page_title: Conduit and Sink OFCs
section_title: Sink OFC
hierarchical_section_title: Conduit and Sink OFCs / Sink OFC
caption_attribution_description: English: Table from the Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network
context_page_description: Conduit OFC and Sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres and tax havens.
  Traditional methods for identifying tax havens analyse tax and legal structures for base erosion and profit shifting tools. However, this approach follows a purely quantitative approach, ignoring any taxation or legal concepts, to instead follow a big data analysis of the ownership chains of 98 million global companies. The technique gives both a method of classification and a method of understanding the relative scale – but not absolute scale – of havens/OFCs.
  The results were published by the University of Amsterdam's CORPNET Group in 2017, and identified two classifications:
  24 global Sink OFCs: jurisdictions in which a "disproportional amount of value disappears from the economic system".
  5 global Conduit OFCs: jurisdictions "through which a disproportional amount of value moves toward sink OFCs".
  Our findings debunk the myth of tax havens as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centers are highly developed countries with strong regulatory environments.
context_section_description: Sink OFCs cover a broad range of locations from very small countries (e.g. the Marshall Islands), to major global financial centres (e.g. Hong Kong).
  Just because funds reach a Sink OFC, does not mean that they remain dormant.  Quite the contrary, the funds can be invested in assets all over the world, but their legal ownership and future gains remain in the Sink OFC.  For example, the circa US$1 trillion of US company offshore cash is held in Sink OFCs (esp. the Caribbean).
  The report highlighted some interesting aspects of the 24 Sink OFCs:
  British Virgin Islands – in terms of connections, the BVI was the "Netherlands of Sink OFCs" and heavily linked with the Conduit OFC United Kingdom.
  Luxembourg and Hong Kong – could have been considered Conduit OFCs, but CORPNET's research showed they are even bigger Sink OFCs (e.g. long-term homes for funds), Luxembourg (for routing funds from high-tax EU countries), and Hong Kong (for routing funds out of China).
  Jersey – remains a unique link with major Conduit OFC, Switzerland (because the study could not capture individual "Jersey trusts", it noted that the scale of Jersey could still be understated).
  Bermuda, British Virgin Islands, Cayman Triad – these three traditional tax havens are heavily interlinked and starting to present as one large Sink OFC.
  Taiwan – has been a controversial entrant on several tax haven lists (the Tax Justice Network calls Taiwan the "Switzerland of Asia", however, Taiwan is not on any EU/OECD/IMF tax-haven list), and is identified as the 2nd largest Asian Sink OFC.
  Cayman Islands – the Cayman Islands are becoming the biggest financial centre for Central and Latin America.
  Malta – the report highlights the rise of Sink OFC Malta as an emerging tax haven "inside" the EU, which has been a source of wider media scrutiny.
  Mauritius – has become a major Sink OFC for both SE Asia (especially India), and African economies, and now ranking 8th overall.
caption: "Uncovering Offshore Financial Centers": List of Sink OFCs ordered by value (showing U.K. dependencies).[4]
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