Financial Transparency Coalition

Photograph by Herry Lawford

A French language economic magazine is reporting that the forthcoming OECD Global Forum peer review (see note below) evaluation of Monaco – due next month – will make unhappy reading for those who think this secrecy jurisdiction and others have mended their ways.

According to this article in Challenges, the Principality will be in the line of fire over the lack of depth of its tax information exchange treaty network, and its continued lack of transparency over beneficial ownership.

Initially included on the OECD’s 2009 ‘grey’ list of secrecy jurisdictions, Monaco rushed to sign up to the minimum of 12 tax information exchange agreements. Much to the OECD’s embarrassment, however, many of these agreements involved other secrecy jurisdictions, including Liechtenstein, San Marino and the Bahamas. To date Monaco has not signed agreements with either Italy or the UK, both of which states are reckoned to lose significant revenues to Monegasque tax evasion structures.

As much as anything else, the Global Forum’s evaluations are likely to reveal the shortcomings of the OECD listing process. Allowing secrecy jurisdictions to slip so easily from the grey to the white list suggests that the OECD has been somewhat naive about the sheer malevolence of the people they’re dealing with. Hopefully they will copy our example and require secrecy jurisdictions to demonstrate true willingness to cooperate by signing up to a minimum of 60 tax treaties with information exchange provisions, this being the threshold we used for the 2009 Financial Secrecy Index evaluation.

Note: Created by the Global Forum at its 2009 meeting in Mexico City, the peer review group is to ensure forum members comply with tax information and exchange agreements they sign (169 DTR I-5, 9/3/09) and whether signed agreements meet OECD standards. The group will also verify agreements are actually been implemented (11 DTR I-6, 1/20/10).

According to OECD, the review group includes senior tax officials, auditors, and lawyers from countries such as France, India, Japan, Singapore, Jersey, Brazil, Cayman Islands, South Africa, Switzerland, the United Kingdom, and the United States.

In its phase 1, to last three years, the group will examine each forum member’s legal and regulatory framework. Phase 2, also slated to begin early this year, is to evaluatemembers’ implementation of OECD tax standards.

The review reports will be published once they have been adopted by the Global Forum, whose next meeting will take place in Singapore at the end of September 2010.