offshore centre

Headline Panama: The Pandora Papers

Vinyl records and common sense are similar: there once was an abundance of both, but not anymore. As an ardent music lover who appreciates the sound produced by a turnable and needle, I do hope that demand for records will grow; as a cosmopolitan, claiming no country as home and just being a guest in many houses, I worry that common sense will go in the opposite direction. It had already started to do so, long before the pandemic began, but since then it seems to have accelerated toward a steep decline.

History tells us, however, that the situation, like everything in life, is transitory. The tedious phrase “new normal” is overused. Still, I am aghast at some of the imbecilic articles, opinions and predictions that I read or hear. Like Mr. Praline in Monty Python’s “Dead Parrot” sketch, am I the only one who sees this? The sketch is mentioned in John Cleese’s memoir So, Anyway… and features an irate customer who has purchased a Norwegian Blue parrot which is dead, yet despite this the pet shop owner tries every trick in the book to convince Mr. Praline otherwise, even suggesting that the bird is possibly so still because it is pining for the fjords. Some of the exasperated parrot-purchaser’s dialogue is priceless: “E’s not pinin’ ! E’s passed on! This parrot is no more!” is but a sample of his exasperation. My particular frustration, on the other hand, has to do with people and not parrots, and their jaundiced, prejudicial views about offshore centres about which they are absolutely convinced. The Pandora Papers will certainly not help.

What is the correct definition of an offshore centre? It was far more cut and dried when I packed my bags and went to the Cayman Islands, one of the remnants of the British Empire, near the end of the last century. Today, not only has the offshore business model changed radically, there are in fact two competing networks: the traditional and the additional. Even the traditional centres created in the middle of the last century can be split into a British and a European version. A bit like Brexit. The latter includes Ireland, Cyprus, Luxemburg, Malta, the Netherlands and Switzerland; all of them offer – some more than others –  what have come to be known as standard offshore services.

That it why today’s definition of an offshore centre is: any country or island where you don’t habitually live but can provide you with one or more of these services: banking, trusts, foundations and companies. Thus traditional and additional offshore centres. The same logic can apply to what is, and is not, a tax haven. The answer depends on who is asking the question. Confused? I don’t blame you.

It is the governments in developed, advanced economies that will have you focus your gaze on islands scattered across the globe in order to find the villains of the plot. Various labels are used, with dramatic descriptions such as “treasure islands” and “exotic secrecy havens”. Let us consider this perception via labelling by taking a practical example which illustrates the connection between blind prejudice and blind testing.

In 1976 the late Steven Spurrier wanted to share his enthusiasm for Californian wines so he invited France’s grandest wine producers, writers and some restaurateurs to taste a selection of them. Worried that French palates might be prejudiced against the American upstarts, he thought it best to mix some of the finest French wines and serve them all “blind”. The wines from California swept the board and, to say the very least, Mr. Spurrier was not very popular for a long time in French wine circles where he had previously enjoyed a fine reputation. In fact, he was a British wine expert and merchant who had been described as a champion of French wine and was the first English wine merchant in Paris.

Unacceptable truths may not be very palatable, but need to be accepted eventually. It is too easy to label jurisdictions as dens of iniquity – just as easy as it is to stick a label on a bottle. But the proof of the pudding, as the proverb goes, is in the eating, just as the quality of the wine is in the drinking.

There follows 2 extracts from an article written by the editorial board of the Financial Times in London (a few days before the Pandora revelations) on 29th September, 2021:

1. One notable company officer in the UK, now resigned, is called Jesus, Holy Christ. He gave his residence as Heaven, nationality as Angelic and occupation as creator. As amusing as the entry is on the UK’s official corporate register (the company has since been dissolved), it underscores the seriousness of poor data verification at Companies House. Such laxity enables financial crime.

2. All that is needed to set up a company in the UK is £12: not even a passport is required and it can be done online in under 15 minutes. Companies House is a mere repository of information, with no statutory powers to verify information provided to it. It lacks the resources to police even the minimal laws that do exist. Little wonder that criminals are drawn to a jurisdiction where few questions are asked in exchange for the imprimatur of a UK address.

Unquote. I rest my case.

Meanwhile, IFC Media Ltd., based in London, and catering for the global wealth management industry, has asked me to provide a review of Offshore Financial Centres and the Law: Suspect Wealth in British Overseas Territories, a new book written by the academic, Dominic Thomas-James.

It will appear in the IFC Economic Report, due to be published in November. The timing could not be more propitious.