No time for excuses

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I've been involved in a debate at AccountingWEB which flows from their limited coverage of the new tax amnesty (a story that I note has had many fewer reads there than one on the use of vans by the self employed this week).

In my comments I sought to broaden the discussion and suggested that the finger of blame should not be pointed solely at those using these accounts (although I have not sought to exonerate them). I said:

You can't have an offshore bank account without there being a bank. No one promotes banking in the Isle of Wight as an industry. The fact that all the main banks and many of the building societies promote banking in the Channel Islands and the Isle of Man is because they know tax will not be paid there. That's not chance. That's deliberate. They lay temptation in people's path, promote it as a product, and then claim no knowledge of the abuse that follows.

But I think they are responsible for the abuse that follows. And they should also know that abuse has taken place. Under the EU Savings Directive these offshore banks had to ask all their UK based customers if they wanted their interest income declared to HMRC. At least 70% said 'no'. In every one of those cases the offshore bank must have had reasonable suspicion that the account holder was, as a result, tax evading. That should have given rise to a money laundering SAR in every one of those cases in my opinion. In Jersey at least none were issued (there was no money laundering reported at all to the Jersey police in 2006 - not one case). In that case the banks have also failed in their duty in this respect as well, in my opinion.

So they are the real culprits. They are, as the Tax Justice Network would describe it, the 'suppliers of corruption services'. They may be legal themselves, but they knowingly supplied a product which others could use for corrupt purpose. And I think this is the bigger problem right now.

People picked up on this. Most notably, one the AccountingWEB editors said:

All very well blaming the banks, but one need to examine the bigger picture. Why do banks behave as they do? Well, you could start by asking who laid down the legislation in the first place to enable to operate like that?

I'm afraid I have to say I think that this was looking at the small picture. As I responded:

I note Nichola [Ross Martin]'s comment. As some people will know, I have some experience of engaging with offshore governments.

The principle actors in writing their financial services legislation are bankers, lawyers and accountants. For example, Jersey's new Trust Act passed in 2006 which allows the blatant creation of sham trusts that can only be of benefit to tax evaders was presented complete to the parliament, and was nodded through by it without a vote. See this . Who promoted it? The local financial services community, of course.

Nichola would be unwise to assume banks are merely responding to an opportunity. They help create that opportunity as well. Offshore is not an accident. It's the creation of the financial services industry acting in concert with the British government, who had a policy of promoting tax havens until about 1990.

I can't emphasise this point enough. Places like Jersey don't have legislators queueing up to invent their laws. The finance sector does this for them. In that sense the offshore world is occupied by the finance industry who have a substantial stranglehold on much that goes on their, including their law-making. This should never be forgotten. The suppliers of corruption services are not innocent by-standers in this matter. The are at the heart of the offshore issue.