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US Ranks First in World’s Most Secretive Financial Jurisdiction for Illegal Money

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The 2022 Financial Secrecy Index (FSI), a comprehensive study from the Tax Justice Network, ranked the United States of America first in the most secretive financial jurisdiction to hide illegal money in the world. Other countries emerging in the top five are Switzerland, Singapore, Hong Kong, and Luxembourg, according to FACT Coalition’s FSI report.

The deterioration of the US ranking in Financial Secrecy Indices can be attributed to unaddressed loopholes and lax rules in the county’s anti-money laundering tax laws, the report stated.

The US emergence as the world’s top destination for illegal money is hinged on the recent declaration by the global financing watchdog, the Financial Action Task Force (FATF) that it would assess its member countries more frequently in an attempt to curb money-laundering and terrorism financing.

Its emergence as number one on the list could come off as surprising considering its recent attempts to enforce sanctions on Russia and its oligarchs since Russia began its invasion of Ukraine. There are however concerns as the US collaborates with governments around the world to track and freeze Russian Oligarchs’ assets as the existing systems of financial secrecy permit people, even criminals, to hide their financial assets from authorities and investigators.

Although the Treasury Department estimates about $480 billion of hidden financial assets, CBS News speculates that it is still uncertain the amount of money illegally hidden in the US. Lakshmi Kumar, a terrorist-financing expert at Washington says the process of establishing a shell corporation being easier than getting a library card is one reason for this uncertainty.

According to the Executive Director of the FACT Coalition, the US topping the ranking shows that while it has been actively supporting global governments to locate and freeze Russian oligarch assets, kleptocrats and criminals are still able to illegally hide and expand their financial assets in the US.

The 2022 Financial Secrecy Index suggests reforms that could assist with enforcing sanctions and help mitigate the hoarding and expansion of illegal financial assets in the US. Some of the reforms include: “Engaging in more reciprocal automatic information exchange of financial account information for tax purposes; introducing consistent anti-money laundering due diligence and reporting requirements to the $11 trillion U.S. private industry.”

Financial secrecy is a threat to national security, the rule of law, and the economy by extension. It is in view of this that the Biden administration, according to Ian Gary, has committed itself to implement anti-corruption reforms to make sanctions more effective and close the financial system to corrupt and criminal actors. 

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