Kleptocrats looting their country and shifting the looted wealth offshore

Just as I finished reading that book, Treasure Islands by Nicholas Shaxson, about the offshore tax evasion system, this ad appeared in my gmail inbox:

Screen Shot 2018-09-28 at 09.08.17So I want to quote a few paragraphs from the conclusion to Shaxson’s book:

A kleptocrat loots his country and shifts the looted wealth offshore, the banks, accountants, and law firms that assist him are just as guilty as the kleptocrat.When a client gets caught and goes to jail, so should his or her relationship manager, accountant, trustee, lawyer, and corporate nominee. A few organizations like London-based Global Witness have sought to call these intermediaries to account— but we now need a sea change in the world’s approach. Get serious with these people at last.

kleptocracy-NYTFirst, policymakers, journalists, and many others can start to understand and accept how 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.The veil of silence and ignorance can be lifted and the message spread.

Tax must now be brought squarely into corporate responsibility debates. Corporate managers are taught to think that they are accountable only to shareholders. From this perspective, escaping tax seems to be their duty. But we have forgotten the fundamental truth that corporations get their license to operate, and the tools and confidence to do so effectively, from society. Seen this way, tax is not a cost to shareholders, to be minimized, but a distribution to the stakeholders in the enterprise: a return on the investment societies and their governments make in infrastructure, education, law and order, and the other basic prerequisites for all corporate activity.

money-laundering-tease_pe5n9x

Wash your dirty money? If anyone can, London can!

The final and most important thing is to change the culture. 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.

When a private equity company shows record profits, we can be told how much of that comes from genuine productive improvement, and how much comes from gaming the offshore system.

When magazines carry alluring advertisements from seedy offshore promoters who may be inciting clients to criminal behavior, we can complain.When corporations talk about social responsibility, we can ask if they mean tax. When journalists need expert commentators to advise them about that tax story they are writing, they must understand that their interviewee from the big accountancy firm works for a business that makes a living out of helping wealthy corporations and individuals get around paying tax, and that their opinions will reflect that corrupted worldview. They must find alternative opinions to balance those views.

kleptocraqcy 2We can recapture our culture from the forces of unaccountable privilege that have taken it away from us.

It is time for the great global debate about tax havens to begin in earnest. Whoever you are, wherever you live, and whatever you do, offshore is at work nearby. It affects you. It is undermining the government you elect, hollowing out its tax base and corrupting your elected 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, control, and eradicate financial secrecy, then the world I found in West Africa more than a decade ago, a world of suave insiders, 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 to make our lives in conditions of steepening inequality. We must avert this future.

You can find the book here.

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Don’t trust that guy! The Lord Mayor of London!

London eyes partnership with Turkey’s business sector

lord mayor

Does he look evil? Read on . . .

This headline caught my eye in our English language daily yesterday. Coincidentally I have been reading a fascinating book about the world of offshore finance (why hadn’t I read it before?), and how it screws the world in the interests of corporate bankers and their cronies.

On the face of it, you might think Turkey should be happy to have “London” taking an interest in their economy. But the truth is – this guy doesn’t represent London at all. His clients are the shady world of international finance and the mega-rich. This is an excerpt from the news item, followed by a few relevant quotes from Nicholas Shaxon’s book, Treasure Islands:

London wants to be a partner of growth in Turkey’s business sector, said Lord Mayor of the City of London Charles Bowman.

Bowman said he is excited about visiting Turkey this week and has five objectives during the visit.

They include providing reassurance that in the context of Brexit, London and U.K. financial and professional services will remain preeminent and to enhance the strong ties between Turkey and the U.K. built over a number of years.

Bowman said the other objectives are to develop, harness and leverage bilateral opportunities in trade, investment and business, innovation in financial and professional services and engaging with Turkish communities and businesses with relation to Business of Trust—a program run by the Lord Mayor of London.

Underlining that as Lord Mayor of London, he is acting as the U.K.’s principal spokesperson for and on behalf of the U.K.’s financial and professional services, Bowman said those services employ 2.3 million people across the country.

The sector is home to and houses 250 banks within London itself, more than any other international financial center. [London] is a national, European and international jewel,” he said.

 “We have a strong relationship with Turkey built over a number of years. And this visit… there is no sense of accident behind the fact that we are traveling to Turkey. We scheduled early in my year, and I am really looking forward to leveraging, developing and harnessing those opportunities to further grow what is already a strong relationship,” said the Lord Mayor.

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treasure islandsExtracts from “Treasure Islands: Dirty Money, Tax Havens and the Men Who Stole Your Cash”, by Nicholas Shaxson

Few British people, let alone anyone else, know that the City of London is the most important financial center in the global offshore system. London provides endless loopholes for U.S. financial corporations, and many U.S. banking catastrophes can be traced substantially to those companies’ London offices.

Another important role for London has concerned a seemingly arcane practice known as “rehypothecation,” a way of shifting assets off banks’ balance sheets. The U.S. has firm rules to curb the abuses, but London does not—so ahead of the latest crisis, Wall Street investment banks simply went off to London where they could do it without limit. A little-noticed IMF paper in July 2010 estimated that by 2007 the seven largest players in the market—Lehman Brothers, Bear Stearns, Morgan Stanley, Goldman Sachs, Merrill/BoA, Citigroup, and JPMorgan—had shifted $4.5 trillion off their balance sheets in this way. So this London-based practice injected trillions more debt into the financial system than would otherwise have been the case. The City of London and Wall Street banks got rich off this—and ordinary Americans will pay for it for years to come.

[The City of London has a] kind of money-laundering filter that lets the City get involved in foreign dirty business but at sufficient distance to minimize the stink.

“In America they send hundreds of people to jail: in this country bankers don’t go to jail,” explains the British author and publisher Robin Ramsay. “There are no consequences in London.” Though Americans may roll their eyes at this, as they consider the financial crimes that have gone unpunished at home in the wake of the latest financial crisis, there is no doubt that London’s tolerance for abusive or criminal financial behavior is in a class of its own.

The head of the Corporation of London is the Lord Mayor of London—not to be confused with the mayor of London, who runs the much larger greater London municipality that contains the City, geographically speaking, but has no jurisdiction over its nonmunicipal affairs. And this separation of powers matters.

When the Queen visits the City, she stops at the boundary at Temple Bar and waits for the Lord Mayor of the City, accompanied by assorted City Aldermen and Sherriffs. This tourist ceremony, in which the Queen touches the Lord Mayor’s sword, strikingly highlights the political discontinuity between the City and the rest of Britain. When heads of state visit Britain the Lord Mayor throws more lavish banquets than the Queen. Each year the Chancellor, Britain’s finance minister, makes a speech at the Guildhall, the seat of City government, and at the Lord Mayor’s Mansion House, in which they justify how they have been serving the interests of finance.

In 1937, Britain’s then prime minister Clement Attlee became one of few politicians to have raised the issue. “Over and over again we have seen that there is in this country another power than that which has its seat at Westminster [the parliament]. The City of London, a convenient term for a collection of financial interests, is able to assert itself against the Government of the country.”