The vilification of offshore centres

Most people when they think about money laundering schemes think about drug dealers and terrorist financing. What people don’t realize is that in the past several years tax evasion has been placed under the official international definition of money laundering.

There are two reasons for this. It makes it a lot easier to scare small governments in the Caribbean as well as a way of subsidizing internal financial centers. Panama for example has been forced by the US to have anti money laundering rules that are so draconian that not even the patriot act in the US come close. Many people believe that this has been done to move more of the lucrative South American offshore business to Miami. I wont say that this is true, but it seems highly plausible.

While money laundering has in the past been high in Panama, Cayman etc. It is much reduced now. It is a fact that New York and the City of London always have been money laundering centres at an order of magnitude large than what we see here in Panama.

Even if we accept say that Tax evasion is money laundering (which I don’t), it isn’t suprising to see an article like this one: Deal on data fights terrorists’ finance by Michelle Gilchrist in the Australian which is really so filled with factual errors that it hurts. It is so filled with contradictions it really makes me wonder what happens in the editorial department here.

First of all lets examine Michelle’s wording:

ONE of the world’s money-laundering hotspots has agreed to exchange information about its banking activities with Australia as part of the fight against terrorist finance and black-market money deals.

From where does she have this information. How is Bahama’s a money laundering hotspot. Are these the words of Austrack the agency in charge? Could it possibly be the FATF the main international agency sponsoring this whole malarkey? Bahamas were on their blacklist briefly from June 2000 to 2001, when they together with amongst others Panama implemented the strict measures we have today. I’m not sure if Michelle realizes it but using this kind of language is basically slander and slander of the cruelest kind.

She goes on:

The agreement with the Bahamas, announced yesterday by Justice and Customs Minister Chris Ellison, is the first information-sharing deal signed by Canberra with a country in the Caribbean, one of the international centres for money-launderers and tax evaders.

Did she just add the entire region to the slander??? Just double checked the black list and there are no Caribbean nations on the list.

She digs herself even further down:

But only three deals have been struck so far with recognized money-laundering centres - Vanuatu, Guernsey and the Isle of Man.

My question is recognized by who? If we look at Austrack’s List of Exchange Agreements we see a whole family of offshore tax havens:

• The US (who are offshore to a large part of the world and profit from it, see Brickell in Miami for Panama’s closest competition, also see FSC’s )
• The UK (The same. All major UK Banks have major offshore branches in London)
• Singapore (Major Regional offshore center)
• Mauritius (the tax evasion center who specializes in the Indian market)
• Malaysia (The number one offshore center in Islamic Banking)
• Lebanon (A link in many terrorist financing schemes, also excellent suppliers of offshore credit cards)
• Netherlands (The Netherland Antilles and Netherlands dual structure has long been a favorite in international tax planning)
• Denmark (Even socialist Denmark plays along here. The new international holding company law is a very competitive vehicle in direct competition with the Netherlands and Cayman).

I wouldn’t be surprised if even Australia’s isn’t a money laundering center for South East Asian criminals or Japanese Tax evaders.

The key point I’m trying to make here is to stop using the term money laundering center if you don’t know what you are writing about. All countries are involved in some way or the other.

Panama is known in the US and Europe as a money laundering center. Try doing smurfing in Panama. It’s virtually impossible. Try doing it in the US or London. Piece of cake. Panama still has a money laundering, but most of it is of the non financial kind, which you probably find just as much of (if not more) in Miami or London. Panama is an important financial center for people in Latin America, who have a history of bad currencies and government mismanagement. Businessmen from Argentina, know that their money is safe in Panama. Panama is also a big center in the world of international export finance, which is natural as it is the equivalent of Hong Kong in the Americas.

Branding countries like the Bahamas and Panama as recognized money laundering centers is plain wrong and goes against all the good people and businesses who work in the banking industry in these countries. It makes an easy headline and people aren’t likely to question it. However it is plainly wrong.