What does a change in the ranking mean?

You can download an excel sheet here which provides for a decomposition of the ranking changes.

Does a change in the FSI ranking mean a jurisdiction got their secrecy better or worse since the last FSI edition?

Short answer, no. The FSI ranking ranks jurisdictions according to their FSI value. This FSI value depends on two elements: the secrecy score and the global scale weight (see here). A change in the ranking of a country could thus be affected by a change in their secrecy score or a change in their global scale weight – or by more dramatic changes of other countries.

Does this mean that it is not possible to see whether a country got their secrecy better or worse since the last edition? Short answer, no. It is possible to see whether a country improved or worsened its secrecy, but this is not shown by the ranking, but somewhere else (see below).

What does a change in the ranking mean?

Firstly, bear in mind that the FSI ranking is about the present. The goal of the FSI ranking is to draw attention to the top jurisdictions, because these are currently the largest contributors to global financial secrecy. If these jurisdictions became more transparent, this would have a huge impact on the fight against tax evasion, money laundering, corruption and other illicit financial flows.

If you compare the top 10 jurisdictions of the last and current editions, you can see whether the same countries are still among the largest contributors, or if there are new ones. However, the fact that a country is no longer in the top 10 doesn’t mean that it got any better, maybe its secrecy and offshore financial services stayed the same, but other countries got much worse.

Why would a country go up in the ranking (become a worse offender) if only their Global Scale Weight went up, but it didn’t actually get any more secretive? Or worse, why would a country move up in the ranking despite the fact that their secrecy actually got better (it became more transparent)?

Again, the ranking is relative to other countries’ FSI value, so it’s possible for a country to change positions only because of other countries’ (more dramatic) changes. It’s also possible for a country to move down in the ranking, as if it contributed less to global financial secrecy, even if its secrecy and offshore services actually got worse. It will all depend on other countries (see below). 

But let’s forget for a moment about other countries, and look only at one country’s specific changes. Why is it fair that a country goes up in the ranking (becomes a bigger contributor to global secrecy), even if its secrecy got better or stayed the same? While the formula may be to blame, what is the explanation for such a formula that “penalises” countries that are more successful and attract more customers for their offshore financial services?

The Secrecy Score assesses the secrecy/transparency legal framework of countries. The Global Scale Weight indicates how much impact or scale that secrecy will have. If a country remains equally secretive (its Secrecy Score stayed the same), but its Global Scale Weight went up, this means that that same level of secrecy will now have a much larger impact worldwide, so in practice, it is now contributes more to global secrecy than before. For instance, this is what happened with the USA in the FSI 2018. The only way in which a country can neutralize such a larger scale or impact (a higher Global Scale Weight) is by becoming way more transparent. If the secrecy improves just a little, or not at all, while the global scale weight goes up, that country is arguably a bigger threat to global transparency than before. However, it will depend on how much both the global scale weight, and the secrecy score, goes up or down. 

Not everything is relative. The starting point, and absolute value, may also be relevant.

Imagine all countries, but one, are almost fully transparent (they all have a secrecy score between 0 and 10). The other country has a secrecy score of 90. All else equal, even if the outlier secretive county reduces its secrecy up to 45 (a very big improvement, reducing it 50%), it may not be enough to change its ranking. This outlier country may still be higher in the ranking even if this was the only country that improved, while all other got worse, and instead of 0-10 their secrecy score is now 15. Why? Because the “big improver” only got down to 45, which is still very high, and much higher than everyone else’s 15.

The same applies for the Global Scale Weight. For countries with a big share of the offshore financial market, even a slight change in their Global Scale Weight may end up having more impact in the ranking, than a jurisdiction whose GSW is 0.00001%. If it the latter increased its GSW 10 times, it now only got to 0.0001%, which may not be enough to show in the ranking (if all other countries had a much higher starting GSW).

How can you tell if a country got its secrecy better or worse?

If the FSI methodology didn’t change since the last edition, you could simply compare that country’s secrecy score of both editions. If the methodology did change, or even if it didn’t but you want to know the details regarding where and how it got better or worse, then you can look at the country’s database report (that contains all the details, sources and explanations on how each country is doing in each of the 20 indicators, as well as in other issues not influencing the Secrecy Score).

Which countries have changed their position in the FSI ranking between the FSI 2015 and FSI 2018?

The changes in the FSI ranking in 2018 may be caused by either or all of three possible causes: 

1)  Expanded coverage: 20 more jurisdictions are now covered in the ranking;

2)  Changes in Secrecy Score: the secrecy score may have changed either because of the new methodology (new indicators are applied) or because the jurisdictions got better or worse in the original indicators that were available in 2015; and/or

3) Changes in Global Scale Weight: the global scale weight may have gone up or down since 2015. 

Some of these changes may have neutralized each other. For example the secrecy score may have improved (the country became more transparent) but its Global Scale Weight went up, so in the end, the country didn’t change any position in the ranking (assuming other countries’ changes were irrelevant). Or they may have potentiated each other, if both the secrecy score and Global Scale Weight got higher, or lower.

The excel sheet for download provides a decomposition of the ranking changes.

Examples of changes in the ranking:

- No changes in ranking, in spite of changes in Secrecy Score and Global Scale Weight: even though Switzerland’s secrecy score increased below average compared to 2015 and its Global Scale Weight is smaller, the starting point was high enough that these changes were not dramatic enough to move its position in the ranking. 

- Changes in Global Scale Weight: the U.S. went up one position (becoming a larger contributor to secrecy) mainly because it had a big increase in its Global Scale Weight which wasn’t neutralized by more transparency (its secrecy score almost stayed the same, performing much better than average).

- Going down in the ranking irrespective of the country’s own changes: Montserrat went down 20 positions in the ranking, not because it got more transparent or with less of a market share of offshore financial services, but only because 20 more jurisdictions are now covered in the ranking.