Guernsey: why has there been no investigation of its rampant money laundering?

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There was an article on a few days ago entitled Guernsey - A World Class International Finance Centre. You have to take this seriously: Mondaq describes itself as:

one of the most comprehensive electronic resources of professionals' knowledge and expertise. We provide legal, regulatory and financial commentary and information supplied directly by hundreds of the world's leading professional advisors, covering over 70 countries.

Except I cannot take this seriously. And there is a simple reason. We know that last year 45,000 people in the UK, being customers of just five UK banks, made voluntary declaration of tax evasion they had undertaken using the services of banks in Jersey, Guernsey and the Isle of Man. We know that HM Revenue & Customs suspect 200,000 might be involved in that practice: that's the number they wrote to.

What does this mean for Guernsey? According to Marty Sullivan there might be $300 billion in Guernsey for the purposes of tax evasion. The equivalent figures are $500 billion for Jersey and $200 billion for the Isle of Man. Applying this ratio to the accounts declared (which is a broadly acceptable thing to do given the respective population sizes) suggests there may be at least 13,000 accounts in Guernsey on which tax was evaded.

But remember, that was five banks. There are 50 banks and 140 trust suppliers in Guernsey. And of course, there's not one country using their services. So let's take 13,000 and multiply by 10 for the number of banks and by just five for the number of countries to allow for the fact that the UK is a major user of the place. That suggests at least 650,000 bank accounts on which tax evasion is taking place. You can see how Sullivan gets to his figures. And this assumes that 45,000 was the right number of evaders: I bet there were more.

My point is this: if I'm only right about the 13,000 accounts this is a catastrophic failure by the financial services industry to identify criminal money laundering taking place within its jurisdiction. If it's 650,000 then that's not catastrophic just for Guernsey, it's disastrous for us all. And there's no reason to presume otherwise: after all, Ireland had already proven how rampant abuse was by its citizens in the same places.

But Guernsey advertises itself as A World Class International Finance Centre. How come? I'd expect that when independent, verified and indisputable evidence that the financial services sector of a state whose entire existence was dependent upon that industry had been shown wholly unable to identify money laundering taking place (and at best 100 or so money laundering reports were made in this respect in 2006 and about 400 in 2007) then a crisis would be recognised. I'd expect there to be a public outcry. I'd expect a government enquiry. I'd expect criminal investigation of the institutions in question. I'd expect radical and dramatic reform of the law to prevent it ever happening again. I'd expect open and full cooperation with the other countries involved. I'd expect the press to be full of it.

Did this happen in Guernsey? No. None of it did. Why not? There's only one possible explanation: everyone knew it was happening and no one has intent to do anything about it.

That's not the mark of a World Class International Finance Centre.

PS Everything I have said applies to Jersey and the Isle of Man as well.