banks has to increase.

Interestingly, when Lloyds\’ announced plans for a rights issue (you know, that raising more capital bit) Ritchie was against that too.

There is a sadness here as well as the hilarity. There really are people in The Treasury who listen to this guff without guffawing in laughter. Sadly so.


You cannot, for example, make a nurse and (I assume he means \”an\”-Tim) added value supplier by transferring them to the private sector.

Our Ritchie.

Private nurses exist: is he saying they don\’t add value? That people pay them because they don\’t value what they do?


The rest of it is that everything truly valuable is supplied by the State, those things provided by the market mere trinkets.

Just in case.

Sorry, more Ritchie. His comment at his place.


I’ll quote this from a review of On Kindness by Adam Philips & Barbara Taylor, Hamish Hamilton, £14.99 in the Guardian today:

“Kindness was mankind’s “greatest delight”, the Roman philosopher-emperor Marcus Aurelius declared, and thinkers and writers have echoed him down the centuries. But today many people find these pleasures literally incredible, or at least highly suspect. An image of the self has been created that is utterly lacking in natural generosity. Most people appear to believe that deep down they (and other people) are mad, bad and dangerous to know; that as a species – apparently unlike other species of animal – we are deeply and fundamentally antagonistic to each other, that our motives are utterly self-seeking and that our sympathies are forms of self-protectiveness.

Kindness – not sexuality, not violence, not money – has become our forbidden pleasure. In one sense kindness is always hazardous because it is based on a susceptibility to others, a capacity to identify with their pleasures and sufferings. Putting oneself in someone else’s shoes, as the saying goes, can be very uncomfortable. But if the pleasures of kindness – like all the greatest human pleasures – are inherently perilous, they are none the less some of the most satisfying we possess.

In 1741 the Scottish philosopher David Hume, confronted by a school of philosophy that held mankind to be irredeemably selfish, lost patience. Any person foolish enough to deny the existence of human kindness had simply lost touch with emotional reality, Hume insisted: “He has forgotten the movements of his heart.”

For nearly all of human history – up to and beyond Hume’s day, the so-called dawn of modernity – people have perceived themselves as naturally kind. In giving up on kindness – and especially our own acts of kindness – we deprive ourselves of a pleasure that is fundamental to our sense of well-being.”

Your argument that economics follows immutable laws of human nature is simply wrong. The current view of that nature has been perverted, not least by economists, and libertarians in particular, as the article goes on to note. Hobbes has a lot to answer for, but the fact is that for a great many people in the world the maxim that a person should love their neighbour as themselves (found in all the major world religions) holds true. Your view of economics and the inevitability of human nature is wrong Tim, because it is built on sand.


My response, as I don\’t know whether it will get published.

Umm. Richard, at the risk of being banned from the comments here again.
You do know that David Hume was the best (philosophic) friend of Adam Smith, don’t you? You do know that Adam Smith wrote “The Theory of Moral Sentiments”? You do know that Smith wrote about “sympathy ” (what we would probably these days call empathy)?

I am, as a Fellow at the Adam Smith Institute, a follower of Smithian (and by implications, Humean) philosophic thought. I am not a Hobbesian. I’m afraid that you are once again betraying your paucity of knowledge about such matters.

Both Smith and Hume pointed out that “sympathy” (as they called it) was indeed entirely human and entirely admirable. But that it wasn’t unlimited. There’s a passage in Wealth of Nations where Smith points out that what happens to Chinamen (his phrase, not mine) is of less import than what happens to our neighbours.

This is indeed a “law of human nature”. What happens to those socially or societally close to us is more important to us (whether it should be or not) than what happens to those who are not so. This is a simple observation of human nature. One made by Smith with the aid of Hume.

Indeed, those who worry about inequality within a society, as opposed to those worrying about global inequality, are making the same argument. When people say that “relative poverty” in the UK is a problem, they are stating that inequality here is of more import than inequality between, say Britons and Ugandans. For that inequality is happening close to us and as Smith and Hume said, empathy (or sympathy) seem to work harder the closer we are to each other.

You’re going to have to do much better than this to prove that I’m some sort of heartless bastard, sorry. In fact, you’re going to have to get a rather greater education than you seem to have in either economics or the philosophy that underlies the major economic schools before you can even critique, let alone criticise, my opinions.

As I’ve said before, you just don’t know what you’re talking about as yet.

I never knew Ritchie was a monetarist

Mr. Murphy today. / Companies / Financials – Danger of persistent deflation is seen as low – I agree on one condition: which is that we print a lot of money

That will permit quantative easing

Of course, it\’s quantitative easing, not quantative. But it\’s a straight monetarist argument.

MV equals PQ of course and if V is falling (as it is, obviously) then in order to keep either or both P or Q stable then we need to increase M. And there are a number of ways of increasing M, from things like changing reserve requirements to increase M4, interest rates for M3 (umm, I\’ll admit to being more than a tad hazy at this level of discussion of monetary economics. Please do correct me in the comments) to simply printing the stuff to increase M0.

Who knew, our Ritchie, a follower of Uncle Milt?