This Week in AML

US Tops Financial Secrecy Index

The Tax Justice Network has released its Financial Secrecy Index 2022. The Index “identifies the world’s biggest suppliers of financial secrecy” with the US being number 1. John and Elliot discuss the findings in this year’s Index, the overall progress noted by the TJN, and the need for continued progress in reducing the availability of tax and secrecy havens around the world.



US Tops Financial Secrecy Index TRANSCRIPT


Elliot Berman: Hi, John, how are you this week?

John Byrne: Hi, Elliot. I'm doing okay. We want to reference the fact that we have a major presence in Buffalo, and I know that Frank has sent out a message on behalf of the company underscoring the horrific nature of the shootings in Buffalo. So it's top of mind to the company, and I think that we'll just leave it at that for now, but I wanted to mention that we obviously are well connected to that community. So it's, it's hit everybody pretty hard.

Elliot Berman: Yeah, it sure has. I also want to extend a hearty welcome to the new company, President Tracy Mortenson. Frank is remaining as CEO, and he's going to continue to focus on growth and strategy, but Tracy joined the company this week, and we're all getting to know her.

So I'm happy to have that news as well. So I just saw yesterday that the tax justice network, which I think annually, publishes a financial secrecy index with the 2022 edition of that. And the US was the winner, and in this case, winner means tops the list for having the most secrecy.

In terms of financial services, but it's, I mean, at the top of the list because of the outsized impact that the US level of financial services provided to the world, so it's kind of a scale. The index is both how secretive your laws are and how impactful it is because you're a bigger small provider. I'm assuming you saw that.

John Byrne: Right. And just so folks know that the good news, if there's any, is that as they indicate there in that press statement that the supply of various what they call financial secrecy services that oligarchs and tax evaders and corrupt politicians use that's decreased globally due to a variety of transparency changes, reforms, legislation, sort of thing.

But as we just mentioned, you know, in addition to the US, the five G7countries alone, which besides the US, UK, Japan, Germany, and Italy, they're responsible for cutting this. The progress against financial secrecy is by more than a half. So, when the US is listed as number one in terms of deficiencies, that's obviously a problem.

You know, I find it a little bit counterintuitive. So obviously, folks should take a look and see how the metrics around the grading, but obviously, in the US, we're going to have a beneficial ownership registry. We're also going to have an eventual focus on gaps in the real estate market. So there are places that the US is already working on, including, as we know, the Biden administration talked about a number of these reforms in their strategy on countering corruption.

So again, the movement is there. But, you know, the tax justice network felt it was important to reference this at this point in time. And then, especially because they are meeting at this point.

Elliot Berman: Finance ministers are meeting on Wednesday of this week when you and I are recording this. And interestingly, TJN is using the announcement and the G7 meeting to call upon the G7 to commit to a global asset register.

So essentially, what that would be is a network version of the various beneficial ownership registries regionally and at the country level into some kind of global version. As you and I have talked about before, the US is working on its first beneficial registry at the national level coming out of the AMLA act. The regulations and its rules have not yet been announced, although we're certainly looking to see those.

And as we've also talked about, one of the challenges of these registries is. They're not uniform in terms of who has access, who has to register, and things like that. So I think that's a laudable goal, a global registry. Still, we're a global network of registries, but unifying the approach to them would be equally valuable, even if they weren't all tied together.

John Byrne: Yeah. And let's, let's be realistic, you know, given the division in this country, I cannot imagine certain legislators saying, yeah, let's have a global registry of sharing information, which law enforcement understands and appreciates. Still, I'm not sure elected officials do the other part of this and another advocacy group.

The fact coalition issued statements based on the financial secrecy index report. And they referenced a few things that we've talked about before. One is they want to see the implementation of the regulations as we've mentioned, but they also want to see more funding for FinCEN, which others have suggested is important.

Given all that's on the table. Still, also I noticed in some of the things that the fact coalition mentioned, which is, you know, similar to criticisms we faced before is to regulate gatekeepers, you know lawyers, trust company, service providers, formation agents. We've talked about that as well. So there seems to be a pretty consistent theme throughout that.

Until you do a number of these things, you know, real estate registry gatekeepers. I would argue things like art and antiquities. So we've talked about before, you're always going to have these, these sort of off-ramps for criminals, and that's obviously important. You can't do it all at once, but I think we're probably more committed now as a country and globally than we've ever been in addressing all of these gaps.

They'll take a while, but you know, you have to be somewhat optimistic that a lot of these things are on people's radar. That wasn't the case a year or two ago.

Elliot Berman: I fully agree with that. There is directional progress, and the challenge for these kinds of things is one collaboration and ultimately reaching an agreement, but also not losing momentum and, you know, whether that can happen from all different kinds of things.

I mean, it could be the result of elections. It can be the result of individual events. I mean, I think some of the momentum most recently has been driven by the Russian invasion into Ukraine, and you know, a deeper dive by many countries into their country's interactions with Russian oligarchs. You know, some of whom clearly didn't come by their wealth in the most appropriate way.

Is that a nice way to say that challenge? That's a very

John Byrne: That's a very understated way of saying that.

Elliot Berman: Hopefully, to maintain momentum, we don't need more, you know, international conflicts to occur that we can continue to maintain momentum across the globe because it's really the right thing to do.

I would recommend to folks that they take a look at the index, not so much for the US rating, but I think it's a very thoughtful way to go about trying to measure something that isn't so easy to me, and we'll link to the website that has an explanation of how the rankings are built.

 So, you should be able to find that, but again, if you go to the tax justice network, if you search that and then look at the financial secrecy index, you'll be able to find it. 

John Byrne: And then just when you do see that, you'll notice they've been around since 2003, and we're officially launching.

And the British house is the parliament. So obviously a global organization, which should be obvious, but they've been around for quite a period of time. And, of course, the FATF coalition has been pushing for transparency for a long time as well. So there are a lot of organizations out there that they're paying attention to where everything is.

Elliot Berman: Yes, and as by the name, you can tell that the tax justice network, when it was first launched, was focused on tax havens. But of course, the problem, as we all have identified over the last number of years, is broader than just tax evasion. So okay, so John, I will talk to you next week. Any other announcements for our listeners?

John Byrne: We have a podcast in the queue. Last week, I was able to sit down with Jamal El-Hindi, who many folks will remember. Former Deputy Director of FinCEN. Who's now at Clifford Chance. Jamal talks about his take on where we are today in the AML world, so that's coming out.

And then we have some scheduled interviews with various government officials about cybersecurity, and other things are coming up. And as we are recording this afternoon, we will have a live LinkedIn that obviously won't be live by the time you hear this about the illicit finance strategy just issued by the treasury

late last week. So staying as current as we can be. And we're always looking for people's thoughts and ideas for topics, themes, and speakers. 

Elliot Berman: Yes. And the LinkedIn live, you'll be able to view the recorded version of that session on the AML RightSource LinkedIn page.

So when you hear this, the recording will be there and available. And we have several members of our advisory board who are well-recognized experts in this space, and I think you'll find it to be a very valuable session. So, John, you have a good weekend, and I will talk to you next week.

John Byrne: Take care, stay safe.

Elliot Berman: Yep. You too. Bye. Bye.