United States Surpasses Switzerland as Top Hub for Corrupt Financial Transactions, UK University Report Finds

The United States has overtaken Switzerland as the preferred hub for corrupt financial transactions, according to a new report from the University of Sussex. The study, which examines data spanning four decades across more than 70 jurisdictions, explores the evolution of illicit global financial networks in response to shifting regulations.

Researchers highlighted several key trends, including the U.S.'s transformation from a leader in promoting financial transparency abroad to a major enabler of financial secrecy at home. Over the past 20 years, the U.S. has exerted significant pressure on other countries to reform their financial systems, while largely avoiding the implementation of similar measures domestically.

The report criticizes the U.S. for its aggressive demands for financial transparency from other nations, while failing to reciprocate by sharing banking information.

Daniel Haberly, a professor of human geography at the University of Sussex and the lead researcher, stated that the U.S. maintains "a high level of financial secrecy coupled with relatively weak AML compliance."

The researchers also noted that organized crime networks are increasingly funneling funds through Hong Kong and Dubai, which have replaced Panama as key hubs for illicit finance following the 2016 Panama Papers revelations. This trend has been dubbed the “Dubai-Kong axis” by the researchers.

The report also indicates that the United Kingdom is no longer a prime destination for financial networks seeking to evade sanctions. However, former British colonies such as Hong Kong and Dubai, along with overseas territories like the British Virgin Islands and Gibraltar, have become increasingly significant as offshore tax havens. These jurisdictions benefit from their legal systems and close ties to emerging markets, which generate substantial illicit funds alongside their growing legitimate economies.

The report observes a notable rise in the use of U.S. bank accounts in bribery cases under the U.S. Foreign Corrupt Practices Act (FCPA) since 2013, a law aimed at preventing corrupt payments to foreign officials. In contrast, the use of Swiss bank accounts in FCPA cases has declined.

The U.S. has not only become a more attractive destination for corruption-related funds but has also emerged as a hub for the creation of shell companies. States such as Delaware and Florida have made it easier to establish corporate entities without requiring the disclosure of their true owners, further contributing to the country’s rise in financial secrecy.

In 2022, the U.S. climbed to the top of the Tax Justice Network’s global ranking of countries most complicit in enabling individuals to hide wealth from the rule of law, receiving the worst rating since the ranking began in 2009.

A significant criticism leveled by the report is the U.S.'s failure to adopt the Organisation for Economic Co-operation and Development’s (OECD) Common Reporting Standard (CRS), which facilitates the automatic exchange of financial account information between jurisdictions. Switzerland is among the more than 100 countries that have implemented the CRS since its introduction by the OECD in 2014. Haberly emphasizes that this discrepancy is a key factor in the shift of corruption-linked banking from Switzerland to the U.S.

The data analyzed by the University of Sussex researchers extends through 2023, just before the U.S. began implementing its long-awaited registry of company owners. However, Haberly notes that this registry is less effective than those in other countries, as access is restricted to law enforcement, government authorities, and financial institutions.

“These jurisdictions provide access to English common law and Western financial services while operating outside Western political jurisdiction,” the report states.

The findings are based on a comprehensive analysis of three datasets, including regulatory data from 70 jurisdictions between 1990 and 2020, information on bank accounts, shell companies, and intermediaries from 262 U.S. foreign bribery cases spanning 1978 to 2023, and the locations of over 10,000 entities subject to U.S. sanctions, cross-referenced with other sources.

Additionally, the researchers drew on leaked data made public by the International Consortium of Investigative Journalists (ICIJ) following its global investigations, as well as samples from the Tax Justice Network.

The study underscores that "anti-corruption initiatives" across various jurisdictions are often driven by NGOs and journalists rather than governments. It suggests that official institutions should work more closely with investigative media and provide broader access to data for journalists.

By fLEXI tEAM