Question

How is financial secrecy an obstacle to investigating international financial crime?
Define financial secrecy
Explain the different components of financial secrecy: bank secrecy,
corporate/commercial secrecy, economic espionage, professional secrecy
Explain the legal exceptions to financial secrecy
Give an example of how financial secrecy is an obstacle to international investigations
Show how international co-operation is reducing the significance of financial secrecy

Answer 1

Financial secrecy means when and individual or institute refuse to share financial information with legitimate authorities. This can be due to maintaining confidentiality of the users or in case of cross border investigations. This can be useful for the respective body to retain the users utmost confidence but may turn to be hurdle in for the fraud investigating teams.

Financial secrecy is different from legitimate confidentiality. Banks can keep the records safe of the users and it is legitimate.tax authorities can keep information secret.

COMPONENTS OF FINANCIAL SECRECY-

Bank secrecy - AS PER TAX JUSTICE NETWORK, Bankers promise to take their clients’ secrets to the grave, and criminal penalties often apply to those who break the secrecy.

Corporate secrecy - AS PER TAX JUSTICE NETWORK, This is where jurisdictions allow the creation of legal entities and arrangements – whether trusts, corporations, foundations, others – whose ownership, accounts, and purpose is kept secret.

economic espionage- AS PER FBI, Economic espionage is foreign power-sponsored or coordinated intelligence activity directed at the U.S. government or U.S. corporations, establishments, or persons, designed to unlawfully or clandestinely influence sensitive economic policy decisions or to unlawfully obtain sensitive financial, trade, or economic policy information; proprietary economic information; or critical technologies. This theft, through open and clandestine methods, can provide foreign entities with vital proprietary economic information at a fraction of the true cost of its research and development, causing significant economic losses

professional secrecy- sometimes the professionals working for a company are bound to keep confidentiality. its a clause in their engagement agreement. for example auditor is bound to keep the information secret.

Legal exceptions to financial secrecy Bank secrecy is the legitimate confidentiality.

Financial secrecy is the hurdle in investigating. example for this is the TERMS AND CONDITION OF CERTAIN BANK in which the black money is deposited to evade taxes.in such case the bank won't disclose the information and the person evading taxes is safe due to lack of sufficient and appropriate evidence.

International treaty of cooperation integrate the geographical boundaries to unit the world as one. Thus simplifying the complex compliance procedures to investigate cases of fraud and all the relevant information can be extracted in a easy and timely manner.