What does a change in the ranking mean?

You can download an excel sheet here which provides for a breakdown of the changes in ranking between the 2018 and 2020 editions of the Financial Secrecy Index. Commercial users must purchase a licence to use any Financial Secrecy Index data. All users must register to access data in Excel format (registration is free for non-commercial users). 

Does a change in the Financial Secrecy Index ranking mean a jurisdiction’s secrecy improved or worsened since the last edition of the Financial Secrecy Index?

Short answer, no. The Financial Secrecy Index ranks jurisdictions according to their Financial Secrecy Index value. This value depends on two elements: the secrecy score and the global scale weight (see here). A change in the ranking of a country could thus be affected by a change in their secrecy score or a change in their global scale weight – or by more dramatic changes in other countries.

This means the ranking does not show whether a country’s secrecy improved or worsened since the last edition, but it’s possible to find this information somewhere else (see below).

What does a change in the ranking mean?

Bear in mind that the ranking in the Financial Secrecy Index is about the present. The goal of the ranking is to draw attention to the top jurisdictions, because these are currently the largest contributors to global financial secrecy. If these jurisdictions became more transparent, this would have a huge impact on the fight against tax evasion, money laundering, corruption, and other illicit financial flows.

If you compare the top 10 jurisdictions of the last and current editions, you can see whether the same countries are still among the largest contributors, or if there are new ones. However, the fact that a country is no longer in the top 10 does not mean that it got any better, maybe its secrecy and offshore financial services stayed the same, but other countries got much worse.

Why might a country rise in the rankings (become a worse offender) if only their global scale weight increases and not their secrecy score? Or worse, why might a country rise up the ranking even though secrecy improved (i.e. it became more transparent)?

Again, one country’s ranking is relative to the Financial Secrecy Index value of other countries. This means it is possible for a country to change positions only because other countries change more dramatically. It is also possible for a country to move down in the ranking, as if it contributed less to global financial secrecy, even if its secrecy and offshore services actually got worse. It will all depend on other countries (see below). 

But let’s forget for a moment about other countries, and look only at one country’s specific changes. How is it fair that a country goes up in the ranking (becomes a bigger contributor to global secrecy), even if its secrecy got better or stayed the same?

By assessing the secrecy/transparency legal framework of countries we arrive at a secrecy score. The global scale weight indicates how much impact or scale that secrecy will have. If a country remains equally secretive (its secrecy score stayed the same), but its global scale weight increased between two editions of the Financial Secrecy Index, this means that the same level of secrecy will now have a much larger impact worldwide. Thus in practice, the country now contributes more to global secrecy than before. For instance, this is what happened with the USA in the 2018 edition of the Financial Secrecy Index. The only way in which a country can neutralise the impact of a greater global scale weight is by becoming more transparent. If the secrecy improves just a little, or not at all, while the global scale weight goes up, that country is arguably a bigger threat to global transparency than before. The change in ranking therefore depends on how much both the global scale weight and the secrecy score rise or fall. 

Not everything is relative. The starting point and absolute value may also be relevant.

Imagine all but one of the countries are almost fully transparent (they all have a secrecy score between 0 and 10). The other country has a secrecy score of 90. All else being equal, even if the outlier highly secretive county reduces its secrecy score by a huge 50% to 45, it may not be enough to change its ranking. This outlier country may still be higher in the ranking even if this was the only country that improved, while all other countries got worse, and instead of 0-10 their secrecy score is now 15. Why? Because the big improver only dropped to 45, which is still very high, and much higher than everyone else’s secrecy score of 15.

The same applies for the global scale weight. For countries with a big share of the offshore financial market, even a slight change in their global scale weight may end up having more impact on the ranking than a jurisdiction whose global scale weight is 0.00001%. If this small player increased its global scale weight 10 times, it would still only have a global scale weight 0.0001%, which may not be enough to affect the ranking if all other countries had a much higher starting global scale weight.

How can you tell if a country has become more transparent?

If the Financial Secrecy Index methodology has not changed since the previous edition, you can simply compare that country’s secrecy score of both editions. If the methodology did change, or even if it didn’t but you want to know the details regarding where and how it got better or worse, then you can look at the country’s database report. The database report contains all the details, sources and explanations about how each country is doing in each of the 20 indicators, as well as in other issues that do not influence the secrecy score.

Which countries have changed their position in the Financial Secrecy Index ranking between the 2018 and 2020 editions?

The changes in the 2020 edition of the Financial Secrecy Index may be because of one or more of the three following causes : 

1. Expanded coverage: 21 more jurisdictions are now covered in the ranking;
2. Changes in secrecy score: the secrecy score may have changed because the jurisdictions got better or worse in the original indicators that were available in 2018; and/or
3. Changes in the global scale weight: the global scale weight may have gone up or down since 2018. 

Some of these changes may have neutralised each other. For example, the secrecy score may have improved (the country became more transparent) but its global scale weight went up, so in the end, the country’s position in the ranking did not change (assuming other countries’ changes were irrelevant). Or they may have potentiated each other, if both the secrecy score and global scale weight increased or decreased.

This excel sheet provides a breakdown of the changes in ranking between the 2018 and 2020 editions of the Financial Secrecy Index.

Examples of changes in the ranking:

- No changes in ranking, in spite of changes in Secrecy Score and Global Scale Weight: Hong Kong remained in the 4^th position of the ranking since 2018. even though Hong Kong’s secrecy score decreased in 6%, this was neutralized by an increase of the Global Scale Weight. 

- Changes in Global Scale Weight: Dominican Republic went down 38 positions in the ranking despite having increased its Global Scale Weight in 22%. This increase was neutralized by more transparency (its secrecy score went down in 13 points).

- Going down in the ranking irrespective of the country’s own changes: Although Lithuania and Macedonia both increased their secrecy scores and the volume of financial activity conducted in their jurisdiction by non-residents, they both dropped on the ranking due to new countries being added to the Financial Secrecy Index 2020 that ranked above Lithuania and Macedonia.