The Hindu Business Line : Smoke 'n mirrors

At least 65 out of the 190 or so jurisdictions in the United Nations `offer secret banking that, in some cases, is absolutely airtight'. And the number of banks operating in the offshore world is estimated to be 4,000 — `with no physical presence anywhere'. Beyond the reach of law, about $6-7 trillion moves through the offshore world...

These are just some of the startling numbers that pop from the preface to The Sink, by Jeffrey Robinson (www.constablerobinson.com). The sub-title can add to the sinking feeling: `How banks, lawyers and accountants finance terrorism and crime — and why governments can't stop them.'

Not a new book, nor is the theme new. Yet, with every fresh strike of terrorism, it becomes a compelling need to revisit the realm of the wile and the abettors of the sinister. For, "in the globalised world of the twenty-first century, corporate command and control is real politik politick."

Drugs, arms, and dirty money are `the Holy Trinity' moving along "like a malignant virus through the system, driving crime and terror, breeding unabated offshore in the murky heart of the legitimate, global financial world," describes Robinson.

Offshore world is the financial black-hole, he'd declare; a sink, "where money trails evaporate into thin air, where dirty money mingles with the financial traffic of the world's legitimate businesses, where connections smudge and are then erased, and where anyone looking for the truth is confronted by so many man-made barriers."

One example of offshore jurisdiction is Niue. "Some 2,000 people living on a rock in the middle of the Pacific earn an estimated $2 million a year in fees from licensing phoney banks and dubious shell companies, representing 7-10 per cent of the national economy." Another is Nauru, where "10,000 natives licensed 400 offshore banks."

Offshore banking and shell companies are promoted for three ostensible purposes — "private investment, so that you can minimise your tax liabilities while maximising privacy; asset protection, so that you can safeguard your holdings from political, fiscal and legal attempts to confiscate them; and estate planning, so that you can leave your property to whomever you choose without having legal restraints and conditions imposed on your wishes."

With much wind in the sails without any threat of sinking is an early form of evasion, using `flags of convenience'.

Robinson narrates how in the 1950s, Aristotle Onassis and his brother-in-law Sravros Niarchos decided to evade Greek taxes by registering each of their ships as `an IBC (international business corporation) in the Bahamas' and listing the shell company `as a vessel on Panama's shipping register.'

Do you know that today "Liberia and Panama are the most important maritime registers of convenience, accounting for somewhere around 75-80 per cent of the world's merchant tonnage"? It is no coincidence that these two places "are also among the world's most prominent dirty money sinks," writes Robinson.

Flags of convenience help the owners by hiding their wealth in anonymous companies. Also, when claims come up, such as when "an oil tanker breaks up on rocks and destroys hundreds of miles of coastline", you may find something queer, as for instance: "The Panamanian ship is owned by a Bahamian shell, which is insured through a shell in Bermuda, which has reinsured the policy with a shell in Antigua, that turns out to be nothing more than a plaque on an office door and an answering machine." A case of smoke and mirrors, or fiction, wonders the author.

A book to soak yourself in.

http://BookPeek.blogspot.com

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