I was disappointed but not altogether surprised by your April 11 article on the financial services leak. So yet another Judas has seen fit to release private and confidential information to the media, this time concerning the clients of Virgin Islands trust companies, after having accepted no doubt a very comfortable salary for many years to safeguard this very same information. These whistle-blowers, as they call themselves, always proclaim that their motives are pure and unselfish, but at the bottom you will invariably find that it was the 30 pieces of silver that was the chief motivator.
What is more depressing about this leak, however, is that this private information has been leaked to, or seized upon, by such organisations as the Tax Justice Network, the International Consortium of Investigative Journalists, and now, it would appear, the Guardian newspaper, all of whom are enthusiastic members of a dedicated cabal whose sole apparent purpose is to destroy the so-called tax havens of this world, which by more sensible and well-balanced people are known as offshore financial centres.
‘Fanatics’
The problem with these zealots is that they are fanatics for their cause and as such they do not let small details like the truth or fair and reasonable judgment stand in the way of a good story. The article printed in the VI Standpoint, which I believe is a copy of what was printed in the Guardian, is a good example. The article is peppered as usual with emotive words and phrases like “fake BVI Companies,” “hiding wealth,” “sham directors,” “so-called nominees,” “notorious for corruption,” “secret companies” and so on.
In this article, as in most other articles of this sort, some expert is called upon to estimate how much wealth is “stashed in overseas havens” or how many tax dollars are avoided by the use of tax havens. Invariably, these numbers are colossal — in the billions or trillions — as they are intended to attract attention. Nobody knows how these estimates are made and obviously they have absolutely no factual basis whatsoever. However, they are still regularly trotted out as clear “evidence” of how pernicious these overseas havens are. Your quotation of a speech by Lord Matthew Oakeshott in the House of Lords, where he speaks of the VI “sucking in billions of dirty money,” is fairly typical.
Accusations
The general thrust of the Guardian article is that there are three serious crimes that the VI and other offshore tax centres encourage: being rich; owning an offshore company; and desiring some privacy.
Generally speaking, everybody who owns anything likes to have some privacy. No one wants the particulars of their bank accounts or their income or their home address published in the press for the world to see. The very rich are particularly vulnerable to kidnapping, to begging letters, to robbery, to celebrity watchers and to the gutter press. They are entitled to their privacy as much as anyone else, but apparently this desire for privacy is a clear indication of fraud and skulduggery.
More balanced and fair publications like The Economist recognise that offshore financial centres play an important role in world economics and that most of them are well run and have stricter regulation in place than many onshore jurisdictions, but these reports are swept aside by the tax haven crusaders as irrelevant.
A brief analysis of the Guardian article quickly reveals its shallowness and its bias. It talks of “fake BVI Companies” used by fraudster Achilleas Kallakis. There is no question that Mr. Kallakis was a fraudster who used VI companies. They were not fake companies and he was readily identified as the owner of the companies. He was prosecuted for perpetrating a fraud on British and Irish bankers who were obviously very gullible. It was not the VI companies that led to the fraud: It was the failure of the lenders to do their due diligence, and if the VI is shrouded in secrecy how was his identity so readily revealed?
The article lists a large number of people who allegedly have VI companies, but it does not identify any wrongdoing by such companies. Obviously, the mere fact that someone owns a VI company is a damning indictment, or in the case of Marcos Manotoc, the fact that her father was “notorious for corruption” is equally damning. What about Baroness Thyssen, who happens to be the widow of a billionaire? She apparently used VI companies to buy artwork — how disgraceful can you get?
‘Sham directors’
The article talks of “sham directors.” There is no such thing as a sham director. A director is a director with all the responsibilities and liabilities of a director, whoever he may be and wherever he may live. There is no requirement that the owners of companies must be directors of their companies. In fact, it is rarely the case. To suggest that it is indicative of fraud that you have your accountant or lawyer manage your affairs is just further evidence of a certain level of paranoia.
Finally, there is the breathtaking statement in the Guardian article that in the case of VI companies the “owners’ true identities are never revealed” and in the next paragraph: “Even the island’s official financial regulators normally have no idea who is behind them.” It is obvious that the writer of the article has never attempted to set up a VI company.
Every VI company is required to have a licensed registered agent who is required to obtain full and accurate information about the beneficial owner of the company. Registered agents who do not comply with this requirement will have their licence cancelled. The Financial Services Commission carries out regular audits to ensure that registered agents comply with their obligations, and the FSC has very wide and sweeping powers to require disclosure of information held by registered agents. These powers will always be exercised if a foreign regulatory body requests assistance and can provide evidence of any wrongdoing.
Tax agreements
The VI is also party to a large number of tax information exchange agreements under which allegations of tax fraud will be investigated and information supplied. The sad fact is that many jurisdictions cannot be bothered to go through the appropriate official channels but instead prefer to grumble about lack of information, and the tax haven zealots thrive on these grumbles.
Undoubtedly, there are some bad apples in the barrel, but the VI is just as anxious to weed them out as their prosecutors. It is quite shocking, however, how the broad brush crusaders will insist on publishing slanted articles, laced with half-truths, exaggerations and emotive references to fraudsters, corruption, fakes and shams in order to demonise entire jurisdictions and all those who use them.
Instead, we would all be better off if they directed their energies towards assisting serious, dedicated, level-headed regulators who are working to identify criminals and to stamp out organised crime and manifest illegality wherever it may emerge without causing huge inconvenience and disruption to the vast majority of persons using offshore jurisdictions like the VI, all of whom have perfectly legitimate and proper reasons to bring their business to these shores.
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