CPI 2024: Trouble at the top

Once again, advanced economies dominate the top rankings of the 2024 Corruption Perceptions Index (CPI). These countries have long benefited from strong rule of law, functioning government institutions, and political stability – factors that contribute to a perception of lower corruption levels domestically. These same attributes, however, also make them prime targets for corrupt actors to launder and protect their illicit gains.

The CPI, which combines data from 13 expert assessments and surveys, measures perceived corruption levels in the public sector. Yet it has its limitations: it does not evaluate private sector corruption, financial secrecy, or transnational corruption.

This can create a misleading impression that some top-performing countries are effectively combating corruption and remain untouched by its stain. This is far from the truth. In particular, nations hosting major financial centres are vulnerable to corrupt financial flows . While their strong institutions give the appearance of integrity, their financial sectors and regulatory frameworks often provide opportunities to exploit loopholes, ultimately undermining global anti-corruption efforts.

Western financial hubs like Switzerland (CPI score: 81 out of 100), Luxembourg (81) and the United Kingdom (71) have historically faced scrutiny for facilitating the movement of dirty money. However, non-Western centres such as Hong Kong (74), Singapore (84), and the United Arab Emirates (UAE) (68) are increasingly playing similar roles and warrant closer examination. Like their Western counterparts, they boast relatively strong rule of law and well-functioning institutions, yet their banking laws, corporate structures, and secrecy provisions can enable shady figures to launder funds, bypass regulations, and avoid detection.

Several top-performing countries in this year’s CPI are not immune to this kind of exploitation, including financial powerhouses such as Germany (75) and France (67). Other key centres, such as the United States (65), also continue to offer loopholes that can be exploited, but they are not included in this analysis as they fall outside the top-performing countries in this year’s CPI.

With expansive banking sectors, sophisticated wealth management services, and markets in high-value assets, financial centres are prime destinations for the corrupt to stash their dirty money. These hubs maintain extensive financial ties with countries worldwide and offer services tailored to the global elite, making it easier to disguise illicit proceeds as business and other legitimate flows while projecting a veneer of respectability.

Luxury purchases in these jurisdictions often face less scrutiny than those in more visible corruption hotspots. Research has also shown instances of financial centres being used by businesses to facilitate bribe payments and kickbacks to corrupt officials.

Recent findings from Transparency International highlight how funds from corrupt officials in Africa often flow into financial centres that score highly on the CPI. One striking example is Carlos São Vicente, a former CEO of a partially state-owned insurance company in Angola, who embezzled over US$1.2 billion through Bermuda-registered companies. He then transferred substantial sums to accounts in Singapore (84) and Switzerland (81), including at least US$558 million to a single account in Singapore.

Elsewhere, a 2023 regional analysis of the Nordic-Baltic region flagged Luxembourg (81) and Ireland (77) as top destinations for potentially suspicious cross-border payment patterns, raising serious concerns about dirty money flowing into these financial centres.

Sadly, this is not surprising. In Luxembourg's case, a staggering 80 per cent of private investment funds in the country failed to disclose their beneficiaries, as revealed by 2021 research. Then, last November, hundreds of accounts at a major Luxembourg bank were found to have played a key role in moving at least US$175 million of allegedly stolen funds from an Azerbaijani state-owned bank, ultimately ending up in real estate in the United Kingdom (71).

Despite these alarming trends, enforcement in many financial hubs remains weak. In 2023, Singapore fined two banks a combined US$2.3 million for anti-money laundering breaches – a mere 0.018% of their combined annual profits. Similarly, upcoming research by Transparency International shows that in 2023, Hong Kong (74) imposed fines totalling US$3.2 million across four banks, a negligible 0.0085% of the profits reported by banks that year.

Meanwhile, Switzerland’s banking regulator lacks the authority to impose fines altogether, relying instead on compliance orders or criminal court referrals. Banks can only face punitive financial penalties following a criminal conviction, which limits the deterrence of the sanction mechanisms in the country, allowing illicit activities to persist.

Despite their high CPI rankings, many financial centres continue to provide secrecy to global clients through legal entities and arrangements registered in their jurisdictions. While these structures can serve legitimate purposes, they are equally effective vehicles for far more nefarious activities.

Take Ireland (77), for example. Irish Limited Partnerships – a business structure often used for investment or asset management – are particularly vulnerable to abuse. Irish Limited Partnerships are not required to declare their beneficial owners (the real individuals who financially benefit from or control a partnership), even when one of the partners is a registered company. This means that if a partner is based in a secrecy jurisdiction abroad, even Irish authorities cannot identify the true owners. To make matters worse, there is no limit on the number of partnerships one person can hold, allowing individuals to act as "fronts," managing multiple partnerships for others on a large scale. In 2022 the International Monetary Fund concluded that, as a rapidly growing international financial centre, Ireland was facing significant and increasing threats from foreign criminal proceeds. The country’s total financial sector assets grew by 30 per cent between 2017 and 2020, reaching €6.57 trillion, largely driven by the expansion of investment funds – a sector particularly vulnerable to money laundering.

While the United Kingdom (71) has made recent moves to crack down on dirty money, its efforts risk being undermined by weak progress towards corporate transparency among its overseas territories, which act as offshore financial havens for crooks to stash and launder their ill-gotten gains.

In Hong Kong (74), the situation is no less concerning. There is no centralised register of beneficial ownership – companies are simply required to maintain this information themselves. Certain types of investment funds are even exempt from keeping records of their owners. With over 1.4 million companies registered in 2023, monitoring compliance with these rules is an enormous challenge, creating loopholes that shady actors can easily exploit.

Both Singapore (84) and the UAE (68) have registers of beneficial ownership, but access is restricted to government authorities. This lack of transparency means journalists and civil society cannot access the information to investigate and expose wrongdoing.

The opacity is even worse when it comes to trusts. Hong Kong, Singapore, and the UAE lack any form of register for beneficial owners of trusts. As a result, even authorities have no way of knowing how many trusts exist or operate in their countries, let alone the assets they hold. In cases where wrongdoing is suspected, authorities must rely on trustees to provide information: a time-consuming and inefficient process.

Current recommendations by the Financial Action Task Force (FATF), which were recently reviewed, failed to adequately address this problem as it does not require trusts to always be registered with a government authority. However, in March last year, FATF’s guidance recognised the benefits of trust registers to ensure the availability of adequate, accurate, and up-to-date beneficial ownership, and emphasised that this would be the best approach to ensure timely and reliable access to critical information.

Financial centres are also hotspots for high-value assets, such as luxury real estate, offering a prime avenue for laundering significant amounts of illicit funds. From London and Paris to Hong Kong and Dubai, these cities host real estate markets where opacity and weak anti-money laundering enforcement make them especially appealing to crooked buyers. The UAE’s (68) opulent property market, valued at US$286 billion in 2022, is a prime example. Investigative reports in 2022 and 2024 revealed that corrupt officials and criminals hold significant property portfolios in Dubai. And yet, despite these damning revelations, authorities have shown little evidence of meaningful action to stem the flow of dirty money into the real estate sector.

Last year, we revisited a sample of 100 politically exposed persons (PEPs) identified in 2018 as owning property in Dubai. Shockingly, more than half still retain their properties over six years later, despite their wealth appearing to be unexplained and with no signs of investigation by UAE authorities.

Financial centres are not only home to bankers but also to networks of non-financial professional enablers who facilitate the laundering of corrupt proceeds – these includes lawyers, real estate agents, notaries, accountants, and other corporate service providers.

Financial centres serve as hubs for these services, with professionals offering their expertise not only within their own jurisdictions but also to clients worldwide. Our analysis of illicit financial flows linked to corruption originating in Africa reveals that enablers registered in Luxembourg (81), Singapore (84), Switzerland (81), and the UAE (68) frequently appear in cases where services are provided abroad to shield assets. Offshore leaks data also shows that trust and corporate service providers routinely create companies and trusts abroad on behalf of PEPs. Supervisory gaps exacerbate this issue, and financial centres that rank highly on this year’s CPI exhibit significant shortcomings in this area.

In Singapore, for example, upcoming research by Transparency International shows that law firms are inspected on average every 24 years, with the Law Society conducting only 50 inspections annually. In the UAE, the rate is even lower – government supervisors carried out inspections on fewer than 2 per cent of the 16,000 professionals with anti-money laundering obligations (not counting lawyers) registered in the country during 2021 and 2022 – the only years for which data is available.

While in Switzerland, the country’s anti-money laundering regulation does not cover the non-financial activities of their lawyers and notaries. The Swiss parliament will debate a bill at the end of February to revise the anti-money laundering law, which would extend these obligations to include lawyers.

Even in Hong Kong (74), where oversight of trust and company service provider industries seems to happen more frequently, enforcement remains incredibly weak. Between 2018 and 2022, the government supervisor of these industries brought forward 72 disciplinary proceedings and successful prosecutions for violations of anti-money laundering obligations. Yet, the average fines amounted to just US$2,263 per violation – hardly a sufficient deterrent. For 2023 and 2024, the 58 highlighted cases averaged less than US$2,090 per case.

Financial centres hold an outsized role – and an undeniable responsibility – in ending the global hide-and-seek game of corrupt money flows.

Yet, despite nearly two decades of major offshore leaks and scandals exposing the complicity of these centres, they persist in accepting tainted funds, undermining global efforts to cleanse the system from corruption.

Transparency is paramount. Governments and international bodies must take decisive action to address persistent systemic weaknesses and prioritise the full disclosure of beneficial ownership for companies, trusts and other assets like real estate. Key enablers must be subject to effective supervision, while regulatory loopholes should be closed and supervisory bodies adequately empowered and funded.

The global community must find the resolve to act decisively and not allow financial centres' reputations as global economic hubs to blind them to the damage being caused. The reality is that these centres both enable corruption and undermine global efforts to combat it. Unless these issues are addressed, they will remain safe havens for the corrupt.