The challenge offshore banking poses

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James Henry has written an amazing article in the US magazine The Nation regarding the US Senate hearings on UBS and LGT. It's lengthy, and I recommend it in full, but I select some elements here:

Many will consider these revelations shocking. After all, just as the US government is facing a $500 billion deficit, millions of Americans are fighting to save their homes, cars and college educations from the consequences of predatory lending, and inequalities of wealth and income are greater than at any time since the late 1920s, we learn that for decades, the world's largest banks have been helping wealthy Americans steal billions in tax revenues from the rest of us. At the very least, this suggests that it may be time to put the issue of big-ticket tax evasion, offshore and on, back on the front burner.

As James Henry notes:

It is also well to remember that UBS and LGT are hardly the only global private banks involved in recruiting wealthy clients to move money offshore. The committee report indicates a long list of other banks that also provided offshore services to American clients involved in the UBS and LGT cases--including Citibank (Swiss), HSBC, Barclays (Birkenfeld's original employer), Credit Suisse, Lloyds TSB, Standard Chartered, Banque du Gotthard, Centrum, Bank Jacob Safra and Bank of Montreal.

I think many are ignoring this. It's also important to note that:

UBS, like most of its competitors in global private banking, has a long history of engaging in perfidious behavior, apologizing for it and then turning back to the future. This includes UBS's involvement in South Africa's apartheid debt and the accounts scandals of the 1980 involving the Marcos family; Benazir Bhutto, Mobutu Sese Seko, Holocaust victims and Nigerian dictator Sani Abacha of the 1990s; the 2001 Enron bankruptcy and the Menem scandal; the 2003 Parmalat scandal; the 2004-2006 Iran/Cuba/Saddam funds transfer scandal, for which it was fined $100 million by the Federal Reserve; the 2008 Massachusetts securities fraud case; and now the Birkenfeld matter. Furthermore, as the committee report noted, UBS has a history of violating even its own policies.

As James Henry notes:

Rich people the world over, including tens of thousands of wealthy Americans, are now free to opt in to this sophisticated, secretive, utterly unprincipled global private banking industry. They can become, in effect, residents of nowhere for tax purposes, citizens of a brave new virtual country, which offers its inhabitants unprecedented freedom from the taxes, regulations and moral restraints that the rest of us take for granted. They wield enormous political influence even without paying taxes, merely by making contributions, threatening to withhold them--or better yet, threatening to abscond with their capital unless certain conditions are met. In a sense, this is the ultimate libertarian pipe dream: representation without taxation. But it is a nightmare for the rest of us, and we must design and organize our way around it.

So, is there a way out. James Henry says:

The ... challenge is to organize a global alliance around this issue. This is more difficult, although steps are already being taken. Global organizations like Tax Justice International, Oxfam GB, Friends of the Earth, Global Witness and Christian Aid are converging on a new global campaign around the issue of havens and offshore tax evasion. They've been enlisting support for this effort from countries like Norway, Chile, Brazil, Spain and France, organizations like the UNDP, the World Bank and even the International Monetary Fund.

It's one heck of a challenge. We're up to it.