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https://dailyasianage.com/news/240408/fsi-index-bangladesh-maintains-very-high-secrecy

Published: 06 September 2020

FSI Index: Bangladesh maintains very high secrecy

M S Siddiqui One of the major problems in global financial sector is illicit transaction and concealment of illegally earned money somewhere in the planet. Lack of transparency and unwillingness to engage in effective information exchange makes a secrecy jurisdiction a more attractive location for routing illicit financial flows and for concealing criminal and corrupt activities. The transparency of activities of individuals and companies can reduce criminal and illegal activities to earn money and hiding of that money. Tax Justice Network, an independent research organization studying on financial secrecy of some countries since 2009 and publishing ‘The Financial Secrecy Index (FSI). The study uses a combination of qualitative data and quantitative data to create a measure of each jurisdiction’s contribution to the global problem of financial secrecy. Those qualitative data based on laws, regulations, cooperation with information exchange processes and other verifiable data sources, is used to prepare a secrecy score for each jurisdiction. The index grades each country’s legal and financial system with a secrecy score out of 100 where a zero out of 100 is full transparency and a 100 out of 100 is full secrecy. Bangladesh maintains very high secrecy in Legal entity transparency and one of the most corrupt countries in the world as per Corruption perception index measured by Transparency International. FSI consists of 20 Key Financial Secrecy Indicators in four Key Indicator Categories – Ownership registration, Legal entity transparency, Integrity of tax and financial regulation, and international standards and cooperation and consist of followings 20 indicators: (1) Banking Secrecy consider that effective access allow the authorities to obtain account information without the need for separate authorisation, for example, from a court, and if there are no undue notification requirements or appeal rights against obtaining or sharing this information. (2) Trust and Foundations Register considers whether a jurisdiction prevents the creation of trusts or similar arrangements such as waqfs under its domestic laws, and/or whether it blocks its residents from administering trusts created under a foreign law. (3) Recorded Company Ownership assesses whether a jurisdiction requires all available types of companies to submit information on beneficial ownership and/or on legal ownership, upon incorporation to a governmental authority and regardless of whether or not this information is made available on public record. (4) Other Wealth Ownership assesses the ownership transparency of real estate and of valuable assets stored in free ports. It assesses whether a jurisdiction requires online publication of the beneficial and/or legal owners of real estate for free and at a minimum cost. Regarding free ports, it assesses whether a jurisdiction offers and promotes its free ports or similar venues such as bonded warehouses and automatic exchange of the identities of legal and/or beneficial owners (BO) of the stored valuables.

(5) Limited Partnership Transparency analyses two aspects of the transparency of limited partnerships. Firstly, it assesses whether a jurisdiction requires all types of limited partnerships to publish ownership online for free and in open data format or at a maximum cost of US$ 10, € 10 or £ 10 and secondly, whether all limited partnerships oblige to file their annual accounts with a governmental authority/administration and to make them accessible online for free and in open data or at a maximum cost of US$ 10, € 10 or £ 10. (6) Public Company Ownership this indicator considers whether a jurisdiction requires all available types of companies with limited liability to publish updated beneficial ownership or legal ownership information on public records accessible for free via the internet. (7) Public Company Accounts considers whether a jurisdiction requires all available types of company with limited liability to file their annual accounts with a governmental authority/ administration and to make them accessible online for free or at a maximum cost of US$ 10, € 10 or £ 10.197 (8) Country-By-Country Reporting measures whether the companies listed on the stock exchanges or incorporated in a given jurisdiction are required to publish publicly worldwide financial reporting data on a country by country reporting basis. (9) Corporate Tax Disclosure assesses three aspects of a jurisdiction’s rules on corporate tax disclosure. It assesses whether a jurisdiction ensures its own access to the country by country reports of any relevant foreign multinational enterprises with domestic operations. Whether a jurisdiction dispenses with issuing unilateral cross-border tax rulings; or failing that, if at least all unilateral cross-border tax rulings are published online for free, or if some are made available upon payment of a fee. Whether a jurisdiction publishes extractive industries (mining and petroleum) contracts online for free. (10) Legal Entity Identifier reviews the extent to which a jurisdiction requires domestic legal entities to use the Legal Entity Identifier (LEI). (11) Tax Administration Capacity considers the capacity of jurisdictions’ tax administration to collect and process data for investigating and ultimately taxing Individuals and companies who usually have most means and opportunities to escape their tax obligations. The indicator assesses organisational capacity, informational data processing precondi-tions as well as the availability of rules for targeted collection of intelligence about complex and risky tax avoidance activities. (12) Consistent Personal Income Tax analyses whether a jurisdiction applies a Personal Income Tax (PIT) regime which is compatible with the (progressive) income tax systems of most jurisdictions worldwide, or if its laws provide laxity around citizenship and/or residency, and if its personal income tax legislation is narrow in scope, resulting in financial secrecy sinks for tax dodgers and criminals. (13) Avoids Promoting Tax Evasion assesses whether a jurisdiction includes worldwide capital income in its income tax base and if it grants unilateral tax credits for foreign tax paid on certain foreign capital income. The types of capital income included are interest and dividend payments. (14) Tax Court Secrecy assesses the openness of a jurisdiction’s judicial system in tax matters by analysing two relevant aspects. 1. Openness of court proceedings/lawsuits/trials: it assesses for (a) criminal and (b) civil/administrative tax matters, whether the public always has the right to attend the full proceedings and cannot be ordered to leave the court room even if a party invokes tax secrecy, bank secrecy, professional secrecy or comparable confidentiality rules.

2. Public online availability of verdicts/judgements/sentences: it assesses for (a) criminal and (b) civil/administrative tax matters, whether all written judgments are published online for free or at a cost of no more than EUR/GBP/USD 10. For a judgement to be considered published, only personal details which are not relevant for assessing the tax matter in question could be redacted. Tax Secrecy, bank secrecy, professional secrecy or comparable confidentiality rules are not acceptable as the basis for exceptions from public disclosure. (15) Harmful Structures assesses the availability of four harmful instruments and structures within the legal and regulatory framework of a jurisdiction: (a) Regarding Large Banknotes (or high denomination cash bills): it assesses whether a jurisdiction issues or accepts the circulation of large banknotes of its own currency (of value greater than 200 EUR/GBP/USD); (b) Regarding Bearer Shares: it assesses whether companies are available with unregistered bearer shares. Either bearer shares should not be available in the jurisdiction or, if available, there should be mechanisms to ensure that all existing bearer shares are immobilised or registered with a government authority (including a country’s Central Securities Depository, if properly regulated); (c ) Regarding trusts with flee clauses: it assesses whether a jurisdiction prohibits the administration of (foreign or domestic law) trusts with flee clauses for any trustee within its territory. (16) Public Statistics this indicator measures the degree to which a jurisdiction makes publicly available ten relevant statistical datasets about its international financial, trade, investment and tax position. Accordingly, we have split this indicator into ten equally weighted subcomponents. (17) Anti-Money Laundering examines the extent to which the anti-money laundering regime of a jurisdiction is failing to meet the recommendations of the Financial Action Task Force (FATF), the international body dedicated to counter money laundering. (18) Automatic Information Exchange this indicator assesses (a) whether jurisdictions have signed the Multilateral Competent Authority Agreement(MCAA) which provides the multilateral legal framework to engage in automatic exchange of information (AEOI). (b) with how many other jurisdictions information exchange takes place under the MCAA, (c) to what extent hurdles are placed in the way of effective information exchange under the MCAA, (d) to what extent it is improving the transparency and use of AEOI data. (19) Bilateral Treaties examines the extent to which a jurisdiction has entered into 108 effective information exchange relationships conforming to the ‘upon request’ standard developed by the OECD and the Global Forum. (20) International Legal Cooperation measures the extent to which a jurisdiction participates in international transparency commitments547 and engages in international judicial cooperation on money laundering and other criminal matters. In assessing FSI index, each of which is scored out of 100. The average of the 20 indicator scores becomes the country’s overall secrecy score. The 20 indicators belong to four categories, one of which tracks countries’ performance on automatic exchange of information among other practices, another tracks performance on beneficial ownership registration and two track performance on country by country reporting. The FSI 2020 is the sixth edition after biennial releases in 2009, 2011, 2013, 2015 and 2018 and 2020.

Bangladesh is included in the study in the last study of 2020. Bangladesh has ranked 54th out of 133 nations in the FSI 2020, with a score of 72.73, based on the country's high secrecy over jurisdiction and offshore financial services. The score indicates how intensely Bangladesh's legal and financial systems allow wealthy individuals and criminals to hide and launder money, according to the study by FSI 2020. Five South Asian countries are mentioned in the report. Sri Lanka topped the chart in this region by ranking 39th. Bangladesh is 3rd, following Sri Lanka and India. Pakistan has the lowest level of financial secrecy with a rank of 100th, while Maldives ranked 74th. Bangladesh maintains very high secrecy in Legal entity transparency, achieving a mean score of 95 out of 100. The writer is a legal economist. Email: shah@banglachemical.com.