Cayman registers almost 20% of FATCA Foreign Financial Institutions globally; more than the UK, Switzerland and Luxembourg combined

Guernsey – population 65 thousand – was recently reported to be eighth worldwide in number of Foreign Financial Institutions registered under the US Foreign Account Tax Compliance Act (FATCA). FATCA, which became law in March of 2010, requires foreign financial institutions (FFIs) with US clients to register with the IRS.

Which countries have registered the most Foreign Financial Institutions under FATCA so far?

According to official data on the IRS website, the frontrunner as of June 2014 is the Cayman Islands, with over 17.000 registered Foreign Financial Institutions, almost 20% of the worldwide total.

What is remarkable is the extent of Cayman’s advantage over the rest: it has more FFIs than the UK, Switzerland and Luxembourg – the next three countries with most FFIs – put together. Considering that the population of Cayman is only 57 thousand, on a per capita basis that is almost one Foreign Financial Institution for every 3 inhabitants. Or over 1300 times more FFIs per capita than the UK, Luxembourg and Switzerland combined.

FATCA has a broad definition of Foreign Financial Institution which includes not just banks but also insurance companies, hedge funds and private equity funds, among others. Although the IRS data is not disaggregated by type of financial institution, the majority of Cayman FFIs are likely to be investment funds.

The table below shows the 20 countries with the most FFIs registered with the IRS, together with each country’s Financial Secrecy Index ranking. These 20 countries – out of a total of 221 jurisdictions listed on the IRS FATCA database – account for 77% of worldwide Foreign Financial Institutions registered with the IRS.

Top 20 jurisdictions by total number of Foreign Financial Institutions registered with IRS

FATCA top 20

Sources: based on data from the IRS website. FSI = Financial Secrecy Index rank.

Estimates of wealth held offshore vary from a conservative 8% of the global financial wealth of households (or USD 7.6 trillion – Gabriel Zucman) up to 21 to 32 trillion USD (Tax Justice Network). The Italian Financial Intelligence Unit recently produced a new estimate of 9.5 trillion in offshore wealth, based on IMF data.

The FATCA data on Foreign Financial Institutions confirms the predominant role of secrecy jurisdictions and offshore centres in the global financial system:

– Thirteen of the top 20 countries with most FFIs are also in the top 20 on the Financial Secrecy Index (FSI – see shaded countries in last column of table above), including Switzerland and Luxembourg which are ranked 1st and 2nd on the FSI respectively.

– Looking at FFIs on a per capita basis, the top 5 jurisdictions become: the Cayman Islands, British Virgin Islands, Guernsey, Bermuda and Jersey. These five offshore jurisdictions, all of which are British Overseas Territories or Crown Dependencies, have a combined population of 313 thousand – equivalent to Riverside, California, or the city of Catania in Italy – and yet have registered 29% of FFIs worldwide.

This is why tax justice advocates argue that the new global standard for automatic exchange of tax information announced by the OECD yesterday needs to go further: although it is “very important step forward” (Global Financial Integrity), the proposed global standard is also “open to abuse by tax havens unwilling to divulge details of those taking advantage of the secrecy they offer” and makes it “too easy for developing countries to be excluded” from the sharing of tax information (Christian Aid).



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