The new BBC series McMafia makes clear three things. First, that organised crime can still money launder, with the active connivance of the financial services industry. Second, it makes it obvious that tax havens are at the heart of this activity. Indeed, this is so much the case that they're not the exception to global capitalism but are at the heart of that system, as my co-authored book of 2010 argued:
Third, it makes clear that London is at the heart of this abusive system, as I argued in my 2017 book:
And as that second book argued, this has a further consequence, which is that this activity causes significant harm to the real economy which supports us all.
Let me be clear what permits this. The issues in question are are easy to specify. They are:
- The existence of limited liability companies;
- The lax regulation of those companies that means that in many jurisdictions they do not have to:
- File the names of their shareholders on public record;
- File the names of their true directors on public record;
- File their accounts on public record;
- The failure of many jurisidictions - including, very notably the UK, to enforce tax law. 87% of companeis linked to Jersey do not file accounting data there. In the UK 400,000 or more companies do not file accounts required by law each year and almost none are prosecuted;
- The existence of trusts, the majority of which around the world remian unregistered whilst not filing accounts or any explanation of their function or on whose behalf they are operated, creating an enormous void in available financial data to be used by the unscrupulous;
- A lack of willing on most politicians' parts to address these issues;
- The failure of many jurisidictions to establish easy access to the registers of companies they do maintain: this is widely true in the EU, let alone beyond it;
- A refusal of jurisidictions to verify the data that they do hold on public record by requiring banks and other financial advisers to disclose to regulators those persons that they identify to be the beneficial owners and managers of companies to whom they supply services, meaning that the whole system of identity verification has no proper checks and balances built into it;
- The failure of many tax authorities to demand tax returns from all the companies incorporated in their jurisidictions. HMRC in the UK fail to do this in the case of well over 500,000 companies a year based on the latest data I secured from them.
Put this altogether and what you have is a web starting in London (which might appropriately be seen as the original home of the limited liability company) and spreading far and wide in which, in the supposed interests of light touch regulation to facilitate commerce, the ideal mechanism for those with criminal intent to launder money (whether for tax, or worse) is made available for anyone to use with almost total impunity, especially if UK companies are used.
So can anything be done about this? Clearly the answer to that is yes, it can. Some of these issues were first raised by John Christensen and myself in 2005 in the seminal version of ‘Tax us if you can' that set out an agenda for tax justice reform that has shaped much of the agenda on this issue for the last decade.
And there is no doubt that the Tax Justice Network Financial Secrecy Index (the first iteration of which was directed by me) has been incredibly useful in highlighting these issues: the next version is due out later this month.
But this is not enough now : real action is now needed. This crime is real, continuing, and undermining the world we all live in.
That to me suggests three needs. One is better data on the deficiencies: the Financial Secrecy Index is great, but no longer enough. This process could begin in the UK, but ideally it needs to be replicated.
Second, a gold standard for what we need now needs to be established. When John and I wrote ‘Tax us if you can' the demands seemed like a pipe dream. It's now clear we need to go much further. Much tougher demands need to be made.
Third, the gap between reality and expectation revealed by steps one and two needs to be made clear.
Fourth, a road map for closing that gap is needed, jurisidiction by jurisidiction.
And last, politicians need to be enlisted to the cause because it will not happen without them.
What the plans would show is that financial crime could be beaten if there was the will to do so, and the actual cost would be small whilst the benefits would be great. But that requires support.
And that's where you come in. Any volunteers to do some legwork?
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and yet 12 years ago li’l ol’ me, a private citizen, was refused to open a Nationwide savings account to deposit my inheritance from my mother’s estate into because their money laundering prevention rules included checking a Royal Mail database of addresses which did not tally with Glasgow City Council’s preferred address usage that I had entered on the application form!! A private interview with the branch manager ( in England so knew nothing of Scottish address systems ) was extremely embarrassing for both of us. I took my 80k and left…. My jaw drops.
It is pretty absurd….
This is one of my biggest issues i am really upset over it. A normal resident in the UK has great difficulties in opening a bank or building society account. Different forms checks the lot. Yet there seems a great ease in accounts being opened using false documents and then used for fraud and crime destroying peoples lives and business. We saw in the media all the time yet everyone is powerless to help the residents of the UK. The nationwide are as bad as the big banks and had some issues that came to light last month.
I had a Tesco savings account opened in my name without my knowledge. Whilst the fraud girls were great that was it nothing more happened. The police dont care IP address show whos computer was used and many other tools can be used. Nothing happened.
The absurd thing is that opening an account fir an individual is hard
Opening a whole new legal identity – a company – can be done with no checks at all
I went through something similarly absurd connected with opening a bank account for my son at the co-op. I had to supply all sorts of evidence which they told me was to do with money laundering issues.
I wrote to the CEO (!) telling them that the only likely money laundering would be that committed by the bank itself. They gave me £50 as a sweetener to open the account.
I sometimes think that banks are gambling fronts with the everyday payments system a side issue.
Simon Cohen says:
January 4 2018 at 9:28 am
“I went through something similarly absurd connected with opening a bank account …..[….] I sometimes think that banks are gambling fronts with the everyday payments system a side issue.”
One of my local bank branches declined to issue cash from my debit card because it was not issued by them, but by a different bank. I had to go to the post office to get cash. I refuse to believe that the banks can’t do these customer service transactions. They chose not to. As pointed out in yesterday’s blog about the NhS the Chomsky principle applies. Bank branches will gradually stop offering useful High Street services to customers then use the declining footfall as justification for branch closures.
This sort of withdrawal of customer contact is one aspect of what makes people gleeful about the potential for cryptocurrency to damage mainstream banks.
wow a real investigation is on next week http://www.aljazeera.com/investigations/ THE OLIGARCHS – COMING SOON yet you talk of a fantasy tv show that has used all the BBC budget for the year.
The narrative matters
But some of us havent see the first McMafia yet
McMafia will almost certainly engage a much wider audience and help to start widening the number of people understanding what is going on.
What did ITN pay you £1K for?
Training on tax and accounting related issues
Hi Richard,
Volunteers required to do what?
John
Edinburgh
Assist with the research….
what does the legwork involve?
Collecting data from Companies House and its equivalents elsewhere
Maybe assistance with FOIs
Happy to help if I am able.
Ken
Thanks and noted
As usual I wrote before quite formulating the next stage
I will be back to you and others who have volunteered
Richard
Might I suggest setting up a Trello team with a board per project and tasks per board for team members to pick off as time/capacity permits?
You may have already done this or similar.
I admit I have never used Trello…
Richard
You should have received an to join a trello team “McMafia” and a test board/project. Try it out, it might be useful.
Anyone else can try using https://trello.com/invite/b/IedgNm5W/bc46ea1469abc8e937ca49b82010a037/project-try-it-out
Andy
I did recall it….
I was involved in a project using it a while ago
Looks worth my while to remind myself how to use it
Thanks
Richard
Richard, If you explain to me what manner of ‘legwork’ you require I’ll do what I can, if I am able.
I have nothing better to do and I’m not sure there IS anything better to do than assist someone who is trying to fight this antisocial crimewave of Tsunami proportions.
If it’s a case of every little helps I am up for it.
I’ll mail you when I have refined this a bit
I guess McMafia clearly shows things about UK finance in the same way that Star Wars shows how The Force binds the universe.
Except it doesn’t
And you are very clearly trolling
I was under the impression this show is a work of fiction. Have I misunderstood?
If it is fiction, how can it be clear on, or prove anything? It surely is just the creation of someone’s imagination for the purposes of entertainment.
It is based on a nonfiction book of the same name and scenarios that are all too real
Tony Fergus says:
January 4 2018 at 12:03 pm
” I was under the impression this show is a work of fiction. ….. It surely is just the creation of someone’s imagination for the purposes of entertainment.”
If you seriously think fiction is entirely confined to the role of entertainment I think you’re missing something fairly major in the power of the arts to explain ‘life, the universe and everything’.
The other side of that coin is to assume that there is such a thing as an objective factual account, and that you might be able to recognise it as such when it is presented to you.
Hi Richard,
I’ll help if I am able to – let me know what you need.
Neil
Neil
Thanks and noted
As usual I wrote before quite formulating the next stage
I will be back to you and others who have volunteered
Richard
Hi Richard,
Please add my name to the list of volunteers. Look forward to hearing from you.
Thanks, Peter
Thanks Peter
I will be looking to see if we can get some things going based on this level of offer
Me too Richard. Each according to their ability. That is the way to do it.
Noted
Thanks
Hi Richard,
I too will be happy to help if I am able to.
Thanks
I’ve been working on ideas all day … give me a few days
Richard
There has been a tranche of people at work who have just left for better pay packets elsewhere and yours truly found himself promoted just over Christmas (despite the fact that I continue to look around too).
Since my job is about developing and building affordable council homes I do hope you understand that I would love to volunteer for this task but I cannot as I now have to do my old job and my new strategic role too. There are now fewer of us here at work but at least we can chip away at the housing waiting list problem – albeit with what sometimes seems to be a teaspoon! By the end of this year we will have only managed to build 8 new council homes against a target of 40. Construction starts are also hopelessly delayed by other problems. We’ve got not none! I’ve got my work cut out I’m afraid.
Best,
PSR.
No problem!
Congratulations
And thanks
Richard
As the Guardian says today re McMafia ‘ The burden of taxation has moved away from multinational corporations and the rich to ordinary people. Offshore has made this happen. We – those of us who pay our taxes – are the dupes ‘. Apple is being lauded today in the press as it is about to become the first 1trn $ company . QED.
Yes I would like to volunteer
Thanks
Hi Richard,
Happy to help.
Now retired, I lectured in company law at Northumbria all my working life and also ran, and am still involved in, a business setting up companies and providing company law services. See companylawsolutions.co.uk. I think I know the nuts and bolts of small company regulation and registration as well as anybody. Ŷ
Jim
Jin
Noted
Thanks!
Richard
I’ll volunteer too if I’m able to help.
Thanks
I will have more on ideas soon – maybe the weekend
I have some spare time, I could help
Colin
I could have an army soon!
Thanks
Will have some ideas over the weekend
How quaint, Richard.
You still remember weekends then, even if you don’t observe them 🙂
I do observe them!
I always blog less at the weekend
I get up at least half an hour later
And I have hobbies ….. and other interests that get attention too
If you think I spend my whole life on tax you’re seriosuly mistaken!
Best
Richard 🙂
Richard
Happy to help if if it doesn’t require an accountants mind!!
Will be in touch Chris
I note you got back!