Thursday, November 21, 2013

Über-warehouses for the ultra-rich: new Economist article on freeports

Artist's impression: Luxembourg's freeport
This fascinating Economist article on Freeports is worth a blog all to itself. Among many other interesting snippets:
Switzerland remains the world’s leading gold repository. Its imports of the yellow metal have exceeded exports by some 13,000 tonnes—worth $650 billion at today’s price—since the late 1960s, says the customs agency. The gap has widened sharply since the mid-2000s. But trade statistics do not tell the whole story, since they fail to capture the quantities of gold that go straight from runways to the freeports.
And of course there's this:
Some hope to use physical storage as a way to continue illegally evading tax owed on past earnings. As Swiss banks come under pressure to shop tax-dodgers, for instance, some are said to have been recommending clients to move money from bank accounts to vaults, in the form of either cash or bought objects, since these are not covered by information-exchange pacts with other countries.
. . .
In a report in 2010 the Financial Action Task Force, which sets global anti-money-laundering standards, fretted that free-trade zones (of which freeports are a subset) were “a unique money-laundering and terrorist-financing threat” because they were “areas where certain administrative and oversight procedures are reduced or eliminated”.
Take a look in The Economist story about the incredible Swiss connections that penetrate through to Luxembourg's and Singapore's freeports. As the report notes:
This has fuelled speculation that Swiss interests have deliberately developed a strategy to globalise the high-end freeport concept as a way to continue to benefit, even as the crackdown on undeclared money in Zurich and Geneva drives some of it to other countries.
This is yet more evidence to dispel perceptions that Switzerland has in any very significant sense cleaned up its financial sector.  It complements stories such as this, from the Wall St. Journal, referenced in our recent links, entitled Private Banking is Alive and Well in Switzerland.

Beyond Switzerland, the Economist article pays particular attention to Luxembourg, fast getting into the game, followed by Singapore. Is it a coincidence that these three jurisdictions are ranked first, second and fifth in our fabulous new Financial Secrecy Index?

We haven't been able to incorporate this kind of freeport information into our Financial Secrecy index: it's almost certainly impossible to do. But it reinforces the point that these are places that will do whatever it takes to attract dirty money - and who gives a damn about the consequences elsewhere?

It is time that civil society organisations, the world's media, and many others, to start paying more attention to this fast-growing scourge. Well done to The Economist for bringing it to wide public attention.

Update September 2014: for a report on the opening of the Luxembourg freeport see here.


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