Driven by social media and the power of technology we are living in a world of ever-increasing transparency in every corner of our lives. But will that transparency ever fully extend to the world of offshore tax havens?If there is one thing that the recent Panama papers leak showed us, it is that huge chunks of cash are still being kept in secret. If you have the will, then there is almost certainly still a way of finding suitable places in which to stash your cash.
None of this should surprise us. After all, at the height of the financial crisis in 2008 when Lehman Brothers collapsed no-one knew where all the money was – and we were talking billions of dollars then.
Tackling the problem
That isn’t to say that there are not concerted efforts to address these issues. For instance here in the UK in the wake of the Panama scandal – which embarrassed David Cameron after it emerged that he profited from an offshore fund founded by his father – the Financial Conduct Authority, the Serious Fraud Office and HM Revenue & Customs are all looking at cases resulting from the leak. David Cameron himself is hosting an international anti-corruption summit this week, while the UK also wants to introduce a corporate criminal offence of failing to prevent tax evasion.
The US has been at the forefront of clamping down on tax evasion. Most notably, in 2009 it levied huge fines on UBS, a Swiss bank, for enabling Americans to evade tax. Last year the Paris-based OECD also named 15 territories as failing to cooperate with international efforts to combat money laundering, and warned that they faced possible counter-measures if they did not improve.
It will be the concerted moves of London, Paris and Washington which dictate whether a global accord towards greater transparency can be reached.
One simple, yet very interesting, idea proposed by the G20 group of countries is the formation of a global ID system (legal entity identifier) which would demand that all individuals and financial institutions own a common passport which is then used to deposit or withdraw funds from any financial institution. However there is huge resistance to the idea and many think it is simply unworkable.
Will we ever be able to stop the use of offshore havens? If there is enough international will then it can perhaps be stopped, but one fears that it could take many years yet despite these efforts.
Life mirroring art
In the meantime, the central themes of an art exhibition based on a fictional novel about offshore financing – which I hosted at Alliance MBS last year – will doubtless ring true for some years yet. That novel, Headless, a contemporary art project by the Swedish artists Goldin+Senneby, recounted a murky tale of secrecy and offshore finance which began with a crime at another offshore centre, the Bahamas.
Ismail Erturk is a Senior Lecturer in Banking at Alliance MBS.