Enablers and intermediaries

Tax evasion and avoidance, capital flight, cross border illicit financial flows — and a wide range of abusive or illegal activities are facilitated by a global network of offshore tax havens and  financial secrecy. This in turn requires a large infrastructure of intermediaries or ‘enablers’ to make the whole system function. These include:

  • Tax Advisers: tax attorneys and law firms, accountants, audit firms. The Big Four accounting firms play a particularly strong role here.
  • Financial Institutions: commercial banks, investment banks, brokerage firms, trust companies and other financial institutions. The large global private banks are particularly involved.
  • Corporate and trust service providers: service providers that set up, organise and/or administer corporations, limited liability companies, trusts and partnerships in tax havens or secrecy jurisdictions.

Prof. Prem Sikka looks at the Pin Stripe Mafia

Any efforts to crack down on the problems must include a strategy to tackle the financial institutions head-on. It is notable, for example, that pretty much all of the (still limited) concessions that Switzerland has made on financial secrecy in recent years have come about as a result of pressure on Swiss banks, rather than from pressure on Switzerland itself.

It is essential to understand that these intermediaries are not just passive facilitators of illicit financial flows and other abusive activities. They are often active, and sometimes aggressive purveyors of these facilities. The large global private banks have a long and sordid history of sending teams of client relationship managers out into the field in countries rich and poor, winkling out trillions in cumulative capital flows from which they and their banks can profit. Very often, surges in illicit financial flows from developing countries are very closely correlated with lending into those countries by those same global banks: the money is lent, looted, then spirited away offshore. (Read more about that here and here.) Meanwhile, large-scale abusive tax avoidance schemes by multinational corporations are usually not requested by them originally, but are pushed onto them by high-pressure sales tactics from the Big Four accountancy firms and others. (Sometimes, the banks are also involved in the sales tactics.)

How Barclays promotes tax havens in Africa

Focusing on intermediaries, and particularly on the global banks, creates many opportunities for new alliances, such as between those concerned with the problem of “Too Big To Jail” and “Too Big To Fail”; and a range of others concerned with tax justice and financial transparency.

The time has come for a global alliance of civil society and other organisations to come together to campaign for large numbers of bankers and other enablers of criminal activities to be thrown into jail, and to call governments to account when they fail to do so.

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Highlights before 2014

Highlights

Nov 2013 – Time to clean up: how Barclays promotes tax havens in Africa. Original here.

April 2013 – Margaret Hodge urges accountancy code of practice over role in tax laws. Guardian.

Feb 2013 – Gangster Bankers: How HSBC hooked up with drug traffickers and terrorists. And got away with it. Matt Taibbi, Rolling Stone. A particularly egregious example.

Dec 2012 –  No accounting firm has been suitably disciplined despite fraud – Prem Sikka

July 2012 – Explaining capital flight: the role of intermediaries. Annex to the Price of Offshore, Revisited.

Sept  2011 – The Pin-stripe Mafia: How Accounting Firms Destroy Societies, Association for Accountancy and Business Affairs

Aug 2010 – New York State Bar Association determination on whether it is acceptable to assist foreign illegal or fraudulent activities – TJN blog.

March 2009 – Undue Diligence: How Banks do business with corrupt regimes – Global Witness.

Aug 2005 – KPMG admits to criminal wrongdoing in a fraud that generated at least $11 billion dollars in phony tax losses for wealthy clients – U.S. IRS. See details of KPMG shelters here.

2005 – The Blood Bankers: Tales from the Global Underground Economy, James S. Henry. A forensic investigation into the world of offshore banking, with particular (but not exclusive) focus on Latin America.

July 2004 – Money laundering and foreign corruption: the case of Riggs Bank. US Permanent Subcommittee on Investigations.

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