I am presently in the United Kingdom, where I regret I have to say I am appalled at the negative and biased publicity being given to the so-called “Panama Papers.” Unfortunately, the Virgin Islands is in the full glare of the spotlight that has been turned upon the offshore world because it is alleged that at least half the companies used by Mossack Fonseca’s Panamanian Office, totalling some 113,000 companies, are incorporated in the VI. However, virtually all reporting on the subject in the media is both hysterical and heavily biased against the VI.
I read the London Times, which I have always regarded as a serious newspaper with balanced views, but now I am beginning to doubt this. Not surprisingly, the UK media has focussed on names like Alla Mubarak, son of the former Egyptian dictator; Soulieman Marouf, allegedly a fixer for president Assad of Syria; Doctor Saraki, president of the Nigerian Senate, who is charged in Nigeria with alleged corruption; the Rotenberg Brothers, friends of Russian President Vladimir Putin and the subject of United States sanctions; and even Fergie, the Duchess of York. These and other people of interest to law enforcement agencies are, I believe, the subject of fair comment. If such people (excluding Fergie of course) have been using VI companies to hide their ill-gotten gains, then that is a matter of concern.
‘Snide insinuations’
However, that does not excuse the endless rhetoric, the banner headlines, the constant snide insinuations that all offshore financial centres, and the VI in particular, exist for the sole purpose of helping criminals to hide their loot and for sanction busters to operate with impunity. In acres of print and screaming headlines, one is bombarded with words like “offshore tax scandal;” “secrecy and a way to avoid regulators;” “criminals in secret deals;” “laundering of cash;” and “millions hidden offshore.”
In the pages of articles we read, “Dictators and their henchmen have always been natural favourites of the offshore financial sector;” and “Sanctions have driven supporters of regimes like North Korea, Russia and Iran towards the secrecy and few-questions-asked culture of high-walled tax havens.” Leaders in the London Times say, “Tax havens facilitate international corruption” and, “No other country in the world maintains and indulges a network of offshore tax havens as brazen in their defence of unwarranted secrecy as Britain’s overseas territories.” There is a two-page spread by a reporter specially sent to the VI, which is packed with the usual snide remarks. It starts with the paragraph referring to Mossack Fonseca’s offices: “As engine rooms for global financial scandals go, it is low key to the point of absurdity; a shabby little office tucked away on a sleepy Caribbean paradise.” It goes on to say that the reporter climbed up “two flights of scruffy stairs” to meet “a worried receptionist” who told him no one was “available” and took down his number “with a shaky hand.” The reporter goes on to say, “The territory is a cross roads for a band of ‘usual suspects: drug dealers, corrupt government officials, you name it.”’ A highlighted box on the same page by the same reporter is headlined, “The pact: We won’t steal the cash you stole from someone else,” which the reporter claims is the unspoken pact between the VI and China.
Advocacy groups
Many of the articles in the Times are laced with liberal quotes from Transparency International and Global Witness, both of which are dedicated to the annihilation of all offshore centres. There is even a diagram, courtesy of Transparency International, headed, “How money is laundered in UK.” The diagram shows as “step one” a Mr. Smith, who “wants to hide a large sum of money concealing the origin and ownership.” There is then an arrow pointing to VI, and as step two we are told, “Mr. Smith puts the money in a financial system overseas (offshore account).” A further arrow points to step three: “The money is transferred through different accounts through several offshore company names” so that “detecting the origin of the money is extremely difficult.” Steps three and four then explain that the “hidden funds” are then transferred by UK professionals (lawyers, accountants and banks) back to the UK, where the funds are used to buy property and luxury items.
Regulations
You will maybe find one sentence in every two or three pages of print saying that it is not illegal to invest in offshore companies, but nowhere is there anything to tell the reader the following:
• The VI is one of the highest regulated jurisdictions in the world — more regulated than the US or the UK.
• The VI regulator, the Financial Services Commission, has to submit regularly to peer reviews by regional and international bodies such as the Financial Action Task Force and the International Monetary Fund to ensure that its regulatory procedures are up to date and working satisfactorily. The VI regulator is always given high marks in these reviews.
• Only licensed registered agents can incorporate VI companies, and every registered agent is required to ascertain who will be the beneficial owner of the company, the intended purpose of the company, and its shareholders and directors. Extra layers of enquiry have to be made for important political persons. All this information has to be made available to the regulator on demand. Regular inspections are carried out by the FSC, and if any registered agent is found to be in default of its obligations, sanctions can be imposed, including revocation of its licence.
• All information made available to FSC is available to law enforcement agencies upon request if there is evidence of any wrongdoing.
• The VI has entered into a significant number of exchange-of-information treaties with a large number of jurisdictions, including the UK. None of these treaties are drafted by the VI.
• Transparency International claims, “Tax havens and their high walls shelter more than $1 trillion of illicit financial outflows from developing countries.” Despite these and other allegations, VI banks are required to publish their balance sheets annually showing all assets, including all deposits with the banks. The total assets of all VI banks probably do not reach even half a billion dollars.
Letter to the editor
I wrote a letter to the Times pointing out these and other matters, which I believe should be explained to the British public to balance the stream of wild allegations, but needless to say my letter was completely ignored.
The negative reporting is not limited to the print media. I watched a BBC programme called Newsnight, which included an interview with the deputy premier of Bermuda. In a well-balanced interview, he explained that offshore jurisdictions, including Bermuda, do have taxes and that Bermuda has had a register of beneficial owners of all Bermuda companies since 1947, which is not public but which can be accessed by the UK authorities pursuant to any legitimate enquiry. This interview was followed by a rabid Labour MP who immediately dismissed everything said by the deputy premier as “a load of baloney.” This same MP then proceeded to mouth off with a load of baloney himself suggesting that his constituents “spit with rage at their being one rule for the rich and another for the poor” – as if access to the VI’s financial services is limited to millionaires.
More balance
It seems that a slightly more balanced approach is gradually appearing in the press. In the latest issue of the Times, it is pointed out that many thousands of UK residents invest in offshore mutual funds like the one David Cameron is pilloried for holding. In fact, the number of UK residents enjoying the use of offshore funds is probably in the millions since virtually every sensible pension fund will have such investments. It is even suggested that investing in government bonds, or avoiding inheritance tax by gifts from parents to children in limited circumstances as is permitted by English law, is not completely immoral. I regret to say, however, that there is still a very long way to go before we see balanced and sensible reporting in relation to the so-called “tax havens.”
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