Island Financial

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WASHINGTON – The names of persons implicated in the leak of the so-called “Panama papers” on April 3 reads like a who’s who of the politically powerful in many parts of the world. 

Included among the persons whose family members and close associates have been identified are: British Prime Minister David Cameron, Ukrainian President Petro Poroshenko, Saudi Arabian King Salman bin Abdulaziz Al Saud, Pakistani Prime Minister Nawaz Sharif, South African President Jacob Zuma, Syrian President Bashar al-Assad, Chinese President Xi Jinping, Icelandic Prime Minister Sigmundur David Gunnlaugsson and Russian President Vladimir Putin.

It should be noted, however, that there has been no evidence of direct connections to companies and bank accounts by these people.  Neither has there been any evidence of illegal behaviour or wrong doing specifically by them.  Some media are feeding a frenzy because mentioning well-known names helps to create and sustain a story that suggests impropriety.

The so-called “Panama Papers” is 11 million files leaked from the Panamanian law firm, Mossack Fonseca, to an organization called the International Consortium of Investigative Journalists (ICIJ) which has widely publicised much of the material.  The law firm has denied any wrongdoing, and said it has fallen victim to “an international campaign against privacy”.

The resignation of Iceland’s Prime Minister, Sigmundur Gunnlaugsson, has helped to fuel the story, even though he has not stood down over an illegality.  His resignation followed demonstrations based on the allegation that he concealed millions of pounds offshore.  Prime Minister David Cameron has also been compelled to talk about his family’s private business after his father was among those named in the Panama Papers.

The Caribbean will not be immune from the excitement that is being generated by the leaking of the papers.  It seems that many of the companies, quite legitimately established by Mossack Fonseca, were registered in the British Virgin Islands.

From all that has emerged so far, it seems that many of the persons who have been identified in the Panama Papers were not evading tax or laundering money.  The majority appeared to have been planning their taxes, including by the use of legitimate vehicles for avoiding the payment of tax.   Tax avoidance in not illegal.  Tax evasion is. But, increasingly there is a tendency to blur the two by those who advocate against low-tax or no tax jurisdictions, claiming that they are ‘tax havens’.

Already, one high-tax European Union country, France, has announced that it is putting Panama back on its list of “uncooperative countries”.  One official of the Organization for Economic Cooperation and Development (OECD), Angel Gurria, has also sharply criticised Panama in the wake of Panama Papers.   Gurria stated publicly that “Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities”.

But, neither of the spokesmen for France or the OECD dealt with the fact that high tax jurisdictions force companies and persons to seek low tax jurisdictions to plan their financial affairs and that no illegality has so far emerged from the events in Panama.

For its part, the Panamanian government has pointed out that it has been removed from the ‘grey list’ of the Financial Action Task Force (FATF), the multilateral body that makes rules to counter money laundering and terrorism financing.  In other words, it was judged to be compliant with FATF rules.

The government has also pointed out that half of offshore companies that were established by Mossack Fonseca are registered in the British Virgin Islands – “a jurisdiction that operates under British legislation.”  The government also stressed that all of the 10 banks named in the Panama Papers as doing business with the law firm hit by the hack were based in Europe, not Panama.

Significantly, the government further noted that the US state of Delaware allowed great anonymity for company owners.  “The tactic to ignore other jurisdictions and focus solely on Panama is unfair and discriminatory,” the statement said.

It is clear from all this that ‘high tax’ jurisdictions and others have branded Panama without establishing that there is any evidence of money laundering or tax evasion.  The fact is that establishing vehicles for tax planning, including avoidance, is not illegal.  Panama has been very strong in resisting the imposition of rules by the OECD’s Global Forum on automatic Information exchange.  It is now paying the price for its attempts to be independent.

In this connection, the observations of Dr Bruce Zagaris, a renowned US Tax lawyer is pertinent.  He made the remarks at a meeting of the Permanent Council of the Organisation of American States that I chaired on March 30.   He pointed out that the Global Forum is a sham by which the OECD strictly controls the agenda, the delegates and the information distributed to attendees, and, in terms of tax policies, the large countries have blocked efforts to have a universal organisation such as the United Nations make policy.

It is interesting that the Russian President Vladimir Putin whose name has been bandied about in relation to the Panama Papers has pointed out that his name is nowhere in the records.

Caribbean jurisdictions have worked hard with scarcer resources than Panama to comply with all the imposed rules and regulations, and to protect their standing in providing financial services. But, as events in Panama show, innuendo is all that is needed if facts confront assertions.

LONDON – A few days ago the leader of the British Labour Party, Jeremy Corbyn, called on the British Prime Minister to consider taking direct control of Britain’s Caribbean overseas territories. His remarks – not without irony, as of all of the members of the British Parliament, he is among those with the strongest track record as an anti-imperialist – respond to the the global furor over the so called Panama Papers.

These are the 11.5m files taken from the database of the Panama based offshore law firm, Mossack Fonseca & Co, which were sent in 2014 in digitized form on an unsolicited basis from an anonymous source to the German newspaper, the Süddeutsche Zeitung. They were subsequently shared with the International Consortium of Investigative Journalists (ICIJ) in Washington and then researched by about 100 newspapers and broadcasters worldwide.

The documents’ contents link national leaders, politicians, their families, close associates, leading business people, individuals subject to UN sanctions, global figures in sports and entertainment, and narcotics-traffickers and other criminals, to companies and legal vehicles registered in or operated through low or no tax offshore financial centers such as the BVI or Bermuda.

In part they indicate how the global elite and the world’s wealthy use these and other jurisdictions to reduce or obviate their tax liability, hide or launder money, or to obscure the origin or ownership of their assets.

Beyond the facts, however, the leaked documents raise broader questions. They shine a light on growing wealth inequality, the role of an ever growing army of intermediaries such as Mossack Fonseca dedicated to helping the very wealthy, and the questionable morality of the individuals and companies that seek to avoid the scrutiny of the societies in which they reside or operate.

That said, while the offshoring of wealth and assets may be morally dubious, hypocritical, and sometimes criminal, it is for the most part legal.

As such it is a reflection of just one of many contradictions between every government’s interest in encouraging domestic growth and employment by ensuring that investment, money and assets are able to flow freely, and the need for sovereign states and political systems to respond to electorates that want them to exert greater control over those who do not contribute appropriate levels of tax in the countries in which they operate.

Unfortunately, when it comes to the Panamanian connection with the Caribbean, what seems to be lost in relation to the sometimes extraordinary revelations, is that the Caribbean offshore financial services being made use of, are legal, have mostly been developed with the active encouragement of successive British governments to facilitate the global role of the City of London, and underpin the economic stability of many small Caribbean nations.

That aside, the Panama papers raise many longer term issues that are more significant than the naming and shaming of individuals.

The first is that much of what is happening globally is being driven by an army of wealth management intermediaries – the lawyers, bankers, tax accountants, and other assorted advisers – who see huge business opportunity in advising the super-rich on ways that enable them to avoid taxes, debts, legal judgments, and other obligations that ordinary citizens, including the moderately wealthy cannot avoid. As with the counter-narcotics industry, the arms trade, NGOs and many other industries, once institutionalised such service roles become self-perpetuating, skewed and expanded in their purpose, and need to be better regulated and policed on an international basis.

A second emerging issue, despite the willingness of the Caribbean Overseas Territories to find ways to accommodate international requirements on information exchange and beneficial ownership, is that their role is being eclipsed by more opaque locations like Wyoming and Delaware in the US, Luxembourg in Europe, and Singapore, to say nothing of the rarely spoken about small nations like the Maldives or the Marshall Islands. The reality is that without all countries, dependent and independent, agreeing multilaterally to cease to offer offshore financial services, the desire of the powerful, wealthy and the criminal to hide their monetary affairs offshore will always be facilitated by one or another country.

A third is that the Panama Papers raise serious questions about regional cyber security. Mossack Fonseca have said that the leaked material became public because its site was hacked by someone in Europe.  If this proves to be the case, it raises all sorts of new issues about the security of offshore financial centres and the ability of governments, lawyers, banks and other intermediaries to protect all of their client’s secrets.

The fourth is the inability of Mr Corbyn and other politicians to understand the consequences of the nuclear option of imposing direct rule on nations like the BVI and Bermuda. They fail to think through the long term consequences at an international and regional level of such a response, or the probability that such actions would lead the overseas territories to accelerate their desire for independence; an outcome that could diminish present levels of co-operation with the UK and others.

And finally, while much of what has been made public may be distasteful, immoral and damaging, the impact is only likely to be felt in the most democratic of societies. It is no surprise that in Iceland the revelations have resulted in the resignation of the Prime Minister, but elsewhere the issue is likely to serve only to maintain the influence and power of those allegedly involved or who they protect, in the certain knowledge that if they were ever to lose office, the information would be used against them.

It is also worth observing that at the other end of the spectrum, it is likely that many of so far unnamed companies and individuals, who are of no interest to the international media, were using the services of Mossack Fonseca for perfectly legitimate reasons to structure international deals, establish family trusts, to create cross border joint ventures, and for other activities that are perfectly normal, unless they involve the use of criminal proceeds, tax evasion or fraud.

Despite this, the angry response to the emergence of a new wealthy elite, paying little tax will not go away, especially so in austerity hit developed nations that have sought to increase their revenue from their middle classes in order to deliver social services for all.

This is not to argue that what has been happening is correct let alone just, but to suggest that if governments like the UK, US and others willingly establish such facilities in order to gain economic advantage for their enterprises and financial centres, it is hardly surprising that aggressive tax advisers, political autocrats and the super-rich, will seize the opportunity to use such offshore anonymity to increase their wealth and power.

SAN JUAN, Puerto Rico – Gov. Alejandro Garcia Padilla announced Saturday that he has declared a state of emergency at the Government Development Bank aimed at ensuring that Puerto Ricans continue to receive essential government services.

The governor said he issued an executive order Friday to halt the erosion of the bank’s dwindling liquidity by only allowing withdrawals to fund necessary costs for health, public safety and education services. The order does not call for a moratorium on the bank’s principal or interest payments. Garcia said the government bank is in talks with creditors regarding a nearly $423 million payment due in May.

The order is the first taken under the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act enacted last week, which gives the governor emergency powers to deal with the fiscal crisis, including the ability to declare a moratorium on all bond payments.

“The GDB’s financial condition has continued to deteriorate and, absent the measures ordered in this executive order, there is an imminent risk of a drastic decrease in GDB’s liquidity in the immediate term. This, in turn, would jeopardize the provision of essential services by the commonwealth,” the order states.

It notes that the government and creditors are in discussions to address the government’s immediate liquidity challenges and to assure its debt service is sustainable over the long-term.

Because restructuring could take time, “the commonwealth has a duty to take any and all actions reasonable and necessary to protect the health, safety and welfare of its residents by ensuring the continuation of essential services,” the order adds.

The governor’s declaration of an emergency at the government bank was attacked by political opponents. House Minority Leader Jennifer Gonzalez said it is the first in a series of “dictatorial actions” the governor is planning to take after approving the debt moratorium law.

Resident Commissioner Pedro Pierluisi, Puerto Rico’s sole Congressional representative, called the declaration an “illegitimate exercise of power.”

“This governor and legislature have created a crisis without precedent on the island,” he said.

Without debt restructuring, Puerto Rico will be forced to default as it faces nearly $2.5 billion in bond payments from May through July, government officials have said.

The U.S. House Natural Resources Committee next week will consider legislation that will provide bankruptcy powers to Puerto Rico while subjecting it to the authority of a federal oversight board. The U.S. Supreme Court is also reviewing federal court rulings that said a local bankruptcy law enacted by the commonwealth is unconstitutional.

Garcia announced in June that Puerto Rico’s nearly $70 billion debt was not payable. Since then, a deal has been struck with creditors to restructure much of the Puerto Rico Electric Power Authority’s nearly $9 billion debt. (AP)

PHILIPSBURG, St. Maarten - Earlier this week, Minister in charge of Finance, the Honorable Richard Gibson confirmed that the budget subsidy for the St. Maarten Carnival Development Foundation has been approved.

However, the Minister was not in a position to say how much, as this the responsibility of the ministry of TEATT.

The Minister, who was at the time responding to a question put to him, also addressed matters pertaining to the various foundations on the island.

More now via PodCast.

PHILIPSBURG, St. Maarten - As of April 8 ,2016 Benjamin & Parker (This email address is being protected from spambots. You need JavaScript enabled to view it." target="_blank">This email address is being protected from spambots. You need JavaScript enabled to view it.), Certified Risk Auditors  and Tax Specialists, will give free online consultation on business Cost Reduction and Efficiency improvement for 2 weeks.

Business enterprising has become a new science with emphasis on reduction of financial waste and cash flow improvement. The mentioned components go hand in hand to secure cash inflow.

Compliance of Tax obligations and a sustainable operation business cycle are the fundamental conditions to have a healthy business health.

Business owners must recognize conditions, characteristics and indicators which are the operation alert warnings, when results are negatively influenced by internal factors. 

In order to assist the clients or potential clients Benjamin & Parkers outlines the conditions for recognition purposes to make the stakeholders conscious of the developing scenarios within their corporate structure that are costing them financial resources short term and long term:


  • Irrational growth of HR infrastructure (too many employees, no benefits)

  • Risk management guidelines not in place

  • Centralized Management Logistics Supervision tools not in place.

    Short term impact results

  • Consistent and uncontainable cost growth

  • Poor cost triggers detection tools

  • Untimely Corporate actions

  • Unsupervised personnel procedure deviations

  • Costs recovery difficulties.

    Untreated conditions develop into major financial problems.


  • Financial resources absorption by Corporate costs.

  • Major capital investments to attempt cost recovery

  • Persistent inefficient workflows fuelling consistent Cash deficits.

    Long term impact results

  • Irrecoverable financial losses

  • Further deterioration of financial position

  • Uncertain financial capacity to secure business continuity 

    Any businessman that recognizes these business conditions, can be sure that company is in need of a REC Audit, to diagnose the company cash flow triggers and improve the operation structure in order to enhance cash money streams.

WASHINGTON – A study on the state of housing in six Caribbean Community (CARICOM) countries has revealed that approximately US$1.8 billion is needed to end poor housing conditions for more than one million citizens.

The study by the Inter-American Development Bank (IDB) looked at the housing problem in The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago.

The study, which analysed the implementation of social housing programs in the Caribbean from 2000 to 2015, underscores the importance of housing to achieve the Sustainable Development Goals (SDGs) and the larger agenda in poverty alleviation, economic development, and climate resilience.

It noted that rapid urbanization has created a housing deficit in the Caribbean, prompting a large share of the population to live in informal settlements that are disproportionately affected by landslides, flooding, and storm surges.

The study notes also that the absence of efficiently functioning land markets, inaccurate property registries, and land disputes have compounded the problem and slowed the pace of housing programs.

“Improving housing conditions in the Caribbean can have large impacts on poverty reduction, improving lives of a significant share of the population,’’ said Michael G. Donovan, IDB Senior Housing and Urban Development Specialist, one of the authors of the study.

“The IDB and the Caribbean have been working together on several projects to help solve this challenge. However, more needs to be done. With this book, we expect to help the region develop a comprehensive urban agenda so countries can achieve their sustainable development goals.”

The study notes that Caribbean governments need to incorporate into their social housing programmes measures to protect homes against rising sea level because half of the population in the region lives within five kilometers from the coastline.

“As the Caribbean urbanizes, it will be also critically important to incorporate risk reduction into the location and design of social housing,” said Pauline McHardy, Jamaican Urban Planner, another author of the report on the study.

According to the report, several housing ministries in the region are adopting new designs to increase the resilience of coastal housing, improving building codes and ensuring that floor levels of social housing are above recorded flood levels. Elevating homes in flood-prone areas saves US$15 for every one US dollar invested because governments do not need to rebuild infrastructure.

Supporting the Caribbean to confront urban challenges and increase economic vitality of cities is central to the Bank’s mission in the region.

The IDB said it has provided over US$700 million in long-term financing to support urban programmes in the Caribbean since 1968.

SAN JUAN, Puerto Rico – A group of hedge funds that say they hold a significant amount of Puerto Rico debt sued the island’s troubled Government Development Bank on Monday, a move that raises concerns about the future of an institution that issues loans and oversees the U.S. territory’s debt transactions.

The lawsuit filed by New York-based Brigade Leveraged Capital Structures Fund Ltd. and others is the first of its kind against the bank, which recently said it faces financial problems. Puerto Rico officials denied rumors it was closing amid a decade-long economic crisis.

The hedge funds argue that the bank is violating local laws by giving preferential treatment to certain creditors, in part by allowing government agencies to withdraw money even though it’s insolvent.

“IF GDB continues making preferential payments as selected governmental depositors race for the exits, it will be impossible for GDB to restructure its debts,” the lawsuit states.

The hedge funds demanded that the U.S. District Court of Puerto Rico stop the bank from paying certain creditors and forgiving debt. The GDB has issued nearly $3.75 billion in outstanding bonds, a portion of Puerto Rico’s $70 billion public debt load that the governor has said is unpayable and needs restructuring. Government officials have already said they expect to default in May on $400 million in bonds issued by the bank. The island has already defaulted on other smaller payments.

Bank President Melba Acosta called the creditors’ allegations erroneous and said the lawsuit is a result of inaction by the U.S. Congress to give Puerto Rico some type of debt-restructuring mechanism.

“The commonwealth’s fiscal, economic and humanitarian crisis is causing widespread chaos for the government, our creditors and the island’s residents on a daily basis,” she said. “Swift action from our leaders in Washington is necessary.”

Acosta said the bank will continue to work with creditors to find a solution to what she called the bank’s precarious fiscal situation. (AP)

TORTOLA, British Virgin Islands – Stashing money overseas isn’t just for criminals. Legitimate banks and law firms have entire departments devoted to moving wealth offshore.

They call it “aggressive tax planning” or “tax avoidance” and it’s perfectly legal — though it costs Canada an estimated $6 billion to $7.8 billion in lost taxes annually. With that money, we could build a downtown relief subway line every year.

Instead, tiny countries like the British Virgin Islands (population 30,000) have grown rich by funneling streams of cash from one corner of the world to another and siphoning off tiny sums for themselves. They’re the global economy’s ATM.

As any bank card user knows, those fees add up. The BVI government collects more than $200 million in corporate fees every year, paying for a $100-million hospital and a massive pier, capable of docking the largest of the world’s cruise ships.

Critics of tax havens call them parasite economies that feed off other countries’ tax revenues.

Nicholas Shaxson, a tax haven researcher and author of the book Treasure IslandsTreasure Islands, says they’re even worse: “The gains that go to tax havens are very small compared to the revenue losses incurred elsewhere.”

Like many tax havens, the BVI is built on secrecy. Business is conducted by email, billions of dollars move through accounts and only law firms and banks know the real owners of offshore companies.

Investors call it an “international financial centre” that greases the wheels of the global economy, providing a low-cost way to transfer money from investors in rich countries to business ventures in poor ones. Critics call it a “secrecy jurisdiction” and argue that legitimate businessmen shouldn’t require anonymity to make foreign investments.

Law firms and banks are the only ones who know the real owners of offshore companies. Despite recent reforms to crack down on the “black” money that comes from corruption and money laundering, “grey” money, which may not have been declared to tax officials, has never been more plentiful.

It’s a “trust me” system that guarantees nearly total discretion for anyone trying to evade or avoid taxes. Now, thanks to an unprecedented leak of more than 11.5 million documents from the BVI’s leading law firm, Mossack Fonseca, the Star has joined the International Consortium of Investigative Journalists (ICIJ) and more than 100 other media outlets to lift this veil of secrecy.

How it works

Each tax haven has a specialty: the Cayman Islands have secret bank accounts; the Cook Islands have private trusts; Luxembourg attracts opaque “foundations.” In the BVI, it’s the cheap and easy incorporation of anonymous offshore companies.

Financial services account for up to 80 per cent of BVI’s government revenues, yet there are no income taxes, no sales taxes and no corporate taxes for commercial activities that occur off the island. The only cost is an annual corporate registration fee.

More than a million companies have been incorporated since 1984 and almost half a million remain active — that’s more than 16 companies for every man, woman and child on the islands.

Many of these companies are ghosts. No more than a certificate in the corporate registry and a post-office box. There are no residency requirements for directors or shareholders, and because there aren’t many banks, most of the money never passes through the country.

This opacity has made BVI companies attractive vehicles for corruption and criminality. The ICIJ’s investigation shows how Russian oligarchs used BVI corporations to hide and move the secret wealth. Victims of Bernie Madoff’s Ponzi scheme traced payouts to anonymous companies based on the islands. More recently, BVI companies have become a popular way to launder the proceeds from logging and mining projects in the developing world.

“The common resources of the people in some of the poorest countries in the world are being siphoned off for private gain and being stashed overseas in secrecy jurisdictions,” said Mark Hays, a senior adviser with the U.K. anti-corruption organization Global Witness. “Time after time, in case after case, that looting can’t be achieved without the willing participation of the global financial system: banks, lawyers and shell companies in secrecy jurisdictions around the world that are the tools of the trade.”

Of the 92 tax havens listed on the Tax Justice Network’s secrecy index, the BVI ranks 21st, behind only the most opaque jurisdictions like Switzerland, Macao and Jersey in the Channel Islands. Yet the BVI plays a disproportionately large role in the offshore finance world. In 2010, the International Monetary Fund estimated that its companies controlled $600 billion in assets.

Because the BVI is a British Overseas Territory, it provides what BVI-based Canadian lawyer Martin Kenney calls a reliable legal system, where disputes can be appealed right up to the Privy Council in London.

“That’s a huge attraction for good people or bad. The paradox is that the fraudster knows all too well not to hand his money to another thief,” Kenney said.

To set up a company in the BVI, you need a local agent, and there are dozens of law firms on the islands that specialize in this. They also provide extra services such as providing “nominee” directors and shareholders to appear on public documents, masking the corporation’s real owner.

According to leaked emails, Panama-based law firm Mossack Fonseca will register a company for $825 (U.S.). For another $450, it will supply directors. For “enhanced anonymity” — costing $3,000 — Mossack Fonseca will register a company, provide directors and shareholders and open a bank account in St. Lucia or the Bahamas. Annual fees run from $622 to $2,600.

Mossack Fonseca also ages companies, filing paperwork every year. After a few years, these “shelf” companies are sold to people seeking a corporate entity with a documented history. The older the company, the higher the price. Last year, Mossack Fonseca had several 4-year-old BVI companies on offer for $6,120 each.

Once you have an anonymous corporation, you can hide international transactions in a corporate labyrinth. Called “layering,” many schemes involve multiple shell companies or private trust funds that exist solely to own other companies. The most sophisticated operators set up dozens of entities in different tax havens.

“You could have a string of 20 companies in 20 countries, owning the end point of a bank account somewhere,” lawyer Kenney said.

“You layer it with layer upon layer upon layer of separate vehicles all designed to fragment the title of ownership of assets between the ultimate owner, through the layers down to the end point where the value sits — in Vancouver real estate or a bank account in Switzerland,” Kenney said.

Trouble in Paradise

After almost 30 years of constant growth, new incorporations in the BVI have started to decline, and with them government revenues.

While some blame the global economic downturn, the chill in offshore investment has also been caused by an international movement to end corporate anonymity, undermining the central pillar of the BVI’s business model.

“Competitive advantage is the only thing they have got going for them and it could disappear tomorrow,” said Bill Maurer, an anthropologist at the University of California at Irvine who studied the financial sector in the BVI.

After decades of operating in relative obscurity, the BVI became the poster child of the offshore tax haven world in 2013, when secret banking documents leaked from Luxembourg and Switzerland showed that BVI companies had been used by the wealthy to buy mansions, yachts and works of art.

Ever since, the BVI has made very public efforts to crack down on illegal “tax evasion” while quietly continuing to encourage legal “tax avoidance.”

Under pressure from the G20 and the U.S. to collect better data on corporate ownership, the BVI made numerous reforms and last August, the BVI was deemed “largely compliant” with the Organization Economic Co-operation and Development’s tax transparency standards. In December, France finally took the BVI off its black list of tax havens. Yet loopholes for secrecy remain.

One rule requires local agents to collect identification documents for beneficial owners. But agents can avoid this obligation by obtaining a letter from an “introducer” (most often a foreign law firm) swearing it holds the owners’ IDs.

While all companies hypothetically have a record of their beneficial owner somewhere, that record isn’t attached to the corporate registration, nor to the agent who set up the company. It could be anywhere, sitting in the office of a lawyer whose only link to the company is a few emails sent to an agent in the BVI.

This system hasn’t been successful in providing accountability. According to an analysis of the Mossack Fonseca leaked document database conducted by The Guardian, the law firm couldn’t find ownership information for nearly 20 per cent of government requests, effectively admitting it didn’t know who was behind its own companies.

The BVI’s bad reputation has even started to taint the U.K., which remains technically responsible for its overseas territories and dependencies, many of which are considered tax havens, including Jersey, Guernsey, Isle of Man and British Anguilla.

British Prime Minister David Cameron has vowed to crack down on money laundering and tax dodging on British soil. At a meeting in London last December, he got overseas administrators to agree to collect beneficial ownership information in a government registry, but couldn’t convince them to make the registry public.

The BVI government says it’s being treated unfairly. Few countries collect any beneficial ownership information, let alone publish it publicly. What’s more, it claims, corporate secrecy in some American states, such as Delaware, is far stronger than in the BVI.

“The U.K. has its work cut out for it with these jurisdictions,” said James Henry, former chief economist with the consulting firm McKinsey and now a fellow at Columbia University and Yale. “It will be difficult for them to insist that these places, which have become very wealthy, give up their livelihood.”

In the end, the BVI is beholden to the flow of global capital and could one day fall victim to the offshore economy it was instrumental in helping develop.

“This is a global industry. It wouldn’t really matter if the BVI disappeared off the earth. Not for very long.” Henry said. “The money would just find another way.”


Tax law is complex and varies so much from country to country that it is difficult to talk about what’s legal and what’s not.

Here are two examples of financial behaviour that have proven popular in the BVI:

Between 2006 and 2012, the BVI was the second biggest source of foreign investment in China, ahead of the United States, Japan and Singapore and behind Hong Kong, according to the Tax Justice Network. Yet, the money isn’t foreign, the TJN claims; it’s Chinese money that has been “round tripped.”

“Local Chinese send their wealth offshore, dress up that wealth in offshore secrecy, then return it to China illegally disguised as foreign investment,” the group writes in its BVI country report. This investment benefits from lower taxes but it’s also a way to launder bribes or proceeds from corruption.

Using the BVI has become so commonplace in China that “BVI” is used as a verb. It means “to open a company” with no underhandedness implied.

Canadians have also used the BVI to take advantage of a tax treaty that allows profits from international business to be brought back into Canada as dividends.

According to a report prepared by Unite Here, a private sector union, one Vancouver family set up three companies in the BVI to funnel profits from a Las Vegas casino to a private trust in Liechtenstein. That trust paid family members dividends, which were brought to Canada at a low tax rate.

“The richest families in Canada, they’re the very ones who have lots of trusts and numbered corporations that take advantage of tax law. But these corporations are nothing more than people with lots of money. As soon as you have a corporation, you can do a hell of a lot to reduce the incidence of tax,” said NDP deputy revenue critic Murray Rankin. “Let’s say that’s 100 per cent within the law, does that make it right?”

PHILIPSBURG, St. Maarten - The process towards the establishment of a National Development Bank for St. Maarten is now ongoing.

According to Finance Minister the Honorable Richard Gibson, this bank will invest in infrastructure as well as provide financial advice and support.

This was announced Thursday at the start of the 1st Caribbean Central Banking Conference organized by the Central Bank of St. Maarten and Curacao.

The minister also spoke of the need for the Parliament of St. Maarten to address the matter of the harmonization Law which aims to provide supervision for the Financial Sector of St. Maarten.

PHILIPSBURG, St. Maarten - The 1st Caribbean Central Banking Conference organized by the Central Bank of St. Maarten and Curacao is set to conclude this afternoon at the Sonesta Maho Beach Resort.

During the conference participants had the opportunity to hear expert opinions on a number of important regulatory matters such as the monitory transmission mechanisms and the resulting impact on the various economies of the region.

According to the President of the Central Bank Dr. Emsley Tromp, the new issue of behavioral economics will also be addressed.

Key is the protection of the consumer and personal economics Tromp noted. More now via PodCast.

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