Video: In this animation, see how investors can create companies and trusts in offshore jurisdictions, where an estimated one-third of the world’s worth resides. The Washington Post, April 6, 2013.
Oligarchs, politicians, and one-percenters around the world went into panic mode today as the International Consortium of Investigative Journalists (ICIJ) released details from a multi-year investigation of a mammoth leak of documents that describe the dirty dealings associated with offshore companies and trusts in a number of notorious offshore tax havens.
The ICIJ’s analysis of the coordination between shady offshore banks and large, equally shady European giants like HSBC and UBS on behalf of wealthy elites from around the world uncovered a massive, methodical, and frequently illegal transfer of trillions of dollars per year from nations to individuals. While politicians in the US and Europe lament their deficits and resort to austerity, the “…cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year,” landing in one of many unregulated hideaways where both ill-gotten gains and those who scammed, stole or extorted them are shielded.
The collapse of the Greek and Cypriot banking systems, the Russian Magnitsky Affair, and a shocking variety of other scandals and meltdowns are directly rooted in this deliberate effort to shield criminals from accountability, taxation and prosecution. While the techniques used by large banks, island governments, and unethical accountants are quite complex, the ICIJ provides a comprehensive breakdown of the specific workarounds tavailable to the very wealthy.
By the numbers: economist James S. Henry claims that between $21 trillion and $32 trillion of wealth is hidden in offshore tax havens – equal to 1/3 of the world’s wealth, according to the Washington Post, or approximately the entire economies of Japan and the United States combined; ICIJ found that “Among the 4,000 U.S. individuals are listed in the records, at least 30 are American citizens accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct.” 2.5 million documents have been leaked by confidential informants to the ICIJ. 86 reporters representing The Guardian, the BBC, Le Monde, Süddeutsche Zeitung, Norddeutscher Rundfunk, The Washington Post, the Canadian Broadcasting Corporation (CBC) and dozens of other media outlets in the ICIJ have been sifting through the documents, using both data mining and more traditional investigative techniques, for over 15 months.
While not every individual and corporation who banks in the Caymans is laundering money, evading taxes, or perpetrating financial fraud, every category of high-level financial crime requires an offshore account. By not recognizing the regulations, laws, or judicial rulings of any country, a network of tiny islands around the world have created a shadow system for the often-illegal flow of money from corrupt politicians, embezzling executives, and tax-dodgers.
According to the Post, these crooked dealings represent an existential threat to the ability of governments to fund themselves, and lobbying efforts by anonymously funded interests, including the banking and accounting industries and a conservative nonprofit group, the Center for Freedom and Prosperity, have stymied the attempts of lawmakers to rein in the hemorrhaging of tax funds as deficits rise. Founded by Andrew Quinlan, a senior economic analyst for the Republican National Committee, and Daniel J. Mitchell, a Senate Finance Committee staffer and tax expert for the conservative Cato Institute, CF&P refuses to divulge whether their donors are based offshore. “I don’t think it matters what percentage of the money comes from which donor,” Quinlan told the Washington Post.
Thomas Ward, the cofounder of Commonwealth Trust Ltd. (CTL), one of the worst offenders on the banking rolls, shares Quinlan’s coyness. “I regard myself as an ethical person. I don’t think I intentionally did anything wrong…I certainly didn’t aid and abet anybody doing anything illegal.” Now, however, email chains in the leaked documents show that Quinlan was fully aware of many clients’ probable criminal activity.
It has long been an open secret that corrupt politicians and individuals stash legal and illegal profits in a sketchy alternate economy where they are neither required to contribute to the infrastructure that created their wealth, or answer for their crimes. It’s high time that the mask of anonymity is stripped away, and the names and actions of the ultra-wealthy are exposed to the bright tropical sunshine.