Wednesday, February 04, 2009

Letter to Planet Jersey

John Christensen responding to comments under Richard Murphy's recent blog on BBC Panorama's Tax me if you can:

I have been publicly accused by JTM (who bravely hides behind the mask of anonimity) of lying about how Jersey does or does not cooperate with other countries in battling financial crime. See comment 36 here. I am also accused - comment 34 - of having a chip on my shoulder about Jersey and (comment 36 again) of being out of touch with current realities. This all follows on from this week's BBC Panorama programme Tax me if you can.

Where to begin?

I grew up in Jersey. I have an interest in the place and worked as economic adviser to the States of Jersey between 1987 and 1998. Before that I worked for a few years in the island's financial sector. I quit my previous career as a development economist to return to Jersey in my early 30s to study the tax haven phenomenom from within. What I encountered simply beggared belief: not just tax evasion on an industrial scale, but also insider trading covering most of the European bourses; market rigging; sanctions busting; illicit political donations; the lot. What disturbed me most was the way in which my colleagues in Jersey were totally indifferent to what was going. They took the money and turned a blind eye, and that includes the politicians and senior government officials I worked with for 11 years.

Now I'm told that things have changed during the ten years since I left the island. Not according to my friends in Jersey, however, and I'm talking about friends with whom I have kept in regular contact who work inside the finance industry. They stick firmly to the view that the laws enacted since 1998 are largely ineffective and amount to little more than window-dressing. Ditto Jersey's engagement in tax information exchange agreements (TIEAs). And I believe them, not least because whilst the Jersey authorities make great play about their engagement with tackling tax evasion, their marketing efforts suggest the exact opposite. For example, take this extract from a report by Jersey Finance (published December 2008):

The HMRC would not generally be able to compel information to be disclosed by Jersey subsidiaries and/or branches of UK institutions. . . A high threshold therefore exists before the Jersey authorities will accede to a request under a TIEA. For example in the past year, there have been just four requests from the US under the terms of the TIEA. There is no automatic exchange of information under any circumstances and no ‘fishing expeditions’ for information. Strict confidentiality provisions in the agreement preclude any information being passed to third parties without the express written consent of the requested country.

The "no automatic exchange of information" tells us all we need to know about the reality of Jersey's commitment to international cooperation in tackling crime. The TIEAs that Jersey has negotiated to date are all based on the OECD Model Agreement, which I have previously described as timid and distinctly sub-prime. These TIEAs have little of no deterrent effect and - as Jersey Finance readily advertises - the Jersey courts require a very high threshold of evidence before they will accede to these requests.

It is impossible to interpret the Jersey Finance statement as anything other than a statement of business as usual. I would seriously welcome detailed comments (non-abusive please) from those who think I'm being too harsh in this assessment.

If Jersey wants to be taken seriously in its intent to tackle financial crime, it should sign up to the European Union's tax information exchange model and accept automatic information exchange as the basis for international cooperation. I discussed this with Colin Powell from the Jersey Financial Services Commission in 2007, and he fully understands why TJN has these concerns about the ineffectiveness of 'by request' TIEAs and prefers the EU's automatic approach. Can anyone explain why Jersey (and the other Crown Dependencies) declined to join in with this process?

The Panorama programme shows a brief excerpt in which John Sweeney asked me whether, in a short sentence, Jersey is transparent. My reply, in a word, was no. I followed this up with a list (not broadcast) of ways in which Jersey lacks financial transparency. This covered tax information exchange (see above); not requiring public disclosure of beneficial ownership of companies; not requiring public disclosure of details of settlors and beneficiaries of trusts; not requiring public disclosure of annual financial statements, and so on. Until these issues are addressed, Jersey is and will remain a tax haven and a facilitator of crime. What my friend and colleague Jack Blum said about Liechtenstein, which he described as a party to felony, applies to all other tax havens that engage in the supply of secrecy services.

At TJN we regularly hear from tax havens that think we pick on them. I heard this complaint from officials in the Isle of Man when I was there last December. Ditto from the Swiss authorities. The Cayman Islands also think they're being picked on. In practice, TJN enumerates 72 tax havens and we demand that all are tackled in a non-discrimatory way - including the City of London, Delaware, Zurich, Luxembourg, Singapore, and so on.

But I keep coming back to Jersey for several reasons: firstly, I know the island very well and have excellent and loyal contacts there. Second, because the original sponsors of the international secretariat which I direct live in Jersey, and they rely heavily upon our support for their efforts to tackle the island's capture by bank, accounting and law firms. Third, because I have visited the island regularly over the past decade and each and every time have invited to politicians and officials to publicly debate our concerns. So far none have accepted my invitation (contacts at BBC Radio Jersey have told me that local politicians have regularly chickened out of debating with me on the Sunday morning Talkback programmes).

I will be back on the island in March, and will again be holding a public meeting to discuss TJN's concerns: will anyone from the finance sector or the Council of Ministers share the platform with me on this occasion? I can be contacted at I look forward to hearing from you.

John Christensen


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