My blog entitled The Crown Protectorates - Open for Money Laundering was reposted on the Is This Jersey? web site. They often are. And, as is equally often the case, it got a comment there. Someone delighting in the name 'Jason the Maverick' said:
Richard, do you actually work in the Offshore Industry? Because I can put your mind at ease that our compliance tightens up nearly every month. This Website seems to be outdated on it's allegations. I would understand if we went back 10 years. But a lot of this hype has no material back-up.
So I responded:
Your comment is absurd. This was an audit published in November 2007 by the UK's National Audit Office based on current data. And the message is absolutely clear - you in the financial services industry might fill in the right pieces of paper but you don't do your job.
What's the evidence? Simply this. In 2006 no one in Jersey - not one person - reported suspicion of money laundering. But tax evasion is money laundering. The JFSC says so. And experts other than me estimate there are $500 billion of funds in Jersey on which the income is tax evaded. So most all of you handle it regularly.
I don't believe you when you say you don't know it.
I don't believe you when you say it's not true - or £400 million in back taxes would not have been paid to the UK under the recent tax amnesty.
I do say you're conspiring in this process.
Because there is no other possible explanation for how this happens.
The only people who have no material back up for what they say are the financial services industry. I have clear, unambiguous evidence that it is generically party to fraud.
Now, what are you going to do about it?
To which I got the reply:
What am I going to do about it? I couldn't really give a monkeys because if this is true, you know as well as anybody that all the clients will do is transfer money elsewhere. I would use the term Tax Avoidance as opposed to Evasion by the way.
We do report STRs in my Firm, including money laundering so this data is definitely not true.
The other thing is that our UK cliant base in tiny.
Now this is a fascinating exchange. First, Jason can't accept the evidence as presented to him. So he seeks to shoot the messenger instead. That's hard in my case. I am, for example, a money laundering officer in a regulated firm.
Next he reveals his indifference to the evidence. His reason is simple: he thinks abuse inevitable. His logic is that of the person who assumes he might as well steal your property because if he does not someone else will which as a justification for action is about as low as they get.
But the excuses this by denying there is a crime at all. As Marty Sullivan has shown, the process in which Jersey is engaged is criminal: there are $500 billion of funds there on which tax is evaded on the income. And although it is hard to find it the Jersey Financial Services Commission does define tax evasion as a money laundering offence. In section 2.7.5 of its new money laundering handbook (which has the basic force of law) it says:
2.7.5 Fraud related offences
Fraud, including fiscal offences (such as tax evasion) and exchange control violations, are commonly and mistakenly regarded as distinct from other types of crime for money laundering purposes. They are not. Any fraud related offence is capable of predicating an offence of money laundering in Jersey where it satisfies the requirements of the definition of criminal conduct within the Proceeds of Crime Law.
But of course if the person in the industry seeks to describe tax evasion as tax avoidance they can of course avoid their obligation to report the offence - and I have no doubt that this practice is widespread and commonplace.
And then he claims something that is obviously untrue: that his firm files STRs. This is clearly untrue for two reasons. First of all if it were true he'd know they are called Suspicious Activity Reports in Jersey. Second, the police would have recorded receiving them - and I think they are telling the truth.
Finally, he absolves himself because his firm does not deal with the UK. I presume he thinks money laundering for people from elsewhere is OK as a result.
So why analyse this? Three reasons. First of all whilst I have no idea as to the real identity of this person I am sure they are real and do work in the industry, and this shows the poverty of analytical skill amongst those who might do so. Second it shows their ability to deny the truth. Third it shows their ability to propagate misinformation.
In combination these elements suggest very clearly why regulation is not working offshore: the industry does not want it to and is doing its best to defeat it by subtle but pervasive non-compliance. And if that's true the approach to this sector and the danger it represents to the world has to change.