What Makes a “Secrecy Jurisdiction?”

offshore taxesAs attitudes and regulations around tax havens change, so does the language we use for addressing offshore tax holdings.


Due to the growing gap between wealth and poverty, more attention is paid to the mechanisms of inequality.  Racial, geographic, political, and financial, the polarization of wealth across the globe is not a recipe for peace or stability.  With the rise of rampant economic insecurity, the landscape is ripe for ripping to pieces fragile agreements between countries and civility between neighbors over who has how much of what.


Owing to the unease, and to greater data sophistication, the hidden places around the world where wealth is stored have garnered greater attention.  Our tax attorneys work regularly with high asset individuals and companies to plan and structure shelters that best protect investments and assets.  Tax havens are legal and form part of a smart strategy—except when they don’t.


Tax havens are fine, secrecy jurisdictions are not


According to the Association of Certified Anti-Money Laundering Specialists (ACAM), there is not a lot of difference between the terms tax haven, secrecy jurisdiction, and international offshore finance center (OFC).  In reviewing research, ACAM opines that secrecy jurisdictions are likely the worst of a bad lot, combining many of the features found with tax havens and OFCs.


Overall, ACAM defines secrecy jurisdictions as those that promote the following:


  • Procedures used to create secrecy around banking activities
  • Lack of overall transparency
  • Financial structure that does not boast much supervision, verification, or information disclosure
  • Regulations and laws that prevent exchange of information


As we discussed earlier, based on a number of factors the Tax Justice Network (TJN) ranks the United States second in is global list of secrecy jurisdictions. That said, the ranking is based on the influence that each jurisdiction has on the global financial and economic market.  When influence is removed, the US ranks 79th, and the top ten secrecy jurisdictions include:


  1. Vanuatu
  2. Antigua and Barbuda
  3. Bahamas
  4. Paraguay
  5. Brunei
  6. United Arab Emirates
  7. Maldives
  8. Bolivia
  9. Kenya
  10. Thailand


The TJN uses the following definition of a secrecy jurisdiction:


"A secrecy jurisdiction provides facilities that enable people or entities escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool."


TJN finds a tendency for secrecy jurisdictions to be “captured states,” which means regions where the offshore tax services are firewalled from local enforcement and regulation.  If the civil authorities are involved, it is usually only to process or certify incoming or outgoing transactional documents without significant verification or reporting.


As could be expected, secrecy jurisdictions are areas that seek comfortable profit by offering shady services and shelters for global clients with a desire or need to remain anonymous. It is an age-old game of “where’s the money,” with a new name.


 Speak with an experienced criminal tax defense attorney in Chicago


If you have an offshore account that you have not disclosed or are noticed up for an IRS audit, contact Robert J. Fedor, Esq., LLC for a confidential consultation.  From offices in Cleveland, Ohio, and Chicago, Illinois, we provide local, national, and international legal service to resolve tax issues and criminal tax matters.  Contact us or call 800.579.0997 today.