Tax havens, man. There are plenty of legitimate reasons for people to move their money to offshore tax havens, for example to protect their assets from an autocratic regime or potential expropriation. And of course, there is nothing wrong with legally reducing your tax burden. But when tax havens help criminals and people subject to international sanctions hide their money it crosses a line. And unfortunately, that is what they are doing.
A new analysis from Bocconi University and Newcastle University shows just how much people who are subject to international sanctions for corruption, drug trafficking, terrorism financing or supporting a rogue regime use tax havens to hide their money. Below is a chart that shows the deposits held in foreign bank accounts split between tax havens and non tax havens. On the left we can see that tax havens hold only about a fifth of total foreign assets when looking at all depositors. But when we restrict the depositors to those who are subject to international sanctions (e.g. Russians, Syrians, people linked to criminal activities and terrorism, etc.) then the picture changes dramatically. Suddenly, about half of all assets are held in tax havens.
Total foreign deposits over time
Source: Kavakli et al. (2023)
Indeed, the researchers could show that when a person becomes sanctioned, he or she is moving assets away from non tax havens and into tax havens to reduce detectability to prosecutors. And the banks and trust companies in tax havens seem only too willing to help.
But there is also good news in the research. Apparently, it makes a difference if the US leads the sanctions. If the US participates in the sanctions, there is no change in this trend to hide assets in tax havens and tax havens have no qualms helping sanctioned persons evade sanctions. But if the US leads a sanction regime (for example against people indicted under the Magnitsky anti-corruption act or for people indicted in the US under drug charges) the picture is very different. In those instances, the targeted persons are not able to move their money into tax havens possibly because the banks and trusts that normally would help them are unwilling to become a target of US prosecutors.
Which goes to show that sanctions only work if you have the means to enforce them and hunt down anyone who tries to avoid them, no matter where they are. A couple of months ago, I wrote how US antibribery enforcement reduces bribery in Africa. This is a similar effect. Nobody dares to mess with the Silverback Gorilla that is US law enforcement. And for that, I applaud US law enforcement. They are improving the world, one indictment at a time.
'money to offshore tax havens, for example to protect their assets from an autocratic regime or potential expropriation.'
Ah, tax evasion as democratic resistance? I hadn't looked at it that way yet. Maybe we should hand London the nickname 'Resistance City'? Financing Freedom all around the world. 'let London help you optimize your tax strategy and move your money to the homes of financial freedom'.
'And of course, there is nothing wrong with legally reducing your tax burden'
Damn right, alcohol is legal so why bother about alcoholism? And you gotta close the money-loop right? Social contracts be damned. After QE pumps your assets and low rates let you borrow cheaply you say thank you gov and look for a place to shelter the revenues. Joe's Place for instance:
Delaware is everywhere’: how a little-known tax haven made the rules for corporate America
https://tinyurl.com/294zxpxd
Of course, when those nasty populists (obviously created and funded by foreign intervention, if it wasn't for them western politics would - still - be of exquisite quality), gain traction with a growing cohort of deplorables, there comes a moment when the Beautiful & the Righteous have to step it up a bit vs those rural white rebels. I give you the world's Best People - it's true - who unite under the banner of MSNBC lamenting the curse of US rurality (80% of Trump voters were suburban but knowing your sh*t and, even more frivolous, speaking your mind there were it's not appreciated, is profoundly old fashioned):
https://www.youtube.com/watch?v=rcsxO6rbhlI - The question the panel asks itself: why do these ruralists choose the billionaire and not the supposedly pro blue collar tax haven guy? Answer: because they are the most racist, homophobic and anti demcoratic. (Btw: it's always heartening to see 'progressives' fret over someone avoiding military conscription...)
https://www.youtube.com/watch?v=r78Kik7wp6I&t=26s
Of course the fight against illegal drug gains, money laundering and terrorist funding is a long and difficult struggle. Especially when Washington finds it usefull to have a few Al Qaeda assets (that would be terrorists) 'balancing' some rebels, an autocrat or a dictator. Or when ISIS is allowed to do its work vs Assad for a while:
https://tinyurl.com/9dmh2t5p John Kerry: 'we let ISIS go at Assad but the Russians didn't want an ISIS gov in Syria so they came in'. Modern US 'grand' strategy right there....'Earlier the audio was published by the New York Times and CNN, but the outlets both only published some parts, omitting Kerry's most critical comments'.
That's so unfortunate, the best media sees the best parts fall of the page...Thankfully that rarely, if ever, happens.
Anyway, the Good Fight (for Freedom & Democracy and vs controlling gov's) is a fight in progress. In the Netherlands large fraud cases often go unpunished (too complicated) and whistle blowers tend to find themselves in a rather lonely (and unemployed) spot - like most western whistle blowers. But when some low life sucker i.e. citizen moves 20k from his savings-account to another account of his, the bank is right on top of him. He now has to prove this money is legit. Or else...