From shadows to light: Why a global asset register is essential to combat financial secrecy

Financial opacity and offshore hidden wealth are structural economic and political problems in today’s world. In times marked by war, inequality and democratic decline, alongside the agonising awareness of the climate emergency, we still witness how financial opacity continues to exist, offering financial secrecy services that allow the world’s richest individuals and criminal organisations to hide their wealth from tax, anti-money laundering or anti-corruption authorities.

This enables the powerful and corrupt to avoid their obligations to society, while accumulating more economic and political power to shape institutions for their own benefit. Unlocking global wealth transparency through a global asset register is the best chance to effectively fight illicit financial flows and address this problem.

Offshore hidden wealth has severe implications. Beyond the loss of revenue generated from tax evasion and stolen assets due to corruption, which are enabled by financial secrecy jurisdictions, it also impacts the perception of fairness in our societies. Since offshore wealth is highly concentrated at the top of the distribution, this means that the wealthiest individuals are not complying with their tax obligations or are trying to hide assets from the authorities. Ultimately, the ability of the powerful to hide wealth offshore worsens inequalities and damages public trust. For low- and middle-income countries, tracking hidden wealth could be a significant new source of revenue, especially considering that the losses from tax evasion and corruption, enabled by tax havens and the ability to hide wealth offshore, are huge relative to tax incomes and fiscal capacities.

Offshore hidden wealth also fuels political instability and undermines governance. Illicit financial flows – from tax abuse and cross-border corruption to transnational financial crime – drain resources from sustainable development and impede states from fulfilling their basic human rights obligations, undermining and putting at risk our democratic principles. When the powerful evade their tax obligations, and corruption results in the hiding of stolen assets and public money, states are deprived of precious resources, ultimately impoverishing the rest of society. This environment creates fertile ground for the rise of extremist regimes. Demagogues can gain appeal because many citizens feel left behind by democracy, perceive rampant corruption, and see impunity for the powerful.

Shedding light on hidden wealth can significantly contribute to the fight against transnational tax abuse, corruption and illegal economies. Enhancing transparency in asset ownership could enable authorities to identify the hidden wealth of many individuals that has, until now, hindered tax authorities, anti-corruption agencies and anti-money laundering bodies from identifying the perpetrators of crimes related to illicit financial flows. It is now clear that illicit finance is a global problem that can only be addressed effectively through collective action.

Although there has been progress in curbing some aspects of financial secrecy, such as multilateral automatic exchange of financial information of offshore bank accounts and the introduction of national beneficial ownership registers of companies and trusts, financial secrecy jurisdictions continue to exist and are largely tolerated by world political and business leaders.

One of the tools that the Independent Commission for the Reform of International Taxation (ICRICT) considers a priority that the world urgently needs to work towards is a global asset register. This could be the missing piece needed to track all hidden wealth.

The global asset register is a comprehensive register that links all types of assets, companies, and other legal vehicles used to own assets, to the beneficial owners, which can be different from the legal owners.

Although there are different types of assets and beneficial ownership registers in several jurisdictions today, these existing registers do not cover all forms of modern wealth nor all legal vehicles. A global asset register should include not only real estate, bank accounts, safe deposit boxes, trusts and other types of legal arrangements used to own assets, but also other important types of wealth like financial securities, crypto assets, artworks, yachts, planes and other luxury items.

It should also come through interconnecting all national beneficial ownership registers in the world. This will first require building national registers that can systematically gather information across all types of assets. Last but not least, the information in these registers should be accessible to all national and foreign governmental institutions, as well as the public.

Achieving a global asset register does not require reinventing the wheel. Many countries have already had land and real estate registers for centuries. By creating registers, countries effectively recorded ownership of almost all wealth, because at the time of their creation most wealth was in the form of real state and land.

Today, financial wealth plays a much more important role, yet the registers we currently have are failing to keep pace with the changes in the nature of wealth over the last century. So, the idea of a global asset register is to modernise these existing tools and interconnect them as we do now with bank information.

Getting there, however, is a building block process. We need to start with what we already have, and gradually continue extending and connecting registries to arrive at the ultimate goal. Therefore, the first and most important step is to start building national registers.

Currently, there is a valuable opportunity to advance financial transparency, especially within the G20. Brazil’s G20 presidency is leading an initiative to adopt minimum standards for taxing the wealthiest individuals in the world. For this initiative to work, it needs to include technical reforms and implement necessary wealth transparency measures to effectively enforce this minimum tax. A global asset register would be a key transparency tool for this.

We need to collectively work towards a global asset register to bring to light all hidden wealth that benefits the few and powerful, while taking valuable resources from societies and undermining our fundamental democratic principles.