British Virgin Islands: it's time to call Britain out on this financial sewer

We are heartily sick of seeing corruption story after crime story after sleaze story oozing forth from the British Virgin Islands. This morning it's a case reviewed in The Guardian where a fraudster used offshore subterfuges to milk an Irish bank for a stunning £740 million, then used trust structures to pretend that the money and assets he'd got hold of weren't really his. (read about slippery trusts here.) 

Once again, the whole story's worth reading, though we'd highlight a few bits.

First, the jurisdiction is a ghastly sewer of secrecy. Among many other problems:

"Even if direct evidence of crime is supplied to the BVI Financial Services Commission by overseas authorities, they can generally do no more than request information from the local agent. The agent in turn will refer inquiries to the introducer who dealt with the original customer, who is generally based in yet another jurisdiction."

and it's a particularly pernicious hole in the global financial system

More than 1m BVI companies have now been incorporated since the launch of their offshore system in the 1980s, according to the latest figures, and it is the world's biggest provider of offshore entities.

and they don't seem to do much else.

A Guardian investigation into the BVI last year revealed that the territory depends heavily on collecting revenue from offshore companies, some of which may be fraudulent or dodging taxes. Last year, the BVI, presided over by a British governor, Boyd McCleary, collected $180m (£112m) from registration fees, more than 60% of the administration's total revenue.

This is a classic case of economic 'rents' - where wealth is not created, but extracted from others. But it's worse than that: wealth is destroyed (via taxpayers elsewhere who have to pick up the tab for their wealthy countryfolk's tax evasion, or via victims of crime and frauds elsewhere.)

And who is behind all this? Yes, you guessed it

The BVI's system of offshore secrecy is underwritten by the UK government, which ultimately controls the behaviour of the Caribbean islands. It is popular among property firms in the City of London, which are allowed by the British government's Department for Business, Innovation & Skills to conceal the identities of owners on the UK's public Land Registry, by putting premises in the name of such BVI vehicles.

And it's not just the land registry: far from it. Britain's excuses continue to pile up.

Michael Foot, a former Bank of England official and Financial Services Authority managing director, reported to the then Labour chancellor, Alistair Darling, in a Treasury paper published in 2009, that to abolish the BVI's secrecy regime "would be likely to result in a loss of business".

Despite the protests of concerned NGOs that corporate secrecy could lead to crime and tax evasion, he rejected transparency, although he conceded it was "attractive in principle". He said the UK should merely "press for improvements" in disclosure by all overseas tax havens simultaneously, at unspecified future international discussions. This was seen by critics as a classic recipe for inaction.

It is pathetic. The Foot report was a disgrace, as we and others have noted. It is time for foreign governments, campaigners, journalists - and many others - to call Britain out on this international disgrace: a key part of Britain's Second Empire.

Campaigners and journalists are already starting to step up to the plate. It is time for foreign governments to get angry, and to get vocal. Tell Britain that this secrecy it protects is not OK.