Monday, September 21, 2009

Offshore private banking: rotten to the core

There are many reasons for being shocked by the revelations of BBC Panorama’s excellent programme on LloydsTSB bank’s activities in Jersey (20h30, Monday 21st September)

Both Lloyds and TSB held important positions on Britain’s high streets for decades. TSB, in particular, in its former guise as the Trustee Savings Bank, was regarded as a quintessentially trustworthy, reliable and public interest oriented institution. Lloyds Bank, which dates back to 1765, was a commercial bank with a reputation for integrity and solid banking values. That was then and this is now. Tonight's programme reveals how LloydsTSB, through its branch in Jersey, British Channel Islands, has been engaged in encouraging and facilitating tax dodging.

These revelations cannot be dismissed as an isolated instance of rotten apples: the Jersey branch of LloydsTSB is a major player in their international operations and nothing, we mean nothing, that happens in Jersey can be dissociated from decisions taken at the highest level within the global organization. So here we have an organization using an offshore secrecy jurisdiction to promote services that purposefully set out to undermine democracy and the rule of law.

The location of these services in Jersey is not coincidental. For decades Jersey has promoted itself as a ‘premier’ financial centre: anyone who labels the island a secrecy jurisdiction faces instant rebuttal by armies of public relations officials. At face value this claim is substantiated by the IMF/FATF assessments of compliance with anti-money laundering procedures. And then Panorama comes along and blows a massive hole below the waterline of both Jersey’s braggadocio and the utter uselessness of the FATF assessments. Hello guys, reality calling. Whilst you’re ticking the boxes the bankers are laughing all the way to the, well, bank.

LloydsTSB hit skid row and was partially nationalised in 2008. It is now desperately trying to re-capitalise on the private markets in order to avoid intervention by European Union competition authorities. But even under partial public ownership it has persevered with illicit activities for the simple reason that abetting tax dodging is highly profitable activity. And the accepted view within the board rooms is that the risk/reward ratio falls down firmly in the latter camp.

This needs to change. Our friend Eva Joly, formerly an examining magistrate, now Chair of the European Parliament Development Committee, says that the only way of re-balancing this equation lies with punitive measures. We agree. A period spent at Her Majesty’s pleasure (for our non-British readers that means JAIL!) might allow the directors of LloydsTSB time to reflect on why bankers have a responsibility to the societies on which they currently predate.

Well done to the Panorama for this astonishing exposé. This is journalism at its finest, and demonstrates why the BBC should be protected from sniping by the likes of James Murdoch, who let’s face carries awkward baggage. As for claims that Jersey is a clean jurisdiction, well what can we say? We were never taken in by the PR nonsense or by the IMF ticking boxes in the sky. Now the rest of the world can see which of us was right.

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