Center of a secretive financial web spanning the entire globe.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
London is not a place to stash your dodgy cash – at least not according to UK Prime Minister David Cameron. Speaking in Singapore, Cameron vowed to expose the use of “anonymous shell companies” – the sort of complex structures that were popularized by his globe-trotting predecessor Tony Blair – to buy up luxury UK properties, often in London.
As part of a global effort to defeat corruption, foreigners will be prevented from buying UK homes with “plundered or laundered cash,” Cameron said. Corruption, he added, is “a cancer which is at the heart of so many of the world’s problems” and must be tackled.
Naturally, international NGOs lapped up Cameron’s tough words. Nick Maxwell, the head of advocacy and research for Transparency International, said the steps towards increasing transparency outlined by Cameron “can help shift the UK from being a safe-haven for illicit wealth to a place where dirty money is not welcome.” Laura Taylor of Christian Aid said it was “another step forward in the battle for greater transparency worldwide.”
There was just one problem with Cameron’s speech: it omitted any mention of the frontline role the City of London plays in laundering the world’s “dodgy cash.” Indeed, the way he presented his case was as if unscrupulous criminals were cleverly exploiting vulnerabilities within the UK financial system, which he painted as an unwitting patsy in the whole process.
The “Head” of the Global Drugs Trade
In reality, London is the place where the world’s richest gangsters dream of stashing or laundering their cash. For years, it has held first place among world capitals with regard to the volume of drug trade and money laundering. According to the British government’s own National Crime Agency, “hundreds of billions of US dollars” are laundered through banks in the United Kingdom every year.
Describing the international drug trade, organized crime expert Roberto Saviano recently told the Independent on Sunday that “Mexico is its heart and London is its head.” While the heart (Mexico) bleeds with the blood of traffickers, soldiers, and innocent bystanders, the head (London) gets fatter.
According to Saviano, UK banks and financial services have consistently ignored “know your customer rules,” which are designed to prevent criminals from laundering the profits of their illegal activities. He also singled out the £1.2 billion fine that HSBC received for money laundering for a Mexican drugs cartel in 2012:
They think it’s all happening “over there somewhere,” so they needn’t worry about it. Sure, HSBC has been reported but there has been no debate. You need to fill the papers.
Destination of Choice
In the absence of any public debate, London seems destined to remain the destination of choice for the world’s footloose capital. Whether you are a Russian oligarch who has fallen out of the Kremlin’s favour, an Arab sheik with billions of oil dollars to burn, a Mexican drug trafficker with well-connected accountants, or a transnational corporation with huge profits to conceal, the City is the place to be. Provided you have fat bundles of cash to stash, you get to enjoy rights, privileges, and financial expertise offered by no other jurisdiction on Planet Earth.
As Nicholas Shaxson, the author of Treasure Islands, writes in the New Statesman, the wholly autonomous City of London Corporation functions as an offshore island inside Britain, a tax haven in its own right:
The term “tax haven” is a bit of a misnomer because such places aren’t just about tax. What they sell is escape: from the laws, rules, and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering.
In the acute absence of democratic scrutiny and public awareness, the City has been allowed to morph into the center of a huge, secretive financial web that spans the entire globe, says Shaxson. Each of the Web’s sections – the individual havens in the Caribbean and elsewhere (all of them Crown dependencies) – trap passing money and business from nearby jurisdictions and feed them up to the City, just as a spider catches a fly.
Given that over 30% of global foreign direct investment is now booked through tax havens, which collectively hide one-sixth of the world’s total private wealth, it is an arrangement that has massively enriched the City while draining the governments and their taxpayers of both the global South and the global North.
An Unlikely Tale
Now David Cameron, the son of a man who made his fortune operating a network of offshore investment funds that boasted of their ability to conceal funds from UK tax authorities, will have us believe that he and the government he heads – the same government that hired Stephen Green, the former chairman of tax evasion extraordinaire HSBC, as Minister of State for Trade and Industry – have suddenly found religion.
Their newfound mission, they claim, is to clean up London’s property market, one of the primary drivers of UK economic growth. This they will do by cutting off one of its main sources of funds – dirty money – precisely at a time when the market’s multi-year bubble is showing signs of strain.
Let’s face it, it’s an unlikely tale.
Cameron’s government, like Blair and Brown’s before it, is and forever will be wholly beholden to the City of London Corporation and the financial firms and corporations headquartered there. And they need the funds from global crime to keep flowing. As such, his tough words in Singapore were probably just that: tough words. As long as you have multiple millions or billions to (ahem) “invest,” you can safely assume that doors will continue to fly open for you in London’s square mile.
As for the rest of us, the reality could not be more different. As the British novelist John le Carré told Democracy Now, the ultimate irony is that while the world’s wealthiest individuals and corporations are able to transfer millions or billions of dollars at the drop of a Panama hat, governments and banks are making it increasingly difficult for normal people to move even relatively small sums of cash:
If you or I go to one of these banks with a few thousand dollars in a briefcase… we will have to give a really thorough explanation… The bank manager may call in the police. We will have to produce our passports… But, if Mr. Orloff comes to a bank here and says, “I am from Russia. I have millions and millions of dollars, please. And here is a letter from a reputable lawyer in Moscow. And here is evidence that I run hotels, casinos, whatnot,” the bank manager says, “What are you doing for lunch?” And we’re away. So, the bigger the sum, the easier the crime.
And whatever David Cameron may say or do, that situation is unlikely to change any time soon, especially in the City of London. By Don Quijones, Raging Bull-Shit.
“Everyone got used to playing with free, easy money. Now it’s going to cost us.” Read… Mexican Peso Dives, Fretting Begins About Peso Crisis
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.