The UK and its tax-haven oversea territories

Mark Brown mark at
Tue Apr 12 10:01:47 BST 2016

Angus Robertson, the leader of the Scottish National Party’s bloc in Britain’s
Parliament, yesterday in response to Prime Minster Cameron's statement on the
Panama Papers in the House of Commons made passing reference to the reality of
how a small number of landowners through offshore trusts own vast swathes of
land across Scotland - a detail which possibly doesn't often get much public
exposure.  He has challenged the prime minister to detail the government’s
efforts to crack down on illegal tax shelters. See his contribution here:

see also: "
A Leonardo da Vinci painting, a Country Park and a secrecy jurisdiction – the
offshore interests of the Scott family" by Andy Whiteman and Carole Ross

> ---------- Original Message ----------
> From: "Mark Brown mark at [LegacyofColonialism]"
> <LegacyofColonialism at>
> To: LegacyofColonialism at
> Date: 12 April 2016 at 00:10
> Subject: [LegacyofColonialism] The UK and its tax-haven oversea territories
 "Offshore is undermining your elected government, hollowing out its tax base
and corrupting its politicians. It is sustaining a vast criminal economy and
creating a new, unaccountable aristocracy of corporate and financial power. If
we do not act together to contain and control financial secrecy then ... a world
of suave insiders, impunity, international criminal complicity and desperate
poverty, will become the world we leave to our children. A tiny few will have
their boots washed in champagne while the rest of us struggle for our lives in
conditions of deepening inequality."- from the book “Treasure Island - Tax
Havens and the Men Who Stole the World”, by Nicholas Shaxson (2011) [Ref:

With the political fallout with the leaking of the "Panama papers", in the UK,
Prime Minster David Cameron received much criticism from the media for an
initially slow admission of this personal fortune tied up in an offshore trust
in a tax haven set up by his late father. The background was that the UK had
been preparing for an international conference to be hosted next month on the
issue of tax-havens and rooting out corruption, and now are making great fanfare
of the assertion that they had already started preparation work for extending
and deepening domestic measures they have brought in to clamp down on tax
evasion since 2010 in the previous UK coalition government (45 different
measures, they claim), including working with their oversea dependencies to
encourage greater transparency - with the ultimate goal being to extend these
measures out into a new global agreement.  After eventually revealing details of
his personal finances under pressure from the media over the last week after
initial evasion, the UK prime minster revealed a three-pronged plan to attack
offshore tax avoidance. These are:

1) UK law enforcement will have powers to investigate the beneficiaries of firms
in all tax havens, except Anguila and Guernsey who are yet to agree to the
 2) A criminal offence will be introduced for ‘corporations who fail to protect
their representatives from criminally facilitating tax evasion.’
3) A government task force will also be introduced to crack down on tax evasion.

 However, the leaking of the Panama Papers - a leaked set of 11.5 million
confidential documents that provide detailed information about more than 214,000
offshore companies listed by the Panamanian corporate service provider Mossack
Fonseca, including the identities of shareholders and directors of the companies
and five then-heads of state or government leaders from Argentina, Iceland,
Saudi Arabia, Ukraine, and the United Arab Emirates - may have pushed the UK
government to go further than they were initially intending to in extending and
deepening measures to crack down on tax evasion as media scrutiny has put them
on the back foot. This maybe the case because over half of the 214,000 offshore
companies set up by Mossack Fonseca were registered in UK overseas territories,
with over 100,000 secret firms registered in the British Virgin Islands. The
UK's claim of 'leadership' in tackling the issue rings hollow. As revealed by
Labour party leader Jeremy Corbyn in the House of Commons in response to Prime
Minster Cameron's statement on the Panama Papers on Monday 11th April 2016, the
UK government opposed a European Union bid to impose sanctions on tax havens
like Bermuda, where Google channels its overseas profits.
Angus Robertson of the Scottish Nationalist Party said in his response: "the UK
and her dependent territories sit on the top of the Financial Secrecy Index of
the Tax Justice Network; the UK did not fully cooperate with its EU partners on
proposals to regulate overseas trusts".
Off-shore tax havens are central to the liberalised international financial
system, building into this system complex liability structures, which have
allowed risks to build-up unseen, increasing vulnerability to sudden shocks.
Tax-havens offer global capital ‘get out of regulation free-cards’, as well as
freedom from tax. According to the IMF, elite corporations and individuals
(popularly referred to as the 1%) hold a third of total wealth on the planet
with between £21 -to- £32 Trillion estimated to be located untaxed or already
taxed in tax haevens across the world (Angus Robertson, House of Commons,  11th
April 2016). [The City of London operates in the same way, under the
jurisdiction of a private corporation – the Corporation of London; Cameron’s
opt-out of a EU agreement on invoking a transaction tax across Europe in 2012
appeared to serve the interests of his hedge-fund buddies and ruling-class

Under the 'Crown', with the territory owned by the Queen cited by writer Kevin
Cahill amounting to about 6,600 million acres of land and sea area across the
world, the Crown’s structure of elite privilege has as it’s foundation a
jurisdiction of global reach that encompasses 3 crown dependencies and oversea
territories with independent legislatures all of which host to an arrangement
that is fundamental to the workings of a corrupt world financial system.
However,'the Crown' is a fusion of Monarch with body politics (the law), and the
body politic in the UK and no doubt across the commonwealth is increasingly
voicing objection to this cancerous arrangement upon which the whole of the
global financial capitalist system is based.


> Excerpts from the book “Treasure Island - Tax Havens and the Men Who Stole the
> World”, by Nicholas Shaxson
> The Bodley Head, London, 2011, paperback
> Source:
> p2
> Gabon became independent in 1960, just as it was starting to emerge as a
> promising new African oil frontier, and France paid it particular attention.
> The
> right president was needed: an authentic African leader who would be
> charismatic, strong, cunning and, when t mattered, utterly pro-French. Omar
> Bongo was the perfect candidate - he was from a tiny minority ethnic group and
> had no natural domestic support base, so he had to rely on France to protect
> him. In 1967, aged just thirty-two, Bongo became the world's youngest
> president,
> and France placed several hundred paratroopers in a barracks in Libreville,
> connected to one of his palaces by underground tunnels. This deterrent against
> coups proved so effective that by the time Bongo died in 2009 he was the
> world's
> longest-serving leader.
> ... France's biggest corporations were able to make use of this west African
> oil
> pot as a source of money that enabled them to pay bribes from Venezuela to
> Germany to Jersey to Taiwan, while ensuring that the money trails did not lead
> to them. Elf's [Elf Aquitaine] dirty money also greased the wheels of French
> political and commercial diplomacy around the globe.
> ... This immensely powerful system helped France punch above its weight in
> global economic and political affairs, and flourished in the gaps between
> jurisdictions. It flourished offshore.
> p5
> The first foreign leader President Nicolas Sarkozy of France telephoned after
> he
> came to power in 2007 was not the president of Germany, the United States or
> the
> European Commission, but
> [Gabon's president Bongo.
> p5
> Eva Jolly
> The personal accounts of monarchs, elected presidents-for-life and dictators
> were being protected from the curiosity of the magistrates. I realised I was
> no
> longer confronted with a marginal thing but with a system of both French
> politics and the offshore world. I do not see this as a terrible,
> multi-faceted
> criminality which is besieging our [onshore] fortresses. I see a respectable,
> established system of power that has accepted grand corruption as a natural
> part
> of its daily business.
> p6
> The US government needs foreign funds to flow in, and it attracts them by
> offering tax-free treatment and secrecy. This had become central to the US
> government's global strategy. Tides of financial capital flow around the world
> in response to small changes in incentives. Not only did almost nobody
> understand this but almost nobody wanted to know.
> p6
> Africa's supposedly natural or inevitable disasters all had one thing in
> common:
> the movement of money out of Africa into Europe and the United States,
> assisted
> by tax havens and a pinstriped army of respectable bankers, lawyers and
> accountants. But nobody wanted to look beyond Africa at the system that mad
> this
> possible.
> p6
> Offshore connects the criminal underworld with the financial elite, the
> diplomatic and intelligence establishments with multinational corporations.
> Offshore drives conflict, shapes our perceptions, creates financial
> instability
> and delivers staggering rewards to les grands -- to the people who matter.
> Offshore is how the world of power now works.
> p8
> More than half of world trade passes, at least on paper, through tax havens.
> Over half of all banking assets and a third of foreign direct investment by
> multinational corporations, are routed offshore.' Some 85 per cent of
> international banking and bond issuance takes place in the so-called
> Euromarket,
> a stateless offshore zone. The IMF estimated in 2010 that the balance sheets
> of
> small island financial centres alone added up to $18 trillion - a sum
> equivalent
> to about a third of the world's GDP. And that, it said, was probably an
> underestimate. The US Government Accountability Office (GAO) reported in 2008
> that 83 of the USA's biggest 100 corporations had subsidiaries in tax
> havens...
> The Tax Justice Network discovered that ninety-nine of Europe's hundred
> largest
> companies used offshore subsidiaries. In each country, the largest user by far
> was a bank.
> p8
> Tax haven['s] don't just offer an escape from tax; they also provide secrecy,
> an
> escape from financial regulation, and a chance Ito shrug off laws and rules of
> other jurisdictions, the countries where most of the world lives.
> p8
> A loose definition of a tax haven is a 'place that seeks to attract business
> by
> offering politically stable facilities to help people or entities get around
> the
> rules, laws and regulations of jurisdictions elsewhere. The whole point is to
> offer escape routes from the duties that come with living in and obtaining
> benefits from society -- tax, responsible financial regulation, criminal laws,
> inheritance rules and so on. This is their core line of business. It is what
> they do.
> p9
> [A] way to spot a secrecy jurisdiction is to look for whether its financial
> services industry is very large compared to the size of the local economy. The
> IMF used this tool in 2007 to finger Britain, correctly, as an offshore
> jurisdiction.
> p9
> The most important feature of a secrecy jurisdiction ... is that local
> politics
> is captured by financial interests.
> p10
> New York millionairess Leona Helmsley
> Taxes are for the little people.
> p10
> Offshore is a project of wealthy and powerful elites to help them take the
> benefits from society without paying for them.
> p12
> Two-thirds of global cross-border world trade happens inside multinational
> corporations.
> p13
> The British Virgin Islands, with fewer than 25,000 inhabitants, hosts over
> 800,000 companies.
> p14
> The world contains about sixty secrecy jurisdictions, divided roughly into
> four
> groups. First are the European havens. Second, comes a British zone centred on
> the City of London, which spans the world and is loosely shaped around
> Britain's
> former empire. Third is a zone of influence focused on the United States. A
> fourth category holds a few unclassified oddities, like Somalia and Uruguay,
> which have not been greatly successful.
> p15
> The City of London [is] the centre of the most important part of the global
> offshore system. The City's offshore network has three main layers. Two inner
> rings - Britain's Crown Dependencies of Jersey, Guernsey and the Isle of Man;
> and its Overseas Territories, such as the Cayman Islands - are substantially
> controlled by Britain, and combine futuristic offshore finance with medieval
> politics. The outer ring is a more diverse array of havens, like Hong Kong,
> which are outside Britain's direct control but nevertheless have strong
> historical and current links to the country and the City of London. One
> authoritative account estimates that this British grouping overall accounts
> for
> well over a third of all international bank assets; add the City of London and
> the total is almost a half.
> p16
> Three [British] Crown Dependencies [Jersey, Guernsey and the Isle of Man] are
> substantially controlled and supported by Britain but have enough independence
> to allow Britain to say: 'There nothing we can do' when other countries
> complain
> of abuses run out of these havens. They channel very large amounts of finance
> up
> to the City of London.
> p16
> Fourteen [British] Overseas Territories ... are the last surviving outposts of
> Britain's formal empire. With just a quarter of a million inhabitants between
> them they include some of world's top secrecy jurisdictions: the Cayman
> Islands,
> Bermuda, the British Virgin Islands, the Turks and Caicos islands and
> Gibraltar.
> p17
> [The Cayman Islands] is the world's fifth largest financial centre, hosting
> 80,000 registered companies, over three-quarters of the world's hedge funds,
> and
> $1.9 trillion on deposit .
> p17
> Hong Kong, Singapore, the Bahamas, Dubai and Ireland are fully independent
> though deeply connected to the City of London.
> p18
> Eva Jolly
> The expansion in the use of ... tax havens ... is a modern form of
> colonialism.
> p18
> The offshore option helped Wall Street get around strong US financial
> regulations, progressively regain its powers and its influence over the US
> political system, and then, mostly from the 1980s, turn the US itself into
> what
> is now the world's single most important tax haven in its own right.
> p20
> The offshore world is not a bunch of independent states exercising their
> sovereign rights to set their laws and tax systems as they see fit. It is a
> set
> of networks of influence controlled by the world's major powers, notably
> Britain
> and the United States. Each network is deeply interconnected with the others.
> Wealthy US individuals and corporations use the British spider's web
> extensively.
> p21
> Marshall Langer, a prominent supporter of secrecy jurisdictions
> The most important tax haven in the world is an island... the name of the
> island
> is Manhattan. The second most-important tax haven in the world is located on
> an
> island. It is a city called London.
> p21
> Instead of opening bank accounts in their own names, fraudsters and money
> launderers form anonymous companies, with which they can then open bank
> accounts
> and move assets.
> p26
> In 2005, the Tax Justice Network estimated that wealthy individuals hold
> perhaps
> $11.5 trillion worth of wealth offshore. That is about a quarter of all global
> wealth, and equivalent to the entire gross national product of the United
> States.
> p27
> the findings of a comprehensive study of illicit cross-border financial flows
> done by Raymond Baker's Global Financial Integrity (GFI) programme at the
> Center
> for International Policy in Washington
> Criminal money - from drug smuggling, counterfeit goods, racketeering and so
> on
> - amounted to $330 -$550 billion, or a third of the total.
> Corrupt money - local bribes remitted abroad or bribes paid abroad - added
> $30-50 billion, or three per cent.
> The third component, making up two-thirds, was cross-border commercial
> transactions... The drugs smugglers, terrorists and other criminals use
> exactly
> the same offshore mechanisms and subterfuges - shell banks, trusts, dummy
> corporations - that corporations use.
> p27
> Drugs smugglers, terrorists and other criminals use exactly the same offshore
> mechanisms and subterfuges - shell banks, trusts, dummy corporations - that
> corporations use.
> p27
> Raymond Baker's Global Financial Integrity (GFI) programme at the Center for
> International Policy in Washington
> Laundered proceeds of drug trafficking, racketeering, corruption, and
> terrorism
> tag along with other forms of dirty money to which the United States and
> Europe
> lend a welcoming hand.
> p28
> The offshore world is the biggest force for shifting wealth and power from
> poor
> to rich in history, yet its effects have been almost invisible.
> p30
> Big finance ... has deployed [the offshore system] in its battle to capture
> political power around the world.
> p43
> William Vestey had bought himself a peerage. There was nothing particularly
> unusual about this. Plenty of people who had made fortunes in the Great War
> [WWI] desperately craved the respectability of a peerage to mask the taint of
> [war] profiteering, and [British] Prime Minister Lloyd George was only too
> happy
> to oblige, selling off official honours willy-nilly.
> p45
> Secrecy jurisdictions constantly tailor their laws to let the wealthy perfect
> their deceits and to stay one step ahead of the tax collectors. Over the
> years,
> offshore trust subterfuges have proliferated and grown more sophisticated.
> Many
> offshore jurisdictions allow things called revocable trusts -- trusts that can
> be revoked and the money returned to the original owner. If the owner can do
> that, then they have not really separated themselves from the asset. Until it
> is
> revoked, though, it looks as if the asset has been passed on, and the
> authorities cannot tax it.
> p51
> Amid the Great Depression, Swiss farmers' and workers' movements began in 1931
> to clamour for more control over the banks. Bankers ... pressed fiercely for a
> new law, to make it a crime to violate Swiss bank secrecy... The Swiss law
> finally adopted in 1934 for the first time made it a criminal offence
> punishable
> by fines and prison to violate bank secrecy.
> p61
> Switzerland remains one the world's biggest repositories for dirty money. In
> 2009 it hosted about $2.1 trillion in offshore accounts owned by
> non-residents,
> about half from Europe--this had been $3.1 trillion in 2007 before the global
> financial crisis.
> p67
> industrial capitalists are subservient to financial capitalists, and their
> interests often conflict. Financiers, for instance, like high interest rates,
> from which they can derive considerable income; but industrialists want low
> interest rates, to curb their costs.
> p67
> The Great Depression that had started in 1929 was the culmination of a long
> period of deregulation and economic freedom and a great bull market built on
> an
> orgy of debt and mind-bending economic inequality. In the late throes of the
> boom the richest 24,000 Americans, for example, received 630 times as much
> income on average as the poorest six million families, and the top 1 per cent
> of
> people received nearly a quarter of all the income - a proportion slightly
> greater than the inequalities at the onset of the global crisis in 2007.
> p68
> from a report to the president by US Treasury secretary Henry Morgenthau
> (1957)
> about the systemic tax evasion by the wealthy
> The ordinary salaried man and the small merchant does not resort to these or
> similar devices. Legalized avoidance or evasion by the so-called leaders of
> the
> business community... throws an additional burden upon other members of the
> community who are less able to bear it, and who are already cheerfully bearing
> their fair share.
> p69
> When a company or government sells bonds or shares, investors hand over money
> in
> exchange for pieces of paper that give the holder title to a future stream of
> income. When bonds or shares are first issued, savings are mobilised, funds
> are
> raised, and they flow into productive investment. This is generally healthy.
> Next, however, a secondary market appears, where these shares and bonds are
> traded. These trades do not directly contribute to productive investment; they
> merely shuffle ownership. Well over 95 per cent of purchases in global markets
> today consist of this kind of secondary activity, rather than in real
> investment.
> p71
> Rampant international capitalism had preceded and created the Great
> Depression,
> as private and central bankers, led by Wall Street and the City of London, had
> sought to restore the laissez-faire pre-1914 financial order in which they had
> been so prominent, an order that had involved freely floating currencies,
> balanced government budgets and free flows of capital around the world - a
> little like the modern global financial system.
> The Great Depression had destroyed their dream and thoroughly discredited the
> liberal financial order.
> p73
> There is a basic tension between democracy, on the one hand, and free capital
> movements, on the other. In a world of free capital flows, if you try to lower
> interest rates to boost struggling local industries, capital will drain
> overseas
> in search of higher returns. Investors hold veto power over national
> governments
> and the real lives of millions of people are determined by ... speculators...
> Freedom for financial capital means less freedom for countries to set their
> own
> economic policies: from this particular kind of freedom, a form of bondage
> emerges.
> p73
> Investors hold veto power over national governments and the real lives of
> millions of people are determined by speculators.
> p73
> Capital controls had first emerged in the First World War. Governments had
> sought to stop capital fleeing their countries in order to be able to tax
> capital income, and keep interest rates low, so as to finance their war
> efforts.
> [Capital] controls evaporated after the war then returned partially during the
> Great Depression, and finally swept the world after the Second World War and
> the
> Bretton Woods arrangements. They slowly became leaky, and then were
> progressively dismantled around the world from about the 1970s.
> p73
> John Maynard Keynes
> Control of capital movements should be a permanent feature of the post-war
> system [WWII].
> p82
> [The] few years after the Second World War were the only time in several
> hundred
> years when politicians had any kind of control over the banking sector. Before
> the [British] bankers slammed the political shutters down, the politicians had
> sneaked in the National Health Service, which, for all its faults, has been
> one
> of the country's most popular institutions ever since.
> p82
> [The] few years after the Second World War were the only time in several
> hundred
> years when politicians had any kind of control over the banking sector.
> p84
> [John Maynard] Keynes had called the Bank of England "a private institution
> practically independent of any form of legal control".
> p88
> The Euromarket [is] the offshore financial market.
> p88
> As the head of the Bank of England's foreign exchange department, [George]
> Bolton was in the perfect position to midwife the new unregulated dollar
> market
> in London. The bank could easily have decided to regulate this market. In
> deciding not to do so, and in preventing other nations from trying to do so,
> it
> can only be concluded that the Bank of England actively created it... This was
> the birth of the Euromarket or the [London] offshore financial market.
> p90
> Fourteen small [British] island states decided not to seek independence,
> becoming British Overseas Territories, with the Queen as their head of state.
> Exactly half of them--Anguila, Bermuda, the British Virgin Islands, the Cayman
> Islands, Gibraltar, Montserrat and the Turks and Caicos islands, are secrecy
> jurisdictions, actively supported and managed from Britain and intimately
> linked
> with the City of London.
> From these beginnings, the London offshore market exploded.
> p90
> Countries had been relatively well insulated against financial calamities that
> happened elsewhere, but the Euromarket [Euromarket = London Offshore Market]
> connected up the world's financial sectors and economies. A shock rise in
> interest rates in one place would, as if transmitted by electricity almost
> instantly affect anywhere else plugged into the system. And, as it grew and
> grew, tides of hot money began to surge back and forth across the globe.
> p91
> Eurobonds [are] unregulated offshore bearer bonds--whoever bears the pieces of
> paper in their hands, owns them. They are a bit like ultra-valuable dollar
> bills: no records are kept of who owns them, and so they are perfect for tax
> evasion.
> p91
> Bank of England memo from 1963
> However much we dislike hot money, we cannot be international bankers and
> refuse
> to accept money.
> p92
> By 1975 [the Euromarket] was reckoned to have grown to exceed the size of the
> entire world's foreign exchange reserves. As the oil shocks hit in the 1970s,
> the [Euro]market was the route through which the oil-rich states' surpluses
> were
> routed to deficit-plagued consumer countries. As the Euromarket bonfire raged
> ever higher, capital began its assault on the citadels of power and the
> democratic nation state.
> ... By 1997, nearly 90 per cent of all international loans were made through
> this market [Euromarket]. It is now so all-enveloping that the Bank for
> international Settlements, which oversees global financial flows, has given up
> trying to measure its size.
> p93
> [A] bank's offshore customers will almost always be the world's wealthier
> citizens and corporations. Free money for bankers and the representatives of
> the
> world's wealthy at the expense of everyone else is a basic leitmotif of the
> offshore system.
> p94
> A bank can expand its balance sheet by extending credit to others. In the
> banking world, money can be created merely by the act of lending it.
> p95
> In the unregulated London-based Euromarkets, a bank isn't required to hold any
> reserves.
> p98
> The Euromarket had become a global transmission belt making short-term capital
> movements more sensitive, rippling interest-rate changes instantly around the
> globe and allowing enough money to pool together in one place to allow large
> speculative attacks against currencies that speculators decided were
> vulnerable.
> p98
> The offshore Euromarkets are to a large degree the enabling environment for
> [a]
> shadow banking system.
> p99
> The US dollar is the world's main reserve currency. While less privileged
> nations are periodically constrained by shortages of foreign exchange, the USA
> can borrow in its own currency - it can print money to acquire real resources,
> and live beyond its means for a long time.
> ... The ability to pay foreign debts in its own currency - which it can print
> -
> helped America fight and pay for the Vietnam war; it helped President George
> W.
> Bush cut taxes and rack up huge deficits. And when the time comes one day to
> pay
> for the mess, you can shift a lot of the burden of adjustment onto other
> states.
> Countries use dollars for their reserves because dollar markets are large and
> liquid, and the dollar is trusted to be relatively stable. Oil is priced in
> dollars. People trade in dollars... Today two-thirds of the world's official
> foreign exchange reserve are held in dollars. Dollars make the world go round.
> p100
> The Euromarkets, [a] huge new, unregulated and highly profitable dollar arena,
> whose liquidity was growing explosively, were perfect to support this imperial
> role for the US. currency... Eurodollars helped America cement its exorbitant
> privilege, finance its deficits, fight foreign wars and throw its weight
> around.
> p100
> Eric Helleiner
> With the creation of the Euromarket, bankers in both countries [United States
> and Britain] ambled on a solution to the problem of how to reconstruct the
> London-New York financial axis that had been prominent in the 1920s.
> p101
> The Bank of England after 1945 set about re-establishing the hegemony of
> international financial capital. And all the time, Britain's offshore
> satellites, Jersey, Cayman, and their like, had their own special parts to
> play
> in this great financial game.
> ... From the 1960s, the island semi-colonies and other assorted satellites of
> London came into their own as offshore Euromarket booking centres ... where
> the
> world's wealthiest individuals and corporations, especially banks, could park
> their money, tax free and in secrecy, and where they could grow faster than
> their regulated onshore counterparts.
> ... The umbilical, two-way relation between London and its overseas satellites
> has remained a defining feature of the entire offshore system ever since.
> ... A new market had emerged, ushering in the rebirth of London as the world's
> largest financial centre... The financial establishment in London was piecing
> together the means by which London would restore its position as the capital
> of
> a world ruled in the interests of an elite of investors... the British empire
> began rise from the dead.
> p103
> From the 1960s, [Euromarkets] grew hand in hand with a second, more
> deliberately
> constructed counterpart a London-centred web of half-British territories
> scattered around the world that would catch financial business from nearby
> jurisdictions by offering lightly taxed, lightly regulated and secretive bolt
> holes for money. Criminal and other money could be handled by the City of
> London, yet far enough from London to minimise any stink.
> ... The British Crown Dependencies of Jersey, Guernsey and the Isle of Man
> would
> form the inner ring of the spider's web and would focus mostly on Europe,
> while
> the Caribbean members of its fourteen Overseas Territories, the last outposts
> of
> the formal empire, would focus mostly on the Americas. A scattering of other
> territories elsewhere would expand the network's global reach:
> British-controlled Hong Kong, as a gateway to China and the sub-region; and
> some
> ex-colonial oddities in the Pacific, the Middle East and elsewhere.
> ... Financial institutions from London, al' Street, Amsterdam, Frankfurt and
> Paris, would spread into these territories at high speed. An offshore
> explosion
> which began with the rise of the Euromarkets in London in the mid-1950s would
> spread first to the Crown Dependencies near the British mainland, then to the
> British-held Caribbean jurisdictions, then to Asia, and finally to
> British-held
> Pacific atolls.
> p115
> veteran US crime-fighter Jack Blum
> Hong Kong is where most of the corruption in China is accomplished.
> p115
> When Britain handed it over to China in 1997 China preserved this offshore
> centre as a 'special administrative zone', and Hong Kong's Basic Law states
> that
> it shall 'enjoy a high degree of autonomy' from China in all matters except
> foreign relations and defence'... Chinese elites want their own offshore
> centre,
> complete with political control and judicial separation.
> p115
> When Britain handed it over to China in 1997 China preserved this offshore
> centre as a 'special administrative zone', and Hong Kong's Basic Law states
> that
> it shall 'enjoy a high degree of autonomy' from China in all matters except
> foreign relations and defence'.
> p115
> Despite Chinese control [of Hong Kong], City of London interests remain
> closely
> engaged, not least through Britain's largest bank HSBC - the Hong Kong &
> Shanghai Banking Corporation... HSBC moved its CEO from London to Hong Kong in
> March 2010 to reflect its shifting focus.
> p116
> Hong Kong ... is still a fairly small player in the offshore world: its $149
> billion in non-resident deposits in 2007 were just one-eleventh as big as the
> Cayman Islands' $1.7 trillion.
> p116
> Singapore set up its financial centre in 1968, while it was still part of the
> British Sterling currency zone. Singapore's success came mainly from being the
> money-laundering centre for corrupt Indonesian businessmen and government
> officials.
> p116'
> Andy Xie, Morgan Stanley's Asia economist, in an internal email in 2006
> To sustain its economy, Singapore is building casinos to attract corruption
> money from China.
> p121
> By the early 1980s the Caribbean was the world's main offshore drugs
> turntable,
> as Colombian Medellin cartel kingpin Carlos Lehder smuggled industrial
> quantities of cocaine from Norman's Cay in the Bahamas... As cocaine flooded
> into America, money flew back out in shrink-wrapped bills loaded on wooden
> pallets and the Cayman islands would then return it to the Federal Reserve.
> p126
> By 2005 US banks were free to receive the proceeds from a long list of crimes
> committed outside the country, including alien smuggling, racketeering,
> peonage
> and slavery. Profiting from crime is legal, so long as the crime itself
> happens
> offshore.
> p126
> A US bank can knowingly receive the proceeds of a wide range of foreign
> crimes.
> p117
> The US had some tax haven characteristics - from 1921, the United States has
> let
> foreigners deposit money with American banks and receive interest tax-free, as
> long as the deposit isn't connected with a US business.
> p117
> From the 1950s and 1960s Florida became a pivot for the French Connection
> heroin
> route, for Kuomintang drugs flowing into the US via Hong Kong, which [was]
> laundered through Florida real estate, for Latin American flight money, and
> for
> Colombian drug money, often routed via the Bahamas, Panama and the Netherlands
> Antilles.
> p128
> By the 1980s, 40 per cent of the money on deposit in Miami banks was reckoned
> to
> originate overseas, particularly in Latin America... Half the property in
> Miami
> is owned by offshore shell companies, and the largest yachts on the
> Intracoastal
> waterway are registered offshore. Miami is the facility of choice for Latin
> ex-heads of state, generals and former friends of the CIA.
> p129
> Corporations hold their profits offshore, indefinitely, and only when they
> bring
> it back home to pay out as dividends to shareholders does it get taxed
> [deferred
> tax]... This sharply reduces multinationals' cost of capital ... and this in
> turn gives them a huge competitive advantage against smaller, locally based
> firms. US corporations alone were believed to hold a trillion dollars' worth
> of
> untaxed foreign profits offshore in 2009.
> p129
> In 2004 George W Bush's administration offered his corporate friends a chance
> to
> repatriate tax and pay just five per cent tax rate instead of the normal 35
> per
> cent. Over $360 billion whooshed back to the US, much of which went into share
> buybacks, boosting executive bonuses.
> p138
> The second smallest state in the USA, Delaware is the home to many of the
> world's corporations... Over half of US publicly traded companies and nearly
> two-thirds of the Fortune 500 are incorporated here.
> p140
> Corporations were once explicitly regarded as vehicles to serve the public
> good.
> Delaware, however, cast that notion aside and adopted what one official
> Delaware
> account calls 'a decidedly freewheeling, private enterprise mode' in which
> corporations and individuals pursue their own goals, and government is kept
> out
> of the way under the assumption that the public good will advance
> automatically.
> p141
> Delaware ... [grants] corporate bosses extraordinary freedoms from bothersome
> stockholders, judicial review and even public opinion.
> p144
> After the brutal Nigerian president Sani Abacha died in 1998, it was revealed
> that he had skimmed off billions of dollars of oil money. Two countries in
> particular soaked up his embezzled wealth - Britain and Switzerland.
> p145
> Transparency International's ranking suggests that Britain and Switzerland -
> not
> to mention the United States - are among the world's 'cleanest' jurisdictions.
> In fact, about half the top twenty in the index are major secrecy
> jurisdictions,
> while the nations of Africa - the victims of the gargantuan illicit flows -
> are
> ranked 'dirtiest'.
> p145
> In November 2009 the Tax Justice Network published a new index... The
> Financial
> Secrecy Index ranked countries according to how important they are in
> providing
> financial secrecy in global finance.
> fifth place in the Financial Secrecy Index was the United Kingdom.
> Although it has by far the most important historical role in the emergence of
> offshore and is the centre of the British offshore spider's web, its domestic
> secrecy structures are relatively transparent. Third and fourth most important
> were, respectively, Switzerland and the Cayman Islands. Luxembourg, a gigantic
> but hardly noticed haven of financial secrecy, came second. And which country
> was ranked - by a mile the world's most important secrecy jurisdiction? -- the
> United States of America.
> p147
> By the early 1980s the main elements of the modern offshore system were in
> place, and growing explosively. An older cluster of European havens, nurtured
> by
> European aristocracies and led by Switzerland, was now being outpaced by a
> network of more flexible, aggressive havens in the former outposts of the
> British empire, which were themselves linked intimately to the City of London.
> A
> state within the British state, the City had been transformed from an
> gentlemen's club operating the financial machinery of empire ... into a
> deregulated global financial centre dominated by American banks... A less
> complex yet still enormously important offshore zone of influence had also
> grown
> up, centred on the United States and also constructed by American banks.
> p147
> A state within the British state, the City [of London] had been transformed
> from
> an gentlemen's club operating the financial machinery of empire ... into a
> deregulated global financial centre dominated by American banks... A less
> complex yet still enormously important offshore zone of influence had also
> grown
> up, centred on the United States and also constructed by American banks.
> p147
> By the early 1980s the main elements of the modern offshore system were in
> place, and growing explosively. An older cluster of European havens, nurtured
> by
> European aristocracies and led by Switzerland, was now being outpaced by a
> network of more flexible, aggressive havens in the former outposts of the
> British empire, which were themselves linked intimately to the City of London.
> p148
> The London-based Euromarket, then the wider offshore world, provided the
> platform for US banks to escape tight domestic constraints and grow
> explosively
> setting the stage for the political capture of Washington by the financial
> services industry, and the emergence of too-big-to-fail banking giants, fed by
> the implicit subsidies of taxpayer guarantees and the explicit subsidies of
> offshore tax avoidance.
> The emergence of the US as an offshore jurisdiction in its own right attracted
> vast financial flows into the country boosting bankers' power even further.
> The
> old alliance between Wall Street and the City of London, which had collapsed
> after the Great Depression and the Second World War, had been resurrected.
> p148
> The London-based Euromarket, then the wider offshore world, provided the
> platform for US banks to escape tight domestic constraints and grow
> explosively
> setting the stage for the political capture of Washington by the financial
> services industry, and the emergence of too-big-to-fail banking giants, fed by
> the implicit subsidies of taxpayer guarantees and the explicit subsidies of
> offshore tax avoidance.
> p148
> US crime-fighting lawyer John Moscow
> Money is power, and we are transferring this power to corporate bank accounts
> run by people who are in the purest sense of the word unaccountable and
> therefore irresponsible.
> p149
> The narcotics industry alone generates some $500 billion in annual sales
> worldwide, twice the value of Saudi Arabia's oil exports.
> p151
> The bank [BCCI - Bank of Credit and Commerce International] was set up in 1972
> by an Indian-born banker, Agha Hassan Abedi, who got backing for his venture
> from members of the Saudi royal family and from Sheikh Zayed Bin Sultan
> Al-Nahayan, the ruler of Abu Dhabi. BCCI grew super-fast under a simple
> business
> model: create the appearance of a reputable business, make powerful friends,
> then agree to do anything, anywhere, on behalf of anyone, for any reason. BCCI
> loaded politicians with bribes and served some of the twentieth century's
> greatest villains: Saddam Hussein, terrorist leader Abu Nidal, the Colombian
> MedellIn drug cartel and Asian heroin warlord Khun Sa. It got involved in
> trafficking nuclear materials via sales of Chinese Silkworm missiles to Saudi
> Arabia and in peddling North Korean Scud-B missiles to Syria. Its branches in
> the Caribbean and Panama serviced the Latin American drug trade; its divisions
> in the United Arab Emirates, then enjoying an oil boom and an offshore banking
> bonanza, serviced the heroin trades in Pakistan, Iran and Afghanistan; and it
> used Hong Kong to cater to drug traffickers in Laos, Thailand and Burma.
> BCCI also penetrated the US banking system, getting around the concerns of
> American regulators by using offshore secrecy structures to make its ownership
> invisible. It paid off Washington insiders and built up a solid partnership
> with
> the CIA.
> p152
> In 1972, BCCI [Bank of Credit and Commerce International] set up its
> headquarters in luxury offices in the heart of the London... Many of its
> 80,000
> depositors were relatively poor people from the developing world who had no
> idea
> that this apparently London-based bank, backed by wealthy Arab sheikhs, was a
> fiction built on a fiction.
> p156
> [a Russian-born Jew named Arkady Gaydamak became Angola's trusted man in
> Moskow.
> He told me:]
> In the so-called market economies, with all the regulations, the taxation, the
> legislation about working conditions, there is no way to make money. It is
> only
> in countries like Russia, during the period of redistribution of wealth - and
> it
> is not yet finished - when you can get a result. So that is Russian money.
> Russian money is clean money, explainable money. How can you make $50 million
> in
> France today? How? Explain to me!
> p156
> Some have compared the vast upward redistribution of wealth in Russia after
> the
> fall of the Soviet Union to the era of the robber barons in the United States
> in
> the nineteenth century. But there is a crucial difference. The Americans
> didn't
> have a huge offshore network in which to hide their money. In spite of their
> many abuses, the barons concentrated on domestic investment. While they
> fleeced
> unwary investors and subverted the political process, they also built the
> country's industrial prosperity. They left America stronger and in time the
> state was able to rein in their worst excesses. But in late twentieth-century
> Angola and Russia the money simply disappeared offshore forever.
> p156
> It was Africa's curse that its countries gained independence at precisely the
> same time as purpose-built offshore warehouses for loot properly started to
> emerge. For many of these countries, independence really meant independence
> for
> their elites from bothersome rules. The colonial powers left, but quietly left
> the mechanisms for exploitation in place.
> p157
> Global Financial Integrity (GFI) in Washington authored a study on illicit
> financial flows out of Africa (March 2010). Between 1970 and 2008, it
> concluded:
> Total illicit financial outflows from Africa, conservatively estimated, were
> approximately $854 billion. total illicit outflows may be as high as $1.8
> trillion... The GFI estimate - equivalent to just over 9 per cent of its $51
> billion in oil and diamond exports during that time - simply has to be a gross
> underestimate of the looting. Many billions have disappeared offshore through
> opaque oil-backed loans channeled outside normal state budgets, many of them
> routed through two special trusts operating out of London.
> ... GFI's shocking estimates complement the figures I mentioned - ten dollars
> out for every dollar of foreign aid flowing in.
> ... Another study emerged in April 2008 from the University of Massachusetts,
> Amherst ... to examine capital flight from forty African countries from 1970
> to
> 2004. Its conclusions are striking.
> Real capital flight over the 35-year period amounted to about $420 billion (in
> 2004 dollars) for the 40 countries as a whole. Including imputed interest
> earnings, the accumulated stock of capital flight was about $607 billion as of
> end-2004.
> Yet at the same time, the total external debt of these countries was 'only'
> $227
> billion. So, the authors note, Africa is a net creditor to the rest of the
> world, with its net external assets vastly exceeding its debts. Yet there is a
> crucial difference between the assets and the liabilities: The subcontinent's
> private external assets belong to a narrow, relatively wealthy stratum of its
> population, while public external debts are borne by he people through their
> governments.
> p158
> Africa's people 'bear' their public debts, in the forms of poverty, war, a
> hopeless lack of real opportunities, and the regular physical and economic
> violence perpetrated against them by corrupt and predatory elites.
> p160
> Playing all three corners of the triangle - source countries being drained of
> wealth, increasingly offshore-like economies receiving the wealth, the
> offshore
> conduits handling its passage turned global private banking into one of the
> most
> profitable businesses in history.
> p160
> economist Jim Henry, in his 2003 book "Blood Bankers"
> The rise of Third World lending in the 1970s and 1980s laid the foundations
> for
> a global [tax] haven network that now shelters the world's most venal
> citizens.
> p160
> [In the 1970s and 1980s] at least half of the money borrowed by the largest
> [Third World] debtor countries flowed right out again under the table, usually
> in less than a year, and typically in just weeks. Third World public debts
> were
> matched almost exactly by the stock of private wealth their elites had
> accumulated in the US and other havens.
> p160
> The top 1 per cent of households in developing countries own an estimated
> 70-90
> per cent of all private financial and real estate wealth.
> p161
> The Boston Consulting Group reckoned in 2003 that over half of all the wealth
> owned by Latin America's wealthiest citizens lay offshore.
> p163
> The OECD [Organization for Economic Cooperation and Development], a club of
> rich
> nations -- works hard to ensure that its treaty models, which tilt the playing
> field in favour of rich countries at the expense of poor ones, is dominant.
> p164
> $18 trillion [in tax revenues from developing nations] flowed in 2008 through
> the Netherlands, just one of many conduit havens.
> p164
> South Africa's finance minister Trevor Manuel
> It is a contradiction to support increased development assistance, yet turn a
> blind eye to actions by multinationals and others that undermine the tax base
> of
> a developing country.'
> p164
> The two biggest sources of foreign investment into China in 2007 were not
> Japan
> or the US or South Korea, but Hong Kong and the British Virgin Islands.
> p164
> The biggest source of foreign investment into India, at over 43 per cent of
> the
> total, was not the US or Britain or China, but the treaty haven of Mauritius,
> a
> rising star of the offshore system.
> p172
> Delaware's legislature is for hire.
> p173
> Paul Tucker of the Bank of England in a 2010 paper on financial stability
> Money [market] funds began their life in the US, as a response to now long
> abolished caps on interest rates that the banks could pay on deposits. They
> have
> become a gigantic part of the US financial system; at about $3 trillion, being
> roughly the same size as the transactions deposits of commercial banks.
> p175
> A tax haven is a state [country] captured by financial interests from
> elsewhere.
> p182
> [The island of Jersey] is a state whose leadership has essentially been
> captured
> by global finance, and whose members will threaten and intimidate anyone who
> dissents.
> p183
> What we have in [the British island of] Jersey and [the US state of] Delaware
> is
> rampant uncontrolled deregulation, harnessed to the interests of a few
> insiders
> and large corporate players. Just as European nobles used to consolidate their
> unaccountable powers in castles, to better subjugate and extract tribute from
> the surrounding peasantry; so financial capital has coalesced in these
> fortified
> nodes of unaccountable political and economic power, capturing local politics
> and turning these jurisdictions into fast and flexible private law-making
> machines, defended against outside interference and protected by establishment
> consensus and the suppression of dissent.
> Offshore [the offshore financial system] is not just a place, an idea, a way
> of
> doing things, or even a weapon for the finance industries. It is also a
> process:
> a race to the bottom where the regulations, laws and trappings of democracy
> are
> steadily degraded, as one arrangement ricochets from one fortified redoubt of
> finance to the next jurisdiction, and the offshore system pushes steadily,
> further, deeper, onshore. The tax havens have become the battering rams of
> deregulation.
> p184
> Secrecy jurisdictions [offshore financial centers] are places that seek to
> attract business by offering politically stable facilities to help people or
> entities get around the rules, laws and regulations of jurisdictions
> elsewhere.
> p183
> The future that the offshore system promises has a distinctly medieval
> quality:
> in a world still nominally run by democratic nation states, the offshore
> system
> is more like a network of guilds in the service of unaccountable and often
> criminal elites.
> p186
> a 2008 Swiss-based Bank for International Settlements (BIS) study on
> derivatives
> stated:
> The most common jurisdictions for US securitisations are the Cayman Islands
> and
> the state of Delaware.
> p186
> The most common jurisdictions for European securitisations are Ireland,
> Luxembourg, Jersey, and the UK. Every last one is a major secrecy jurisdiction
> that uses a simple business model: ask the financial institutions exactly what
> they need, then shape the laws accordingly and without democratic debate.
> p186
> Among the only academic experts to have seriously examined offshore's role in
> the [2007 Wall Street] financial crisis is Jim Stewart, senior lecturer in
> finance at Trinity College, Dublin. In reports in July 2008, Stewart
> investigated the Dublin International Financial Services Centre (IFSC), a
> secrecy jurisdiction setup in 1987 under corrupt Irish politician Charles
> Haughey with help primarily from City of London interests. A showcase for
> high-risk wild-west financial capitalism, the Dublin IFSC emerged the year
> after
> London's giant deregulatory Big Bang and currently hosts over half the world's
> top fifty financial institutions. It became a big player in the shadow banking
> system, and now hosts 8,000 funds with $1.5 trillion in assets.
> p189
> The business model of private equity companies [is to] buy a company that
> someone has sweated for years to create, then load it up with debt, cutting
> the
> tax bill and magnifying the returns.
> ... Sometimes private equity companies do create real value, but the core
> feature of their business model is not value creation, but value skimming. A
> big
> tax bill is slashed, the company's shares or value rise, managers'
> remunerations
> become fatter, wealth is shifted away from taxpayers to wealthy managers and
> stockholders. Nowhere in any of this does anyone produce a better or cheaper
> product.
> p190
> Banks have been particularly adept at going offshore to grow fast: by using
> tax
> havens to escape tax, to avoid reserves requirements and other financial
> regulation and to gear up their borrowings. Banks achieved a staggering 16 per
> cent annual return on equity between 1986 and 2006, according to Bank of
> England
> data, and this offshore-enhanced growth means the banks are now big enough to
> hold us all to ransom. Unless taxpayers give them what they want, financial
> calamity ensues. This is the too-big-to-fail problem - courtesy of offshore.
> p190
> Banks achieved a staggering 16 per cent annual return on equity between 1986
> and
> 2006, according to Bank of England data, and this offshore-enhanced growth
> means
> the banks are now big enough to hold us all to ransom.
> p230
> Offshore attitudes are characterised by amazing similarities of argument, of
> approach and of method, and some striking psychological affinities in a
> geographically diverse but like-minded global cultural community. A peculiar
> mixture of characters populates this world: castle-owning members of ancient
> continental European aristocracies, fanatical supporters of American
> libertarian
> writer Ayn Rand, members of the world's intelligence services, global
> criminals,
> British public schoolboys, assorted lords and ladies and bankers galore. Its
> bugbears are government, laws and taxes, and its slogan is freedom.
> ... While it is in secrecy jurisdictions where these attitudes flourish so
> vigorously, they mainly originate among the onshore ruling classes.
> p233
> Unaccountable elites are always irresponsible.
> p234
> Island of Jersey Senator Stuart Syvret in his blog
> Come to Sunny Jersey. The North Korea of the English Channel.
> p234
> Island of Jersey Senator Stuart Syvret after his arrest at the island's
> airport
> This is a society with no checks and balances, run by an oligarchy. It is a
> one-party state, and it has been for centuries.
> p234
> an Island of Jersey politician
> The [Jersey] finance industry is like an amoeba. You attack it , and it
> absorbs
> that, and attacks back. It is the parasite in the island, It has taken it
> over.
> It controls us and decides on everything that happens here.
> p237
> Economists talk of the 'Dutch disease' that afflicts mineral-rich countries:
> when revenues flood in, price levels rise and locally made goods, notably
> manufactures and agricultural products, cannot compete with cheaper imports.
> These sectors wither. Meanwhile, talent leaches into the dominant sectors, and
> politicians lose interest in the thorny challenge of keeping other areas
> afloat,
> because it is far simpler and more lucrative to latch on to the sources of
> easy
> cash.
> p242
> Right-wing ideologies that for years have been beyond the pale in the larger
> democracies have been allowed to grow without restraint offshore. As offshore
> finance has become increasingly influential in the global economy,
> re-engineering onshore economies in ever more significant ways, so such
> attitudes have flourished, gaining strength and confidence within the larger
> economies. This is evident in the intransigent arrogance of bankers, who,
> having
> nearly brought the world economy to its knees, still ask for more and threaten
> to relocate elsewhere if they are regulated or taxed too much. It is visible
> in
> the demands of the super-rich, who have come to expect and demand tax rates
> below those of their office cleaners.
> p244
> The City of London! the collective term for Britain's global financial
> services
> industry.
> p245
> Maurice GIasman a north London jewish academic and a young Anglican priest
> named
> Father William Taylor directly confronted the City of London Corporation, the
> municipal authority for the City of London. The social silence they found
> hides
> what may be the most astonishing story in the history of global finance.
> p246
> The City of London Corporation [is] the world's oldest continuous municipal
> government.
> p247
> The term 'City of London' refers to the financial services industry located in
> and around the British capital [London].
> p247
> The City [of London], or the Square Mile, is a 1.22-square-mile slab of prime
> central London real estate.
> p247
> When the City [of London's] 350,000-odd workforce - four-fifths employed in
> financial services -- has left, fewer than 9,000 resident souls. plus security
> guards, remain.
> p247
> London has more foreign banks than any other financial centre: by 2008 it
> accounted for half of all international trade in equities, nearly 45 per cent
> of
> over-the-counter derivatives turnover, 70 per cent of Eurobond turnover, 35
> per
> cent of global currency trading and 55 per cent of all international public
> offerings. New York is bigger in areas like securitisation, insurance, mergers
> and acquisitions, and asset management, but much of its business is domestic,
> making London the world's biggest international - and offshore - financial
> hub.
> p248
> It was the creation of the unregulated offshore Euromarkets in London from the
> late 1950s onwards, which emerged exactly as Britain's formal empire
> collapsed,
> that created an escape route for US banks, and others, seeking to get around
> the
> burdens of New Deal regulation.
> p249
> Three-quarters of US Fortune 500 companies, and all of its big banks, have
> London offices.
> p249
> Having gone out of its way to welcome wealthy Arabs in the 1980s and rich
> Japanese and oil-rich Africans in the 1990s, the City [of London] has more
> recently aggressively courted Russian oligarchs, providing them with
> bolt-holes
> beyond the reach of Russian law enforcement... Some 300,000 Russians live in
> London.
> p249
> The British bank Lloyds TSB ... secretly channeled Iranian and Sudanese money
> into the American banking system.
> p250
> political writer Robin Ramsay
> In this country [UK] bankers don't go to jail.
> p250
> In 1914 the tax rules were twisted to let those resident but not domiciled in
> England escape tax on their worldwide income - they would only be taxed on
> what
> was actually earned in Britain... And that is essentially the situation today.
> p251
> 60 percent of world trade happens inside multinational corporations.
> p252
> The International Accounting Standards Board (IASB), sets the rules for how
> companies around the world publish their financial data. Over one hundred
> countries use its standards... The IASB is not a public rule-setting body,
> accountable to democratic parliaments; it is a private company registered in
> Delaware, financed by the big four accountancy firms and some of the world's
> biggest multinationals... Through the IASB, hosted by the City of London
> Corporation, these giant businesses write their own disclosure rules.
> p252
> The City [of London's] biggest role in the global offshore system is in its
> relationship with running Britain's spider's web. In the second quarter of
> 2009
> the UK received net financing of US $332.5 billion just from its three Crown
> Dependencies Jersey, Guernsey and the Isle of Man. In 2009 the web as a whole
> held an estimated US $3.2 trillion in offshore bank deposits, about 55 per
> cent
> of the global total according to data from the Bank for International
> Settlements, and that is just bank deposits.
> p252
> The British offshore web provides the City [of London] with three things.
> First,
> the tax havens scattered across the world capture passing foreign business and
> channel it to London just as a spider's web catches insects; second, it is a
> storage mechanism for assets; and third, it is a money-laundering filter that
> lets the City get involved in dirty business while providing it with enough
> distance to maintain plausible deniability
> p252
> The head of the [City of London] Corporation is the Lord Mayor of London, not
> to
> be confused with the mayor of London, who is head of the much larger Greater
> London municipality which contains the tiny City [of London] but has no
> jurisdiction at all over it. The Lord Mayor's principal role today is
> ambassador
> for all UK-based financial and professional services.
> p254
> The [City of London] Corporation is one of the most powerful players, if not
> the
> most powerful, in global financial regulation. Through myriad subtle levers
> and
> influences, it exerts an invisible influence on Britain's financial regulators
> and politicians.
> p255
> As Britain's mainstream political system has evolved over the centuries, the
> City [of London] has been a fortress withstanding the tides of history that
> have
> transformed the rest of the British nation state. Its special privileges stem
> ultimately from the power of financial capital. Britain's rulers have needed
> the
> City's money and given the City what it wants in exchange.
> ... Britain's entire political system derives, in a sense, from the City of
> London Corporation.
> p256
> Modern Britain has no written constitution but some historians talk of an
> ancient constitution involving old rights, privileges and liberties... [There
> are] four pillars of the ancient constitution: the King as its head, the
> Church
> as its soul, the parliament as the country and the City as the money - not so
> much subordinate to the Crown or parliament but intertwined with them in
> complex
> political relationship.
> p259
> London is two cities: a large, vibrant and troubled population centre plus a
> supremely wealthy offshore island in its midst.
> p261
> British Prime Minister Clement Attlee (1945-1951)
> Over and over again we have seen that there is in this country another power
> than that which has its seat at Westminster. The City of London, a convenient
> term for a collection of financial interests, is able to assert itself against
> the Government of the country. Those who control money can pursue a policy at
> home and abroad contrary to that which has been decided by the people.
> p261
> The Bank of England was set up in 1694 as a private institution capitalised by
> wealthy Protestant City interests, in large part to provide credit for
> building
> the navy.
> p261
> The Bank of England was finally nationalised in 1946... In the end,
> nationalisation was a mirage. The bank continued to be run by essentially the
> same court of Old Etonian merchant bankers... The government got powers to
> issue
> 'directions' to the bank, but admitted in 2010 that 'thus far, the power has
> not
> been used.
> p262
> The Economist magazine said soon after the Bank of England was nationalized
> The nationalized bank 1946 will not differ in any fundamental way from the
> privately owned bank of 1945.
> p262
> Margaret Thatcher was prime minister [1981], and almost the entire political
> class was losing faith in manufacturing and genuflecting towards the City [of
> London]. Everything was for sale: school playing fields, telephone companies,
> railways and marketplaces. The City was at the forefront of a global trend of
> financialisation: the re-engineering of manufacturing firms as highly
> leveraged
> investment vehicles and, soon, the packaging of mortgages into asset-backed
> securities for trading on global markets.
> p262
> The Bank of England is accountable to parliament, not to the [City of London]
> Corporation, but its physical location at the geographical centre of the City
> reflects were its heart lies. It shares the City's view, established over
> centuries, that the path to progress lies in deregulation and with the City at
> the forefront.
> p262
> In 1991 the [Bank of England] directors decided to work out more explicitly
> what
> the bank is for, and they came up with three main aims. Two were the usual
> central bankers' goals: to protect the currency and to keep the financial
> system
> stable. The third - as [City of London] governor Eddie George put it - is to
> ensure the effectiveness of the United Kingdom's financial services and
> advance
> a financial system which enhances the international competitive position of
> the
> City of London and other UK financial centres. In other words, to protect and
> promote the City as an offshore centre.
> p263
> Corporations get their licence to operate from the state - they are creatures
> of
> state power. The City of London Corporation is something else.
> p283
> Maurice Glasman
> [The City of London] is an ancient and very small intimate relational
> institution -- a medieval commune representing capital.
> p264
> Tony Blair transformed the Labour Party into an institution that the City [of
> London] could learn to love... In 1996 Blair quietly dropped Labour's
> eighty-year-old pledge to abolish the Corporation of London, replacing it with
> a
> vague promise to 'reform' the City. Few people in Britain even noticed the
> capture of Britain's last major bastion of real opposition to the financial
> sector. When Blair was elected the following year by a landslide, the
> Corporation could rest assured that its position was safe.
> p265
> Labour MP John McDonnell
> [Tony] Blair and [[Gordon] Brown made a Faustian pact to give the City [of
> London] its head. The idea was to let them do their profiteering and just take
> the tax benefit. It was not a relationship on our terms; it was simply 'Give
> them what they want'.
> p266
> British MP Tony Benn
> The City of London is an offshore island moored in the Thames, with a freedom
> that many other offshore islands would be glad to have.
> p273
> a 2009 OECD [Organization for Economic Co-operation and Development] study
> examining regulatory capture, where government regulators are taken over by
> sectional interests like banks - David Miller led the research
> We found there was a huge number of connections of people who had gone through
> the revolving door to the banks and back again, with alarming speed. The
> biggest
> banks had the most concentrated connections, and the countries that had the
> biggest connections were the UK, the US and Switzerland.
> p274
> Richard Brooks, a high-profile tax writer
> All the tax breaks end up with the banks, or they lever the tax breaks to get
> a
> huge competitive advantage. Tax avoidance played a key part in generating the
> financial crisis. To put it simply, the securitisation vehicles, which were so
> profitable that banks couldn't generate enough of them, were often such good
> deals because of the tax avoidance central to them. It was a key part of
> cranking up the engine.
> p276
> There is no constitutional protection [in Britain] for free speech, like the
> First Amendment in the US; there is no defence in cases of high public
> interest;
> and unlike nearly everywhere else the burden of proof is deposited squarely on
> the shoulders of the defendant.
> p276
> An Oxford University study in 2008 revealed that libel litigation in England
> and
> Wales costs 140 times the European average. Of 154 libel proceedings
> identified
> in an official review in 2008, defendants won precisely zero.
> p277
> Robin Ramsey
> Manufacturing, mining, fishing [in Britain] are ... irrelevant. The interests
> of
> a minority [financial industry] have come to dominate society.
> p277
> Manufacturing's share of UK GDP, having fallen to 20 per cent by the time Tony
> Blair came to power in 1997, slipped to under 12 per cent by 2009.
> p277
> Britain and the US, the two leaders of modern global finance, are now among
> the
> most unequal societies in the developed world. In Britain 0.3 per cent of the
> population owns two-thirds of the land... In a UNICEF league of twenty-one
> industrialised nations measuring child well-being, the UK came last,
> marginally
> behind the USA.
> p277
> Britain's pensioners have Europe's fourth highest level of poverty and are
> worse
> off than their counterparts in Romania and Poland.
> p277
> The 1,000 richest Britons had wealth of £335 billion by the end of Labour's
> term
> in 2010, up from £99 billion when Labour came to power in 1997. And that's
> just
> what we know about.
> p278
> Jim Cousins, a member of the UK Treasury Select Committee
> For thirty years this city [of London] has been engaged in a second empire
> project. We have run huge trade deficits for over thirty years ... they dealt
> with that trade deficit by sucking in money from wholesale markets on the
> basis
> of better returns than could be got elsewhere. This was invented by Margaret
> Thatcher: the idea was that we would become financial dealers for oligarchs
> and
> oil people from around the world.
> p279
> About 60 per cent of world trade happens inside multinational corporations,
> which cut taxes by shuffling money between jurisdictions to create artificial
> paper trails that shift their profits into zero-tax havens and their costs
> into
> high-tax countries.
> p282
> The City of London Corporation - this offshore island floating partly free
> from
> Britain's people and its democratic system - must be abolished and submerged
> into a unified and fully democratic London. The City's international offshore
> web, a mechanism for harvesting and profiting from financial capital from
> around
> the globe, however dirty it may be, must be dismantled.
> p284
> When a kieptocrat loots his country and shifts the plunder offshore, the
> banks,
> accountants and law firms that assist him are just as guilty as the
> kieptocrat.
> When a client gets caught and goes to jail, so should his relationship
> manager,
> accountant, trustee, lawyer and corporate nominee.
> p285
> Tax havens have become the fortified refuges of financial capital, protecting
> it
> from tax and regulation and in the process contributing to the latest crisis
> in
> many and varied ways.
> p286
> The Jersey-Delaware [the British Island of Jersey and the US State of
> Delaware]
> notion of the captured state [is]: a place that seeks to attract business by
> offering politically stable facilities to help people or entities get around
> the
> rules, laws and regulations of jurisdictions elsewhere.
> p287
> Corruption involves insiders abusing the common good in secrecy and with
> impunity, undermining the rules and systems that promote the public interest,
> and undermining our faith in those rules and systems. In the process it
> worsens
> poverty and inequality and entrenches vested interests and unaccountable
> power.
> Bribery does all these things, but many of the services tax havens provide do
> the same. The parallels between bribery and the business of secrecy
> jurisdictions are no coincidence: we are talking about the same underlying
> thing... Bribery may benefit the payer, but it damages the system as a whole.
> Similarly, defenders of secrecy jurisdictions may argue that their services
> help
> private actors get around 'inefficiencies' in mainstream economies, smoothing
> the way for business to proceed. And they do. But what are those
> inefficiencies?
> They are, most importantly, tax, financial regulations, criminal laws and
> transparency, which exist for good reason. To help someone get around an
> obstacle is to corrode both the system and trust in the system. Bribery rots
> and
> corrupts governments, and tax havens rot and corrupt the global financial
> system.
> p287
> Bribery rots and corrupts governments, and tax havens rot and corrupt the
> global
> financial system.
> p287
> When pundits, journalists and politicians fawn over people who get rich by
> abusing the system - getting around tax and regulation and forcing everyone
> else
> to shoulder the associated risks and taxes - then we have lost our way.
> p289
> Mervyn King, governor of the Bank of England, following the 2007 economic
> meltdown
> "Never in the field of financial endeavour has so much money been owed by so
> few
> to so many.
> p289
> Offshore is undermining your elected government, hollowing out its tax base
> and
> corrupting its politicians. It is sustaining a vast criminal economy and
> creating a new, unaccountable aristocracy of corporate and financial power. If
> we do not act together to contain and control financial secrecy then ... a
> world
> of suave insiders, impunity, international criminal complicity and desperate
> poverty, will become the world we leave to our children. A tiny few will have
> their boots washed in champagne while the rest of us struggle for our lives in
> conditions of deepening inequality.

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