Treasure Islands: Following The Money To The Heart Of The Global Financial System
April 15th, 2011
April 15th, 2011
It links terrorism to the financial crisis, corporate tax evasion to Mexican drug cartels, corrupt kleptocrats in developing countries to the ruling elites in some of the biggest countries in the world. It is the very opaque offshore financial system, and it is the focus of Nicholas Shaxson‘s enlightening new book, “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens,” which was just published in the United States this week.
Reading like a John le Carré thriller, Treasure Islands whisks you from the echelons of power in Paris to the poverty-stricken streets of Libreville, Gabon, as the notorious Elf Aquitane corruption scandal unravels in front of your eyes. You’re presented with a front-row, first-person account of the intricate web of corruption, oil money, offshore bank accounts, kleptocracy, and neo-colonialism which implicated the highest power-brokers in both major French political parties going back decades. And, thereby, Treasure Islands begins.
How could a system so corrupt and so pervasive prosper for decades unnoticed in one of the wealthiest countries in the world? One word: offshore. A complex web of tax havens, banks and their respective enablers lies at the heart of the global financial system allowing almost anyone–or anything–to get away with whatever they so choose.
Most of us think of tax havens as sunny Caribbean jurisdictions like the Cayman Islands, or as land-locked, mountainous European enclaves such as Switzerland, where wealthy celebrities and corrupt dictators can hide their money from the local tax authority or law enforcement. And that may have been true 60 years ago. But Treasure Islands reveals that 60 jurisdictions around the world, including countries such as the U.S., the UK, the Netherlands and Ireland, are all worthy of the label, tax haven or “secrecy jurisdiction.” And these places aren’t just offering a low tax-rate. These are places, as Shaxson explains, 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.”
The offshore system allows major multinational companies and banks to escape regulations in their own country with the stroke of a pen. Think of Enron, AIG, and the 2008 financial crisis. The offshore system allows terrorists to circulate money around the world to finance their nefarious activities without raising any red-flags. Think of Viktor Bout, the infamous “merchant of death” who armed the Taliban and other tyrannical regimes. The offshore system allows corrupt leaders in both developing and developed countries alike to receive bribes and kickbacks secretly into their accounts. Think of the Philippines’ Ferdinand Marcos, Zaire’s Mobutu Sese Seko, or Haiti’s Jean-Claude Duvalier. And the offshore system allows criminals and traffickers to easily finance their global illicit activites. Think of the Mexican drug cartels who finance their operations through money they’ve stashed in Miami banks.
Filled with colorful anecdotes, Treasure Islands explains how the offshore system is seemingly at the core of all of society’s ills. But it does offer hope. There are ways to curtail the harmfulness of the opaque system, and a lot of those solutions are advocated on the Task Force blog quite regularly. The five policy recommendations of the Task Force – curtailment of mispricing in trade imports and exports; country-by-country accounting of sales, profits, and taxes paid by multinational corporations; confirmation of beneficial ownership in all banking and securities accounts; automatic cross-border exchange of tax information; and harmonization of predicate offenses under anti-money laundering laws – would all do their part in bringing about a more transparent financial system.
For more information on Treasure Islands and to purchase a copy of the book, visit http://www.treasureislands.org.