In 1966, a memo from a former U.S. State Department official found its way to a staffer at Chase Manhattan Bank. “The U.S.,” the memo read, “is probably the second major flight money center in the world, but with little probability of rivaling Switzerland for the foreseeable future.” Five decades on, that relationship has continued, with Switzerland – as the most recent rankings from the Tax Justice Network’s Financial Secrecy Index indicate – remaining the only country outpacing the United States.
However, in the half-century following the memo, the gap between the two countries has shrunk significantly, and over the past few years the U.S. has begun a handful of policies that may well catapult Washington past Bern as the world’s leading destination for financial secrecy. Speared by both state- and federal-level policies, the United States, as a recent Washington Post analysis found, “is now becoming one of the world’s largest ‘offshore’ financial destinations.” Or as Bloomberg noted earlier this year, “Some are calling [the U.S.] the new Switzerland.”
The U.S.’s transition into one of the foremost offshore destinations stems, in no small part, from Washington’s 2014 decision not to join the OECD’s recent financial information-sharing agreement, known as the Common Reporting Standards (CRS). American officials instead opted to implement the Foreign Account Tax Compliance Act (FATCA), which came into force in July 2014. Even though much of text within FATCA’s provisions – which required international financial firms to notify the IRS of American accounts – mirrored CRS requirements, the two programs remain remarkably disjointed, such that, as the Tax Justice Network wrote, “Washington’s independent-minded approach risks tearing a giant hole in international efforts” at financial transparency. (more...)