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International Journal of Management (IJM)
Volume 11, Issue 3, March 2020, pp.612–623, Article ID: IJM_11_03_063
Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=3
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REGULATION OF OFFSHORE JURISDICTIONS’
ACTIVITIES: A PRACTICAL ASPECT
Andrii V. Paziuk
Department of Public International Law, Institute of International Relations, Taras
Shevchenko National University of Kyiv, Kyiv, Ukraine
Liliia M. Nevara
Department of International Law and Comparative Law, Faculty of International Relations,
National Aviation University, Kyiv, Ukraine
Ella M. Derkach
Department of Constitutional, International aYnd Criminal Law, Law Faculty, Vasyl’ Stus
Donetsk National University, Vinnytsia, Ukraine
Mykhailo A. Paziuk
International Relations Department, National Aviation University, Kyiv, Ukraine
Yuliia O. Yefimenko
The Department of International Law, Yaroslav Mudryi National Law University, Kharkiv,
Ukraine
ABSTRACT
As of today, there are significant violations of fiscal functions in almost every
country in the world, the main reasons for which are the illegal activities of offshore
jurisdictions and the constant struggle for capital among the countries. Based on the
above, the purpose of the scientific investigation is to study the key principles of
regulation of offshore jurisdictions from a practical point of view. Such method of
economic analysis as comparison was used to process statistical data. It has been
proposed to introduce new standards and norms for regulation of offshore
jurisdictions in the context of minimization and gradual neutralization of the
laundering of illegal assets (money). It has been revealed that existing international
regime AML / CFT instruments, aimed at regulating the activities of offshore
jurisdictions, are currently at the development stage. The dynamics of FDI inflows and
outflows of EU countries during the period 2012-2018 have been analyzed; and it has
been proven that significant volumes of direct investments both in the economy and
abroad were in Great Britain, Ireland, Spain, Italy, Germany, France, the Czech
Republic and Sweden. It has been established that Luxembourg, the Netherlands,
Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 613 [email protected]
Great Britain, Germany and Malta have the most opaque financial system, which is
displayed by s igni f icant ly high values of the f inancial secret index.
Keywords: Offshore jurisdiction, International anti-money laundering regime,
combating the financing of terrorism, Intermediaries for trust and corporate services.
Cite this Article: Viktoriia D. Filippova, Viktoriia A. Budnyk, Halyna V. Mykhailiv,
Liubov V. Hryniv and Olga I. Los, Public Private Partnership Project Management:
Benefits For The State And Business, International Journal of Management, 11 (3),
2020, pp. 612–623.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=3
1. INTRODUCTION
The problems of laundering illegal assets (dirty money) and the financing of terrorism are the
basic problems, facing the development of the world economy nowadays. Such tactics are
often associated with the activities of offshore jurisdictions. Thus, in recent years, it has
become known that in many cases law firms have in some ways become a key tool for
concealing illegal assets in offshore areas as a result of their tax optimization services. The
international community has still not found an appropriate tool to combat the laundering of
illegal assets in order to counteract this.
It is worth noting that today the scale of laundering of illegal assets and the financing of
terrorism are so large that they practically have no borders and are present in many countries
of the world. Thus, the relevance of the scientific investigation’s topic lies in the development
of a unified approach to counteracting these phenomena, while observing the principles of the
international AML / CFT regime. At the same time, particular attention should be focused on
the basic tendencies and problems of coercion against countries that pursue ineffective
national policies and have adverse legislation regarding the international AML / CFT regime.
2. LITERATURE REVIEW
An analysis of the issues outlined in a scientific paper makes it possible to note that the
subject of regulation of offshore jurisdictions is today one of the most studied ones.
In view of the above, it should be noted that, according to conclusion in [1] it is difficult
to determine the amount of money laundering, as well as methods of tax evasion by offshore
jurisdictions in the context of studying the activities of international jurisdictions. Therefore,
as a way to solve this problem, the scientist proposes to reform international financial
institutions and organizations in the direction of improving the state of their financial flows
and avoiding imbalances. This will make the financial flows of these companies and
organizations transparent and open to others [1].
In the framework of the study [2] conducted, state that the leading, highly developed
countries of the world, such as the USA, Great Britain, France and Germany, are quite critical
towards a number of offshore jurisdictions (including Bermuda, the Cayman Islands, the
Channel). Their distrust is manifested in the fact that a number of the offshore jurisdictions,
listed above, carry out various financial frauds and conduct criminal activities that are poorly
controlled by highly developed countries [2].
In turn, having conducted a thorough study [3] state, that a significant proportion of
distressed securities, protected by assets, are issued from offshore jurisdictions such as the
Cayman Islands, Jersey, Ireland.
At the same time, in [4] is stated, that the introduction of the Tax and Savings Directive in
2005 in European Union significantly contributed to the growth in the number of business
entities that are not owned by residents of European Union’s countries but are in ownership of
Regulation of Offshore Jurisdictions’ Activities: A Practical Aspect
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foreign non-residents. However, the number of economic entities, owned by EU residents,
after the Directive was adopted, has decreased significantly. This is explained by the fact that
the provisions of the Directive have foreseen full reporting of jurisdictions on tax
withholding, as well as on income derived from interest [4].
Herewith, Researcher in [5] notes, that forcing countries to implement global standards
and practices, put forward by developed countries of the world, can lead to a significant gap
in the development of these countries and the formation of even greater inequality among
developed countries.
At the same time, Author in [6] believes, that the principle of reforming their policies
should be applied to countries that launder illegal assets. Moreover, countries will be required
to return illegal assets to countries, where those assets have been stolen [6].
3. DATA AND RESEARCH METHODOLOGY
Herewith, such method of economic analysis as a comparison was used for statistical data
processing. At the same time, a correlation analysis of the foreign direct investment’ indicator
in the economy of European Union was carried out.
The scientific paper analyzes such indicators presented by Eurostat, the World Bank, Tax
Justice Network, in particular:
foreign direct investment of countries of European Union abroad (direct
investment abroad);
direct investments in the economy of the countries of European Union (foreign
direct investment);
Financial Secrecy Index;
level of country’s secrecy (according to 100 scale) (Secrecy Score);
share of the world offshore market (Global Scale Weight).
4. RESULTS OF THE RESEARCH
In the context of the disclosure of the subject matter of this scientific investigation, the
dynamics of such economic indicators as foreign direct investment of EU countries and direct
investments, made in the economy of European Union’s countries, should be analyzed.
Therefore, in the period of 2012–2018, significant volumes of foreign direct investment
were carried out from EU Member States such as Great Britain, Ireland, Spain, Italy,
Germany, France, the Czech Republic and Sweden (Table 1). It should be noted that, in
contradiction to 2012, the significant growth of FDI was recorded in 2018 by Great Britain
(35441 million of national currency), Denmark (66058 million of national currency), Ireland
(54109 million of national currency), Spain (27362 million of national currency), Italy (28471
million of national currency), Germany (55836 million of national currency), France (66259
million of national currency) and the Czech Republic (32256 million of national currency). In
contrast to these countries, as of 2018, such countries as: Belgium, Estonia, Cyprus, Latvia,
Luxembourg, Malta, the Netherlands and Hungary had negative direct investment values.
Herewith, a significant decrease of foreign direct investment in 2018, compared to the
beginning of the analyzed period, took place in Luxembourg (-770405 million of national
currency), the Netherlands (-398018 million of national currency) and Hungary (-21322168
million of national currency).
Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 615 [email protected]
Table 1. Dynamics of direct investments abroad, million units of national currency (Direct investment
abroad, main components – annual data, million units of national currency) [7]
No. Countries 2012 2013 2014 2015 2016 2017 2018
1 Austria 14216,0 8200,0 -551,0 -2002,0 -24728,0 8864,0 6037,0
2 Belgium 32373,0 -9424,0 -561,0 6243,0 31780,0 -5615,0 -45314,0
3 Bulgaria 616,0 520,3 1285,5 205,7 1475,3 872,8 1455,2
4 Great Britain 7662,0 28611,0 -70518,0 -39301,0 24262,0 107097,0 43103,0
5 Greece 525,0 -533,0 2276,0 1426,0 -1551,0 143,0 438,0
6 Denmark -62623,0 39352,0 56877,0 48484,0 121688,0 58699,0 3435,0
7 Estonia 996,0 641,1 846,9 -521,5 315,0 605,8 -220,6
8 Ireland 24867,0 37034,0 69607,0 170924,0 85429,0 8462,0 78976,0
9 Spain -1930,0 25045,0 34285,0 50689,0 50846,0 35041,0 25432,0
10 Italy 5241,0 15288,0 15267,0 13786,0 12249,0 10912,0 33712,0
11 Cyprus 57985,0 22539,0 49708,0 39940,0 5699,0 14836,0 -2617,0
12 Latvia 127,0 373,0 501,0 128,0 202,0 516,0 -290,0
13 Lithuania 329,9 253,7 424,7 324,5 841,9 353,1 844,1
14 Luxembourg 354221,0 362989,0 166164,0 771164,0 70086,0 214695,0 -416184,0
15 Malta -6431,1 -6605,0 -6546,5 -5942,1 -5770,6 -5930,0 -5701,4
16 Netherlands 196362,0 313182,0 88849,0 350366,0 227713,0 134515,0 -201656,
17 Germany 76835,0 70643,0 79539,0 117865,0 99180,0 123084,0 132671,0
18 Poland 4236,0 -10499,0 21299,0 18194,0 56011,0 14583,0 6706,0
19 Portugal 3477,0 5291,0 2626,0 -1013,0 2890,0 1941,0 391,0
20 Romania -818,0 -119,0 1012,0 n. a. 5134,0 1600,0 5860,0
21 Slovakia -957,9 976,1 94,1 1266,3 3684,4 1366,6 1354,1
22 Slovenia -438,9 23,6 155,1 291,6 433,9 570,0 361,9
23 Hungary 1746890,5 -845252,8 2192963,4 -2329735,3 19135999,6 -3834903,2 -19575277,6
24 Finland 6522,0 -5454,0 549,0 -713,0 n. a. n. a. 2194,0
25 France 40336,0 13287,0 39822,0 45887,0 67491,0 44661,0 106595,0
26 Croatia -360,0 -119,0 12277,0 -1443,0 -12266,0 -5171,0 1957,0
27 Czech
Republic 63459,0 151420,0 87707,0 91305,0 78628,0 217962,0 95715,0
28 Sweden 118956,0 181158,0 -33140,0 125899,0 6304,0 319417,0 98656,0
Regarding direct investment in the economy of European Union’s countries, during 2012–
2018, the largest amount of foreign direct investment was invested in the economy of Great
Britain, Ireland, Spain, Italy, Germany, Poland, Romania, France and the Czech Republic.
(Table 2). In respect of growth in the volume of direct investment in the economy, in 2018,
compared to the beginning of the analyzed period, it was significant in Great Britain (31340
million of national currency), Denmark (100917 million of national currency), Italy (33927
million of national currency), Germany (38765 million of national currency) and Poland
(35657 million of national currency). As of 2018, such countries as Belgium, Luxembourg,
the Netherlands, Hungary, Finland and Sweden had negative direct investment in the
economy. At the same time, in comparison with 2012, a significant decrease in the volume of
direct investments in the economy in 2018 occurred in Belgium (-63383 million of national
currency), Cyprus (-49123 million of national currency), Luxembourg (-862295 million of
national currency), the Netherlands (-403286 million of national currency) and Hungary (-
21067107 million of national currency).
Regulation of Offshore Jurisdictions’ Activities: A Practical Aspect
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Table 2. Dynamics of direct investments in the economy of countries, million units of national
currency (Direct investment in the reporting economy, main components – annual data, million units
of national currency) [7]
No. Countries 2012 2013 2014 2015 2016 2017 2018
1 Austria 4008,0 315,0 1421,0 -7225,0 -26657,0 11825,0 3303,0
2 Belgium 9123,0 -22066,0 -10747,0 -17972,0 52440,0 -30792,0 -54260,0
3 Bulgaria 2704,6 2951,7 1571,0 3824,6 2567,1 3441,1 2066,4
4 Great
Britain 29658,0 35770,0 36427,0 30086,0 243714,0 94427,0 60998,0
5 Greece 1352,0 2179,0 2027,0 1147,0 2452,0 3078,0 3399,0
6 Denmark -93529,0 3884,0 38689,0 12842,0 52919,0 19465,0 7388,0
7 Estonia 1393,9 833,0 1330,5 -653,6 832,0 1532,2 996,3
8 Ireland 45363,0 53171,0 74886,0 215433,0 93859,0 57045,0 54574,0
9 Spain 16031,0 35628,0 23603,0 20614,0 39664,0 23052,0 40619,0
10 Italy -52,0 14637,0 12928,0 11975,0 23350,0 10485,0 33875,0
11 Cyprus 53806,0 19585,0 38828,0 26119,0 7722,0 16216,0 4683,0
12 Latvia 842,0 743,0 784,0 729,0 302,0 991,0 390,0
13 Lithuania 533,3 545,0 279,9 941,8 1189,7 1203,8 1201,2
14 Luxembourg 428584,0 476212,0 137799,0 674557,0 105679,0 71785,0 -433711,0
15 Malta 2589,5 431,9 238,5 3280,4 2851,2 3508,0 4007,6
16 Netherlands 192297,0 247478,0 86978,0 289439,0 218393,0 90657,0 -210989,0
17 Germany 50386,0 50525,0 13981,0 56147,0 56018,0 74395,0 89151,0
18 Poland 23931,0 2809,0 62025,0 56857,0 72604,0 43415,0 59588,0
19 Portugal 16597,0 11742,0 9116,0 1155,0 6615,0 8819,0 5512,0
20 Romania 10671,0 12806,0 13022,0 17266,0 25402,0 23904,0 28870,0
21 Slovakia 1356,3 756,8 -324,2 1356,6 4326,1 3749,0 2158,2
22 Slovenia 26,7 70,7 739,0 1560,4 1297,6 1065,2 1294,6
23 Hungary 2377559,5 -803709,0 3122242,8 -1504328,0 19981490,9 -3179163,9 -18689547,5
24 Finland 3884,0 -3797,0 13216,0 15684,0 n. a. n. a. -9351,0
25 France 25253,0 23758,0 4309,0 38809,0 29755,0 34496,0 51419,0
26 Croatia 7608,0 5539,0 17515,0 259,0 2699,0 3372,0 7379,0
27 Czech
Republic 184719,0 143984,0 168088,0 41558,0 265177,0 263820,0 186979,0
28 Sweden 30109,0 9464,0 -68563,0 86706,0 129950,0 223179,0 -18346,0
The conducted correlation analysis of the dynamics of foreign direct investment in the
economy of EU countries showed that there is a correlation among the foreign direct
investment of EU countries, due to the fact that the coefficient of determination (R2) was
0.188 (Figure 1).
Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 617 [email protected]
Figure 1 Dynamics of foreign direct investment in the economy of EU countries during 2012-2018,
US dollar [8]
In the process of studying the issues of offshore jurisdictions’ regulation, it is advisable to
consider such basic models of money laundering, which are presented in Figure 2. Therefore,
money laundering by international offshore jurisdictions in national accounts is carried out
with the participation of a professional lawyer, when he purchases a fixed service, for which
he carries out payments with fictitious legal services (case a). In a similar vein, another option
for money laundering may be reflected in the balance of payments statistics when an offshore
company acts directly as a participant in these transactions (case b).
Figure 2. The primary model of money laundering: a) on national accounts; b) in the balance of
payments statistics [9]
Investigations show that the volume of offshore financial activity of each country can be
determined using the Financial Secrecy Index, which is calculated by the Tax Justice
Network. Therefore, according to the Tax Justice Network, presented in 2020, such countries
of European Union, as Luxembourg, the Netherlands, Great Britain and Malta have the most
opaque financial system; they are also among the twenty most opaque countries in the world
(based on surveys as of 2020) (Figure 3) and (Annex A).
-
99279778425.4
2
-
54611480694.0
8
1039416836.97
146091343151.
09
-
265116549512.
49
244845454144.
89
136248339699.
23
y = 1E+11ln(x) - 1E+11
R² = 0.1883
-300000000000.00
-200000000000.00
-100000000000.00
0.00
100000000000.00
200000000000.00
300000000000.00
2012 2013 2014 2015 2016 2017 2018
PROFESSIONAL LAWYER
acquis
itio
n o
f fi
xed
ser
vic
es
pay
men
t fo
r fi
ctit
ious
legal
serv
ices
PRIMARY CRIMINAL PRIMARY CRIMINAL
OFFSHORE COMPANY
export
of
serv
ices
(cr
edit
s);
finan
cial
set
tlem
ents
thro
ugh
oth
er i
nves
tmen
ts (
net
ac
quis
itio
n o
f fi
nan
cial
as
sets
)
import
of
serv
ices
(deb
it);
oth
er f
inan
cial
set
tlem
ents
(n
et c
over
age
of
finan
cial
li
abil
itie
s)
Regulation of Offshore Jurisdictions’ Activities: A Practical Aspect
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Figure 3. The financial secrecy indices of European Union’s countries, presented in 2020
At the same time, the countries with the most secrecy indices, according to the same Tax
Justice Network study, are Cyprus, Malta, the Netherlands, and Romania (Table 3). In turn, a
significant share of the global offshore market is held by Great Britain, Ireland, Luxembourg,
Germany and France.
27.5 46 57.5
89.8 91.3 91.7 103.5 112.3 119.3
151.2 151.5 163.3 164.3
182.8 182.9
212.1 224.1 236.2
287.8 317
350.5 363.8
383.4 442.2
499.7 534.7
682.2 849.4
1
Luxembourg Netherlands Great Britain Germany
Malta Cyprus Ireland France
Austria Italy Belgium Romania
Poland Sweden Latvia Spain
Czech Republic Hungary Portugal Finland
Croatia Denmark Greece Slovakia
Lithuania Bulgaria Estonia Slovenia
Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 619 [email protected]
Table 3. Assessment of secrecy and the share of the offshore market of European Union’s countries
[8]
No. Countries
2013 2015 2018 2020
Co
un
try
’s s
ecre
cy a
sses
smen
t
(by
10
0 s
cale
) (S
ecre
cy
Sco
re)
Sh
are
of
the
glo
bal
off
sho
re
mar
ket
, %
(G
lobal
Sca
le
Wei
gh
t)
Co
un
try
’s s
ecre
cy a
sses
smen
t
(by
10
0 s
cale
) (S
ecre
cy
Sco
re)
Sh
are
of
the
glo
bal
off
sho
re
mar
ket
, %
(G
lobal
Sca
le
Wei
gh
t)
Co
un
try
’s s
ecre
cy a
sses
smen
t
(by
10
0 s
cale
) (S
ecre
cy
Sco
re)
Sh
are
of
the
glo
bal
off
sho
re
mar
ket
, %
(G
lobal
Sca
le
Wei
gh
t)
Co
un
try
’s s
ecre
cy a
sses
smen
t
(by
10
0 s
cale
) (S
ecre
cy
Sco
re)
Sh
are
of
the
glo
bal
off
sho
re
mar
ket
, %
(G
lobal
Sca
le
Wei
gh
t)
1 Austria 64 0,37 54 0,69 55,90 0,56 56 0,54
2 Belgium 45 1,03 41 1,86 44,00 1,56 45 1,72
3 Bulgaria n.a. n.a. n.a. n.a. 54,18 0,02 49 0,01
4 Great
Britain 40 18,53 41 17,39 42,35 17,37 46 15,94
5 Greece n.a. n.a. 36 0,05 57,88 0,02 51 0,03
6 Denmark 33 0,605 31 0,219 52,50 0,15 45 0,14
7 Estonia n.a. n.a. 44 0,02 50,85 0,02 43 0,02
8 Ireland 37 2,65 40 2,31 50,65 2,66 48 3,46
9 Spain 36 1,50 33 1,09 47,70 0,77 44 0,72
10 Italy 39 0,75 35 1,22 49,48 0,92 50 1,14
11 Cyprus 52 0,26 50 0,52 61,25 0,55 61 0,48
12 Latvia 51 0,002 45 0,11 57,38 0,11 59 0,07
13 Lithuania n.a. n.a. n.a. n.a. 46,8 0,02 50 0,04
14 Luxembourg 67 12,05 55 11,63 58,20 12,13 55 12,36
15 Malta 44 0,08 50 0,99 60,53 0,71 62 0,66
Regulation of Offshore Jurisdictions’ Activities: A Practical Aspect
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16 Netherlands 50 0,43 48 0,32 66,03 0,90 67 1,11
17 Germany 59 4,33 56 6,03 59,10 5,17 52 4,71
18 Poland n.a. n.a. 36 0,17 57,35 0,15 56 0,19
19 Portugal 39 0,09 39 0,06 54,68 0,08 54 0,09
20 Romania n.a. n.a. n.a. n.a. 65,53 0,06 63 0,08
21 Slovakia n.a. n.a. 50 0,01 54,90 0,05 51 0,03
22 Slovenia n.a. n.a. 34 0,02 41,83 0,01 38 0,01
23 Hungary 40 0,06 36 0,05 54,70 0,05 54 0,09
24 Finland n.a. n.a. 31 0,03 52,70 0,09 52 0,06
25 France 41 2,14 43 3,10 51,65 2,52 50 2,25
26 Croatia n.a. n.a. n.a. n.a. 59,28 0,02 55 0,03
27 Czech
Republic n.a. n.a. 35 0,10 52,93 0,09 55 0,09
28 Sweden 32 0,44 36 1,00 45,48 1,01 46 0,71
For example, regulation of offshore jurisdictions in the USA is clearly carried out by law.
The calculation of the amount of possible budget losses from tax evasion is conducted in this
country, as well as a number of confrontations are introduced to these processes. In light of
this, it is appropriate to recollect the criminal case initiated by the USA against the Swiss
financial institution HSBC Switzerland in December 2019 (it should be noted that this
institution pleaded guilty in full). Therefore, HSBC Switzerland was accused of hiding
information on taxation of income of US citizens. The key method used by this financial
institution was quite widespread among the Swiss banks; this is the method of opening and
maintaining bank accounts for nominee owners, that is, for companies created in jurisdictions
of a tax haven, such as the British Virgin Islands, Liechtenstein or Panama [10].
Earlier in 2016, there had been an event that significantly affected the tendencies of
functioning of the global financial markets. The International Consortium of Investigative
Journalists (ICIJ) has published numerous documents of the Panamanian company Mossack
Fonseca, stating the fact that the company is the founder of more than 214 000 offshore
companies in the 21 jurisdiction country of tax haven. These facts testify to the connection of
this crime to the persons of 200 countries (including 12 heads of state, 128 politicians and
civil servants, etc.). According to European Parliament studies, the implementation of such
schemes has resulted in the failure of the European Union budget to receive 50-70 billion
EUR annually [11].
Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 621 [email protected]
Taking in consideration the above, it should be noted that such cases of formation and
development of offshore jurisdictions’ activities are very frequent, since the main purpose of
their creation and functioning is aimed at participating in global financial transactions and
rarely helps to alleviate financial abuse [12, 13].
Studies show that today reducing obligation level to customers and obtaining a permit for
ownership are the basic methods, directly used to solve issues concerning financial
transparency. These methods are interrelated and reflect the transparency of legal entities and
their legal arrangements.
5. DISCUSSION
Based on the studies conducted, it has been established that it is advisable, first of all, to
introduce new standards and norms for regulating the activities of offshore jurisdictions in
order to minimize and gradually neutralize the laundering of illegal assets (money). Herewith,
it has been found that the existing AML / CFT instruments of the international regime, which
are aimed at regulating the activities of offshore jurisdictions, are currently at the
development stage. Thus, in case the country implements an international AML / CFT regime
regarding the illegal activities of offshore jurisdictions, it will first and foremost need
technical assistance to reform its own legislation and conduct training.
A thorough analysis of the dynamics of European Union’s FDI inflows and outflows
makes it possible to note that the leading European countries, among which Great Britain,
Ireland, Spain, Italy, Germany, France, the Czech Republic and Sweden hold an honorable
place and play a significant role in the processes of functioning of the international financial
market.
In turn, a survey, conducted by the Tax Justice Network, shows that Luxembourg, the
Netherlands, Great Britain, Germany and Malta have the most opaque financial system, which
is displayed by significantly higher values of the financial secrecy index.
6. CONCLUSION
Thus, in the context of studying the key features of the activities of offshore jurisdictions in
the territory of European Union, it has been established that the existing AML / CFT
instruments of international regime should be applied to them.
At the same time, investigations prove that the existing international regime’s AML / CFT
instruments, aimed at regulating the activities of offshore jurisdictions, are currently in
development phase. It has been revealed that in case of implementation of AML / CFT
international regime by the country regarding the activities of offshore jurisdictions, first of
all, this country will need technical assistance to reform its own legislation and conduct
training.
It has been also established that in countries, where enforcement of the implementation of
AML / CFT international regime is applied to the activities of offshore jurisdictions, an
appropriate individual approach should be used, taking into account the peculiarities of their
economic development and support from developed countries.
It has been revealed that Luxembourg, the Netherlands, Great Britain and Malta have the
most opaque financial system, which, in addition, are among the twenty most opaque
countries in the world. Studies have shown that Cyprus, Malta, the Netherlands and Romania
are the countries with the most secrecy indices, as well as the significant share of the global
offshore market is occupied by Great Britain, Ireland, Luxembourg, Germany and France.
Regulation of Offshore Jurisdictions’ Activities: A Practical Aspect
http://www.iaeme.com/IJM/index.asp 622 [email protected]
REFERENCES
[1] Radu, D. The use of jurisdictions in international financial fittings. In: Challenges of the
Knowledge Society, Legal sciences. ProUniversitaria, 2012, pp. 967-973.
[2] Morriss, A. P., Henson, C. C. Regulatory Effectiveness & Offshore Financial Centers.
Virginia Journal of International Law, 5, 2013, pp. 417-466.
[3] Haberly, D. and Wojcik, D. Culprits or Bystanders? Offshore Jurisdiction and the Global
Financial Crisis. Journal of Financial Regulation, 3(2), 2017, pp. 233-261.
https://doi.org/10.1093/jfr/fjx005.
[4] Caruana-Galizia, P. and Caruana-Galizia, M. Offshore financial activity and tax policy:
evidence from a leaked data set. Journal of Public Policy, 36(3), 2016, pp. 457-488.
https://doi.org/10.1017/S0143814X16000027.
[5] Khlopenko, O. International Anti-Money Laundering Regulations through thePrism of
Financial Inclusion and Competition. Yearbook of Antitrust and RegulatoryStudies, 19,
2019, pp. 75-90.
[6] Mugarura, N. The War against Corruption Is a Lost Cause without Robust Measures to
Repatriate Stolen Assets to Countries of Origin. Journal of Anti-Corruption Law, 1(1),
2017, pp. 53-69.
[7] Statiatic. Eurostat. https://ec.europa.eu/eurostat/
[8] Financial Secrecy Index - 2020 Results. Tax Justice Network.
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[9] Handbook on the compilation of statistics on illegal economic activities in national
accounts and balance of payments. Eurostat. https://ec.europa.eu/eurostat/web/products-
manuals-and-guidelines/-/KS-05-17-202
[10] Zagaris, B. Int’l tax enforcement cooperation. International Enforcement LawReporter,
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[11] Request for the setting up of a Committee of Inquiry to investigate alleged contraventions
and maladministration in the application of Union law in relation to money laundering and
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[12] The Misuse of Corporate Vehicles, Including Trust and Company Service Providers.
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Andrii V. Paziuk, Liliia M. Nevara, Ella M. Derkach, Mykhailo A. Paziuk and Yuliia O.
Yefimenko
http://www.iaeme.com/IJM/index.asp 623 [email protected]
ANNEX A
The Financial Secrecy Indexes (Financial Secrecy Index) and the corresponding European
Union rankings according to this index
No. Countries 2013 2015 2018 2020
Rank FSI Rank FSI Rank FSI Rank FSI
1 Austria 18 400,8 24 295,3 35 310,4 36 317,0
2 Belgium 40 199,3 38 181,2 53 213,0 50 236,2
3 Bulgaria n.a. n.a. n.a. n.a. 89 91,4 115 57,5
4 Great
Britain 21 361,3 15 380,2 23 423,8 12 534,7
5 Greece n.a. n.a. 85 37,2 80 118,6 103 91,7
6 Denmark 66 63,1 83 38,2 61 166,1 97 103,5
7 Estonia n.a. n.a. 77 52,9 93 79,5 121 46,0
8 Ireland 47 155,5 37 187,4 26 388,0 29 363,8
9 Spain 56 111,4 66 77,5 52 213,9 66 164,3
10 Italy 54 119,0 58 98,7 41 254,1 41 287,8
11 Cyprus 41 198,9 35 213,9 24 404,4 27 383,4
12 Latvia 53 128,1 59 92,8 55 195,7 65 182,8
13 Lithuania n.a. n.a. n.a. n.a. 97 58,75 105 89,8
14 Luxembourg 2 1454,5 6 817,0 6 975,9 6 849,4
15 Malta 64 78,1 27 260,9 20 426,3 18 442,2
16 Netherlands 39 204,9 41 168,4 14 598,8 8 682,2
17 Germany 8 738,3 8 701,9 7 769,0 14 499,7
18 Poland n.a. n.a. 75 57,2 51 215,4 59 212,1
19 Portugal 69 57,9 78 52,5 64 151,6 76 151,2
20 Romania n.a. n.a. n.a. n.a. 47 232,3 56 224,1
21 Slovakia n.a. n.a. 73 60,1 76 127,9 104 91,3
22 Slovenia n.a. n.a. 88 22,5 104 35,3 128 27,5
23 Hungary 72 54,7 84 37,3 74 132,7 75 151,5
24 Finland н.д н.д. 90 19,4 71 142,2 87 119,3
25 France 43 191,0 31 241,9 25 404,9 33 350,5
26 Croatia n.a. n.a. n.a. n.a. 79 119,4 93 112,3
27 Czech
Republic n.a. n.a. 81 44,2 70 145,1 67 163,3
28 Sweden 71 55,7 56 100,9 54 203,6 64 182,9