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
Number of multinational company subsidiaries in the jurisdiction
Number of Big 4 firms in the jurisdiction
Number of lawyers in the jurisdiction
Number of accountants in the jurisdiction
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?