The long read: The years since 2008 have seen a global crackdown on offshore finance. Yet a few places have doubled down on offering secrecy to the super-rich. Among these, one tiny Caribbean island might be the worst offender
Tax havens hate attention. Places suchas Jersey, Switzerland and theBritish Virgin Islands made a handsome living from helping their clients break other countries laws fordecades, without anyone really noticing. Andthey liked it that way. Then came the 2007-8 financial crisis, and the good times ended. Rich nations, angry over the loss to their budgets caused by tax dodging, put diplomatic pressure on the havens. Activists, furious over the theft of hundreds of billions of pounds from poor countries, exposed them in the press. The release ofvast troves of confidential information SwissLeaks, the HSBC files, the Panama Papers, the Paradise Papers cemented a public perception that offshore financial centres exist to help the powerful dodge their obligations to the rest of us, and governments have queued up to punish them. In May, when Britains parliament voted toforce transparency on its Caribbean islands, it was justthe latest blow to the offshore havens.
This concerted campaign has threatened the tax haven business model. Since Swiss banks were forced to open up by the US Department of Justice in 2010, their share of the worlds offshore wealth has dropped from almost half to less than a third. In the British Virgin Islands (BVI), where UK investigators now have access to corporate ownership information, the number of new companies created annually has fallen by more than 50%since 2012. Jerseys banking sector is barely half thesize that it was in 2007.
Although cooperating with outsiders in this way hasproven expensive, the havens clearly concluded there was little choice. Ifdenied access to the global financial system, or sanctioned by Brussels or Washington, an offshore centre could be put out of business altogether.
This is good. Tax havens have helped the worlds wealthiest and most powerful keep a disproportionate share of the benefits of globalisation, by preventing the rest of us from seeing how much they own. This, in turn, has eroded trust in democracy and capitalism all over the world. Restricting the operations of tax havens, andenforcing true transparency on the ownership of property, is crucial if citizens are truly to take back control of their countries destinies.
Yet, at the heart of this increasingly encouraging picture, there remain a few holdouts places that have stuck to the old habit of keeping the secrets of the powerful. Foremost among them is Nevis, a solitary volcano in the Caribbean with apopulation of just 11,000, which has been implicated in some of the most sordid financial scams of modern times, from Britains biggest-ever tax fraud to the fleecing of 620,000 vulnerable Americans in a $220m payday loan scam. The story of Nevis reveals the difficulties the world faces in trying to put an end totaxevasion, fraud and kleptocracy.
While Neviss rivals have lost business by opening up,Nevis has doubled down on secrecy. Not long ago, Ispoke to alawyer with extensive experience of the island, who asked not to be identified because he still needs to workwith Nevisian officials. The only good thing that Donald Trump could do, if he was ever so inclined, he said, is take a battleship and roll it up to Nevis, and literally train the guns and say: Get rid of these bullshit laws or Ill blow you to kingdom come.
In short, he said, A bright light needs to be shone onthis cockroach.
Tax havens are often lumped together as if they all do the same job. In reality, they are distinctive and highly specialised predators in the financial shark tank. At the top of the food chain as far as the western world goes, anyway are places such as London, Switzerland and New York. These apex predators are surrounded by clouds ofpilot fish that snap up the scraps: places such as Monaco, Jersey and the Cayman Islands.
These smaller centres all play different aspects of the offshore game: Jersey specialises in trusts, the BVI in incorporation, Liechtenstein in foundations. They also differ in their tolerance for criminality. Among the British territories: Gibraltar is dodgier than Guernsey, but cleaner than Anguilla. And they serve different geographical regions: Mauritius for Africa and India; Cyprus for the former Soviet Union; the Bahamas for the US.
In the world of offshore, Nevis is a bottom-feeder. It specialises inletting its clients create corporations with greater anonymity than almost anywhere else on earth. Last year, information on 70,000 Nevisian companies was leaked as part of the Paradise Papers investigation, but that didnt help us find out who owns them: ownership information is so secret there that even theislands own corporate registry doesnt know. In other words, there was nothing substantial to leak.
We feel very strongly that people are entitled to some semblance of financial privacy, the Nevis premier, Mark Brantley, himself an offshore lawyer, told me when we met in his office in January. Why shouldnt you be entitled to a secret?
The secrets dont belong to residents of Nevis, of course: it would be hard to keep anything quiet for long on an island this size. The secrets belong to foreigners and are being kept from other foreigners, with Nevis getting paid to protect them.