Who enables financial secrecy?
Global financial secrecy requires a large infrastructure of lawyers, accountants, bankers, trust and company formation agents, and other professionals. These are the intermediaries who make the whole system function. In many small secrecy jurisdictions, expatriate professionals constitute a significant share of the population.
The market has thousands of players, yet the room at the top is surprisingly small.
Global accounting is still dominated by the "Big Four" firms of accountants, while a small number of "capital city" and haven‐based law firms in the so-called "Offshore Magic Circle" dominate the lawyering. As our report The Price of Offshore, Revisited makes clear, global private banking is dominated by fewer than 50 multinational banks.
These include both household names, such as HSBC and UBS, and lesser known companies.
International rules seeking to tackle the problem of secrecy rarely target these private intermediaries, even in the rare cases where prosecutions can be brought against their clients. However, this is starting to change.
The United States has launched a number of criminal investigations against major banks for their role in tax evasion and money laundering. The most high profile has been the case against BNP Paribas for its facilitation of money laundering on behalf of countries subject to US sanctions, Iran, Cuba and Sudan. After entering into a plea bargain, BNP Paribas was subject to a US$8.9 billion fine.
In 2015, the UK government announced a new criminal offence of failing to prevent tax evasion, or the facilitation of tax evasion, the law implementing this new offence, the Criminal Finances Act was passed in 2017. Businesses have responded to ensure employees or any person associated does not facilitate tax evasion. The broader impact is yet to be assessed.
Following the Panama Papers in 2016, several authorities around the world are investigating Mossack Fonseca, the law firm at the centre of the controversy. Yet in the wake of other leaks, including the Paradise Papers in 2018 and the Luanda Leaks in 2020, that continue to reveal the rot in the global financial system, it is clear more needs to be done.
Read more on our dedicated page about the intermediaries, and in our summary of recent developments.