Obama faces criticism as US state tops secrecy table

Delaware named as world's most secret financial location

• Nick Mathiason
• The Observer, Sunday 1 November 2009
• Article history

Delaware in the US is officially the world's most secret financial location. The finding will embarrass President Barack Obama as the Stop Tax Haven Abuse Bill he supports comes before Congress this week.

In the first ever detailed ranking of 60 of the world's financial hubs, published today, Delaware was found wanting in 11 out of 12 secrecy indicators. London was also ranked in the top five most secretive jurisdictions.

The east coast state of Delaware, home to half of all America's quoted companies, fails to place on public record details of trusts, company accounts and, crucially, the identity of beneficial owners – the people who receive the profits. It also allows companies to relocate to other countries, leaving minimal trace.

The opaque nature of Delaware is seen as America's weak link in its fight against tax evasion, the financing of terrorism and drug money laundering. Both the FBI and the Financial Action Task Force, the high-level international body set up to combat money laundering and terrorist finance, have repeatedly expressed concern at the way some US companies use the state as a base from which to operate under their radar.

John Christensen, director of the Tax Justice Network and one of the authors of the report, said: "Secrecy is a core feature of the global financial system. Jurisdictions compete with each other to provide it, in order to attract financial flows. But this comes at a price. Financial secrecy provides cover for money laundering, tax evasion and avoidance, insider trading, terrorist financing, embezzlement, Ponzi schemes, illicit financial flows, fraud and much more."

Delaware's assistant secretary of state, Rick Geisenberger, told the Observer that companies did not choose the state for secrecy but for the sophistication of its judicial system. He admitted that Delaware was under pressure to amend beneficial ownership disclosure laws.

The revelations will heighten calls for the US to get its own house in order before clamping down on tax havens. The Stop Tax Haven Abuse Bill, which seeks to deter the use by Americans of tax havens, is attracting intense opposition from US business interests.