Tax Havens: a Key Enabler of Global Corruption

The tens of trillions of‘missing’ financial”assets we identify in this report are on a larger scale than any estimate hitherto produced, and substantially not counted in any inequality study. The impact on inequality implied by our new data is astonishing. We estimate that fewer than 100,000 people that is, 0.001% of the world’s population, now control over 30% of the world’s financial wealth.

Given the lead role played by leading banks, law firms, and accounting firms in ‘enabling’ all this dubious activity, authorities must develop far stronger compliance cultures and penalties for the pinstriped professionals and leading institutions who treat the facilitation of crime on a global scale as a legitimate source of profits.

- The Tax Justice Network, The Price of Offshore Revisited: Key Issues, July 2012

Half the world’s trade goes through tax havens. Most of Africa’s problems of poverty are due to tax havens illegally enabling dictators to hide trillions of stolen dollars. Without understanding offshore, we will never understand the history of the modern world.

- Nicholas Shaxson

What’s the REAL reason why so many bad people in the world seem to be able to become so rich, powerful and untouchable? Two words: TAX HAVEN.  

We’ve all heard of Swiss bank accounts and Cayman Islands tax shelters as ways to reduce your tax burden but are tax havens really just harmless money-saving accounting tricks? Tax haven service providers insist that they are used for legitimate purposes. Although they may argue that as their objective, the reality diverges far from the ideal.  Tax havens sell only one commodity, secrecy and this built-in lack of transparency makes them magnets for any and all manner of ill-gotten gains. Drug cartels, arms dealers and rogue nations all employ the secrecy of tax havens to hide their illicit and illegal financial transactions. Tax Havens are the other side of globalization. They have been proven to be quite literally at the heart of many, if not most of the greatest atrocities of the 20th and 21st century. For this reason alone, the relatively little benefit they offer to an already wealthy class of clients is far outweighed by the untold human misery they have caused and this justifies banning them globally.

If you want to know how global corruption can reach such dizzying heights, just think “tax haven” – they are the key enablers for corruption and fraud on a massive international scale. Corruption is synonymous with tax havens; the two go together like tea and biscuits.

There is no way to get rid of corruption without also eliminating tax havens and their code of secrecy. No matter how much practitioners try to legitimize it, stripped to its naked core, it is deception which lay at its heart. Those in the business of offering Offshore bank accounts or tax havens are in the business of aiding and abetting escape. They provide escape routes for anyone wanting to run from criminal laws, creditors, tax, prudent financial regulation – and above all, from democratic scrutiny and accountability. Those who operate tax havens get rich solely by providing these escape routes and protecting them from public scrutiny. Tax havens are, in fact, the biggest legalized criminals of all and it’s time to put them on the other side of the law. As Nicholas Shaxton, author of Treasure Islands says, tax havens escape routes transform the merely powerful into the untouchable.

Tax Havens

The New Economics Foundation’s 1st in a series of reports on the problems of international finance kicks off with Tax Havens. Used by wealthy individuals and companies to shift huge sums of money around the world in secret, tax havens cost governments and ordinary taxpayers billions of pounds. International efforts to tackle tax havens to date have been feeble, but there’s no reason why action can’t be taken. How can we put a end to such widespread tax evasion?

Capital Controls

Over the last few decades, governments around the world have worked hard to strip away all obstacles to the free flow of money from country to country. The idea is simple: the freer the money, the more prosperous we all become. But is free flowing money really the panacea it’s cracked up to be? Instead of aiding international development, there is evidence that it instead leads to asset bubbles, and the speedy transmission of financial crises from one country to another. Could capital controls be the answer?

Shadow Banks

Banks make extensive use of shadow banking to get around the rules, with worrying consequences. Shadow banking hugely exacerbated the fallout from Lehmans Brothers’ collapse in 2008 and yet there is now more banking-like activity going on in shadow banks than there is in banks themselves. This poses real risks to global financial stability.

The Tax Justice Network (TJN) is an independent organisation launched in the British Houses of Parliament in March 2003. It is dedicated to high-level research, analysis and advocacy in the field of tax and regulation. TJN works to map, analyse and explain the role of taxation and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens. TJN’s objective is to encourage  reform at the global and national  levels and are not aligned to any political party. TJN’s network includes academics, accountants, NGO’s, development organizations, faith groups, financial professionals, journalists, lawyers, public interest groups, trade unions and others.


  • to raise the level of awareness about the secretive world of offshore finance;
  • to promote links between interested parties around the world, particularly involving developing countries;
  • to stimulate and organise research and debate;
  • to encourage and support national and international campaign activity.


  • promote more local campaigns for tax justice, especially in developing countries;
  • provide a medium through which tax justice issues can be promoted within multilateral agencies such as the United Nations, the World Bank, the International Monetary Fund [IMF] , the Organisation for Economic Cooperation & Development [OECD] and the European Union.

A major Tax Justice Network study – THE PRICE OF OFFSHORE REVISITED

In July, 2012, The Tax Justice Network released a groundbreaking study entitled The Price of Offshore revisited.  James Henry, the lead author of the study is an expert on tax havens and former chief economist at consultancy McKinsey.

In the introduction to this very important study, Henry says “The very existence of the global offshore industry, and the tax free status of the enormous sums invested by their wealthy clients, is predicated on secrecy: that is what this industry really “supplies” as it competes for, conceals, and manages private capital from all over the planet, from any and all sources, no questions asked. We are up against one of society’s most well entrenched interest groups. After all, there’s no interest group more rich and powerful than the rich and powerful, who are the ultimate subjects of our research.”

The Price of Offshore Revisited: KEY FINDINGS 

 1. There is CONSERVATIVELY between $20 and $32 TRILLION DOLLARS in nontaxed dollars in tax havens.

A significant fraction of global private financial wealth – conservatively estimated at $21 to 32 trillion dollars as of 2010 – has been invested in virtually tax-free through the world’s continually expanding black hole of more than 80 “offshore” secrecy jurisdictions. This is believed to be a conservative estimate range.

The above is JUST FINANCIAL WEALTH and DOES NOT INCLUDE ASSETS such as real estate, yachts, racehorses, goldbricks and many other things that count as non-financial wealth which are also owned via offshore structures where it is impossible to identify the owners. This considerable amount of wealth was not within the scope of the study.

On this scale, this “offshore economy” is large enough to have major impact on estmates of

  • inequality of wealth and income
  • national income and debt ratios
  • significant negative impacts on the domestic tax bases of key “source” countries (countries that have seen net unrecorded private captial outflows over time)

 2. If  tax havens are taken into account, Developing countries are not in debt at all, but are lenders to the tune of $10.1 to $13.1 TRILLION DOLLARS at the end of 2010

The study focuses on a subgroup of 139 mainly low to middle income “source” countries for which the World Bank and IMF have sufficient external debt data. These are comprised of the typical “developing” country and such countries are usually considered to be in debt. A major finding of this study is that if offshore tax havens are factored into the equation, they are not debtors at all, but lenders.

Since 1970 with the illegal assistance of the international private banking industry, the private elites in this subgroup have accumulated between $7.3 to $9.3 TRILLION of unrecorded offshore wealth in 2010, conservatively estimated. This is while many of these countries public sectors are:

  • borrowing themselves into bankruptcy
  • enduring extreme austerity and structural adjustments
  • enduring low growth
  • holding fire sales of public assets
  • unable to make a dent in disease, poverty and education for their people

When aggregated foreign reserves are taken into account, most “poor” countries are not poor at all:

  1. Gross agreggate external debt of this 139 country subgroup: $4.08 trillion
  2. aggregate foreign reserves (invested in 1st world securities): 6.88 trillion
  3. difference: $-2.8 trillion

So developing countries are actually not in debt at all!

Add to this, now the unrecorded offshore assets:

  • low side of conservative estimate:  $2.8 trillion + $7.3 trillion = $10.1 trillion at end of 2010
  • high side of conservative estimate: $2.8 trillion + $9.3 trillion = 13.1 trillion at end of 2010

and the aggregated source countries are actually quite wealthy. The problem is that the rightful assets of these countries are (often illegally) held by a small number of wealthy individuals while the debt is shouldered by ordinary people. In terms of tackling poverty, it is difficult to imagine a more pressing issue than the connection between illegal tax havens and the poverty of developing countries all around the globe.

3. The world’s largest banks are complicent in illegal offshore havens that support this illegal capital flight

The study showed that at the end of 2010, the top 50 international private banks collectively managed $12.1 trillion in cros-border invested assets from private clients, including trusts and foundations. Major global banks are key players in many havens and therefore key enablers of the global tax injustice system.

This video produced by the American News Project explores the close connection between the ongoing financial crisis involving banks and tax havens, showing once again, how tax havens play a critical role in major economic crisis of modern civilization.

The financial crisis seems as if it emerged from nowhere and struck as hard and fast as lightning. How did so many financial institutions crumble with so little warning? There are many reasons, but one that has not been given much attention is how tax havens helped enable the mess — and how several of the big companies that have received billions of bailout dollars were also the most active in the shady world of offshore finance.

The Price of Offshores Revisited: NEWS REPORTS

Tax Justice Institute Network report on RT News

Tax Justice Institute Network report on Democracy Now

TED Talk on tax havens

The Price of Offshore Revisited: ANALYSIS TECHNIQUES

To come up with reasonable base estimate of the amount of money hidden in this secretive area of global financing, Henry and his colleagues used 4 techniques:

  1. a  “sources and uses”  model  for country by country unrecorded capital flows;
  2. an “accumulated  offshore  wealth” model;
  3. an “offshore  investor  portfolio” model;
  4. direct estimates of offshore assets at the world’s top 50 global  private  banks.

The estimates were compiled using data from World Bank, IMF, UN, central banks and national accounts to explicitly model capital flow in 139 key “source” countries that publish such data.  This was further supplemented by other evidence such as transfer pricing, mattress money, and other market research from consulting firms on the size of the offshore individual.

The Price of Offshore Revisited: DEMOGRAPHICS OF THE SUPER RICH

Table 1: Top income and income shares in the US, 2010 (Source: Inequality – You don’t know the half of it)   


 Figure 1: Ultra high net worth individuals 2011, selected countries (Source: Inequality – You don’t know the half of it)

The Pivotal Role of Tax Havens in Global Criminal Activity

The key selling point of tax havens is secrecy. Because of their ability to maintain secrecy in spite of law enforcement efforts to crack them, tax havens represent a safe haven for criminals and their ill-gotten gains. There is a wide spectrum of people who use tax havens;  from regular people trying to tax dodges to dictators and drug cartels hiding vast fortunes gotten through criminal activity to all the major banks of the world.

The impenetrable wall of secrecy of tax havens have played a key role in the global social disintegration of society because they enable theft at a national scale. Tax havens are tied to poverty, war, murder and theft by providing the world’s worst perpetrators of crime secrecy so that their plunder can be kept safe. Ruthless dictators from around the world use tax havens to hide the billions they have stolen from their people. Drug cartels use tax havens. If not for tax havens, these criminals would not be able to have safekeeping for their large amounts of stolen money.

It is startling to see how many recent news stories of human suffering of the past decades have been enabled by tax havens. Many of the most powerful people on the world stage have been and are intimately tied to tax havens:

  • Poverty in Africa
  • Industrial-scale corruption
  • Wholesale subversion of governments by criminalised interests across the developing world
  • Crooked African dictators who have left their countries bankrupt
  • Systematic looting of the former Soviet Union and the merging of the nuclear-armed country’s intelligence apparatus with organized crime
  • Saddam Hussein
  • North Korea’s Kim Jong-Il
  • Prime Minister Silvio Berlusconi’s strange hold over Italian politics
  • Robert Mugabe
  • The Elf Affair, Europe’s biggest ever corruption scandal
  • Arms smuggling to terrorist organisations
  • The growth of mafia empires
  • The illiegal drug trade -you can only fit about $1 million into a briefcase: without offshore, the illegal drugs trade would be a fraction of its size
  • Private equity and hedge funds – Goldman Sachs, Citigroup
  • The scandals of Enron, Parmalat, Long Term Capital Management, Lehman Brothers, AIG — and many more
  • The rise of multinationals
  • The explosion of debt in advanced economies since the 1970s
  • Complex monopolies, frauds, insider trading rings — corruptions of free markets always have tax havens at their heart

and last, but not least, every big financial crisis since the 1970s – including the great global crisis that erupted in 2007 – has been made possible through the tax havens!

Startling Stats

  • Assets held offshore, beyond the reach of effective taxation, are equal to about a third of total global assets
  • Over half of all world trade passes through tax havens
  • Developing countries lose revenues far greater than annual aid flows: 100 billion received, 150 billion go to tax havens.
  • Amount of funds held offshore by individuals is about $11.5 trillion – with a resulting annual loss of tax revenue on the income from these assets of about 250 billion dollars
  • This is five times what the World Bank estimated in 2002 was needed to address the UN Millenium Development Goal of halving world poverty by 2015
  • This much money could also pay to transform the world’s energy infrastructure to tackle climate change.
  • In 2007 the World Bank has endorsed estimates by Global Financial Integrity (GFI) that the cross-border flow of the global proceeds from criminal activities, corruption, and tax evasion at US$1-1.6 trillion per year, half from developing and transitional economies
  • In 2009 GFI’s updated research estimated that the annual cross-border flows from developing countries alone amounts to approximately US$850 billion – US$1.1 trillion per year

(Source: Tax Justice Network)

“Don’t tax or regulate us or we will flee offshore!” the financiers cry, and elected politicians around the world crawl on their bellies and capitulate. And so tax havens lead a global race to the bottom to offer deeper secrecy, ever laxer financial regulations, and ever more sophisticated tax loopholes. – Nicholas Shaxton, author of Treasure Islands.

A world without tax havens is a world without powerful drug cartels, who can only grow so big with the help of tax havens. Without them, all corrupt leaders in developing countries would find it exceedingly difficult to hide their stolen billions and developing countries can easily pay off their loan debts. In effect, tax havens aid and abet criminal theft on a massive scale.

I call tax havens secrecy jurisdictions because that is a more accurate term of what they do.  The looting of whole states could not happen without tax havens.

- Richard Murphy, Advisor, Tax Justice Network

Almost all African leaders are criminals who have stolen money that belong to the people and secretly stashed them in offshore accounts with layer upon layer of phoney companies. The tax havens are therefore, rightly considered as criminal accomplices who turn a blind eye and are key conspirators in this shell game. In the African continent alone, business-as-usual for those providing tax haven services to corrupt government official is nothing short of the continual suffering of hundreds of millions of people. Unless this is challenged, there can be no sustainable development in Africa or any other developing nation.

Tax havens and Offshore accounts are the equivalent of the concept of dark matter in physics – they represent the unseen and unknown force which profoundly affects the universe of development and prosperity in Africa.  It’s continuing presence place an invisible barrier to any real development in Africa. It creates the environment so challenging that Africa can never escape her poverty. The money is stolen and the debt is then borne by the poor people of the country. The elite benefit with complete impunity while there is wholesale subversion of entire countries.

History of the British Virgin Islands (BVI) Offshore Industry

The British Virgin Islands (BVI) is a micro-state consisting of little more than a few stretches of tropical beach, with a population of no more than 24,000. When Margaret Thatcher abolished exchange controls, this allowed British capital to move around freely. It was then that savvy British lawyers realised that they could make money by selling financial secrecy there.  It really took off though when the US invaded Panama in 1990, disrupting the traditional location for financial secrecy. Since then, this town of 24,000 has registered more than 1 million BVI companies and is by far the world’s biggest provider of offshore entities.

The BVI’s trademark secrecy operates at multiple levels:

  • The BVI government has no idea who actually owns the tax-free companies or what they do
  • The only significant information supplied to the official registry is the name of the company’s agent – one of the local firms who arrange incorporations and collect the hefty annual fees
  • The agents will typically refuse to release further facts to anyone
  • There is only one legal recourse – if definite evidence for prior criminal fraud is provided. In this case, the BVI courts will sometimes order a local agent to disclose what it knows
  • Even such a rare courtroom victory is empty though as the agents have many tactics to allow their client to get away:
  • Agents may even then only produce the names of sham nominee directors or shareholders, based in Nevis or Vanuatu or Dubai, where the British legal system is powerless.
  • Agents may claim they have no knowledge of the real buyer of the company, because they took all their instructions from a so-called “introducer” based in yet another country
  • The delay tactics are often costly and endless, giving suspects time to empty their accounts and cover their tracks

Secrecy is the British-based offshoring agencies main marketing tool. It is not illegal, and all agencies will insist they never knowingly assist wrongdoing. Here are a few of them:

  • Pendragon Management in London, run by a Dutch lawyer, Gerard Kelderman, provides Dutch, Belgian and Russian clients with BVI companies through London. Their slogans are “You need to find a tax haven with a good record in … financial privacy.” and  “I want to be invisible.”
  • the Stanley Davis Group is a family firm with offices behind Euston station, London. They claim “nominee officers and shareholders when confidentiality is a key issue”.
  • Fletcher Kennedy, run by Charles Fletcher from Haslemere, Surrey. He promises potential BVI customers: “The names of directors and shareholders do not appear on any public documents.”
  • Johnsons, an accountants’ firm in west London owned by Shaukat Murad, advertises “Maximum confidentiality and anonymity … Unlike many other jurisdictions, there are no disclosure requirements.”

Offshoring is not only a big business on the BVI, but it is the biggest business with 60% of revenues coming from it. Last year, the BVI collected $180m from registration fees, more than 60% of total revenue. The BVI’s prosperity depends on dirty money that has been the source of much of the planet’s suffering.

In a show of misplaced priorities, the UK government refuses to step in and make reforms. In a 2009 Treasury paper, Michael Foot, a former Bank of England official and Financial Services Authority managing director reported to the then Labour chancellor, Alistair Darling 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.

International Consortium of Investigative Journal expose Tax Haven Leak – 30 Years of Data and Massive Fraud 

I’ve never seen anything like this. This secret world has finally been revealed

This was the comment of a stunned tax haven expert, professor Arthur Cockfield of Queen’s University in Canada who reviewed some of the documents during an interview with the CBC. He said the documents remind him of the scene in the movie classic The Wizard of Oz in which “they pull back the curtain and you see the wizard operating this secret machine.”


This CBC Canada report covers the 2 million leaked secret tax haven files that implicate thousands of people around the world and how the ICIJ, an international consortium of journalists spent years piecing the information together. This revelation is sending shock waves around the world as the highest profile business and political leaders are now being investigated for tax evasion and worse.

Another newstory on the thousands of names simultaneously released by major news organizations participating in world’s biggest tax haven investigation
Indian news media story on ICIJ investigation and impact on India

A worldwide investigation lead by the International Consortium of Investigative Journalists (ICIJ)  with 86 investigative journalists from 46 countries has dealt a major blow to the illicit offshore tax haven industry. Tax prosecutors worldwide are salivating at the opportunities and this is a major global win for democracy and the people. The multi-year investigation represents one of the biggest cross-border investigative partnerships in journalism history.  It has resulted in the holy grail of tax haven investigation – exposing the mega-rich business and political despots known to have looted their countries wealth. The capital exposed is truly staggering – $32 trillions dollars or the combined economies of the United States and Japan. The investigation has finally stripped away the secrecy so coveted by offshore tax haven users.

Data leaked to ICIJ included:

  1. 260 gigabytes of data
  2.  2.5 million files
  3. more than 2 million e-mails
  4. four large databases
  5. half a million text, PDF, spreadsheet, image and web files
  6.  data originated in 10 offshore jurisdictions, including the British Virgin Islands, the Cook Islands and Singapore
  7. details of more than 122,000 offshore companies or trusts,
  8. details of nearly 12,000 intermediaries (agents or “introducers”),
  9. details about 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies

To analyze the documents, ICIJ collaborated with reporters from:

  1. The Guardian in UK,
  2. BBC in UK,
  3. Le Monde in France,
  4. Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany,
  5. The Washington Post in the US,
  6. the Canadian Broadcasting Corporation (CBC)

and 31 other media partners around the world. Eighty-six journalists from 46 countries sifted through emails, account ledgers and other files covering nearly 30 years. ICIJ’s 15-month investigation found that, alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world enables fraud, tax dodging and political corruption to thrive. The cache has already gone a long way in explaining unsolved crimes of the last 3 decades and criminal justice systems the world over are preparing massive criminal charges based on the released information.

Further analysis by ICIJ using sophisticated Free Text Retrieval (FTR) software systems /matching software found that about 40 percent of files and emails were duplicates.

Figure 2: NUIX Free Text Retrieval tool for analyzing the data

The investigation also yielded the many roles played in this industry:

  • “nominee directors,” whose names appear again and again, sometimes in hundreds or even thousands of companies.  Nominee directors are people who, for a fee, lend their names as office holders of companies they know little about.  It is a legal device widely utilized in the offshore world.
  • shareholders, directors, secretaries and nominees of companies and trustees,
  • “settlors” or “protectors” of offshore trusts,
  • power-of-attorney holders who direct the actions of third parties

Many of the structures are designed to conceal the true ownership and control of assets placed offshore.   Their identified addresses are spread across over more than 170 countries and territories.


Figure 1: Countries with active investigations (Source: ICIJ)

People and Organizations Implicated and being Investigated

  • Government officials and their families and associates in Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia and other countries have embraced the use of covert companies and bank accounts.
  • Nine of Indonesia’s 11 richest families, with a combined worth of $39 billion dollars have found shelter in tropical tax havens, holding ownership of more than 190 offshore trusts and companies. Six were closely tied to the late dictator Suharto, who helped a special circle of Indonesians grow rich during his 31-year rule by granting economic fiefdoms to family and friends. On its website, the Indonesian tax authority says that taxpayers and companies resident in Indonesia are subject to taxation on their worldwide income. This includes in tax havens.
  • Possible new clues to crimes and money trails that have gone cold.
  • The Dutch banks ING and ABN Amro registered dozens of companies for their clients in offshore refuges with lovely beaches and low tax rates such as the British Virgin Islands, the Cook Islands and the Malaysian island of Labuan, an investigation by Dutch newspaper Trouw and the International Consortium of Investigative Journalists has found.
  • Switzerland’s Clariden Bank, part of Credit Suisse, contacted the Singapore office of the offshore services firm Portcullis TrustNet to discuss a sensitive question. Clariden didn’t want to disclose to TrustNet the identities of its clients. Clariden officials were asking TrustNet  to break the law and blindly oversee an offshore company for anonymous wealthy individuals and record the bank as the “principal” in those entities, relying on the bank’s assurances that its clients weren’t involved in illicit activities.
  • Swiss lawyers are complicit in assisting the deception of billions of dollars with principle involvement from lawyers from Lenz & Staehelin, the largest law firm in Switzerland.
  • Many of India’s wealthiest are under investigation including:
    • Ravikant Ruia, who in December 2011 was accused of criminal conspiracy by India’s principal anti-corruption enforcement agency,
    • Teja Raju Byrraju. He is the eldest son of Ramalinga Raju, the former chairman of Satyam Computers, who was jailed in a fraud case that has been called India’s Enron,
    • Vijay Mallya, a flamboyant billionaire, liquor baron and elected member of the upper house of India’s parliament.
    • Vivekanand Gaddam, a member of the ruling Congress Party.  Gaddam is also vice-chairman of Visaka Industries, which produces about one quarter of India’s asbestos needs. Gaddam and his wife Saroja are listed as directors and shareholders of a BVI company called Belrose Universal Limited, which was incorporated in September 2008.
    • Sai Ramakrishna Karuturi (the world’s largest producer of cut roses) and his wife Anitha appear to have registered six BVI tax haven companies in 2007.
    • The late K M Mammen Mappillai, the founder of India’s leading tire manufacturer, MRF Tyres and whose family have registered a BVI company called Moon Mist Enterprise Limited.
    • Two prominent Mumbai-based jewelers, Rashmi Kirtilal Mehta and his son Bhavin Mehta. Father and son are shown as joint shareholders in a BVI company registered in 2004 called Bapaji Incorporated.
  • The mega-rich use complex offshore structures to own mansions, yachts, art masterpieces and other assets, gaining tax advantages and anonymity not available to average people.
  • Many of the world’s top’s banks – including UBS, Clariden and Deutsche Bank – have aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways.
  • A well-paid industry of accountants, middlemen and other operatives has helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct.
  • Ponzi schemers and other large-scale fraudsters routinely use offshore havens to pull off their shell games and move their ill-gotten gains.
  • Individuals and companies linked to Russia’s Magnitsky Affair, a tax fraud scandal that has strained U.S.-Russia relations and led to a ban on Americans adopting Russian orphans.
  • A Venezuelan deal maker accused of using offshore entities to bankroll a U.S.-based Ponzi scheme and funneling millions of dollars in bribes to a Venezuelan government official.
  • A corporate mogul who won billions of dollars in contracts amid Azerbaijani President Ilham Aliyev’s massive construction boom even as he served as a director of secrecy-shrouded offshore companies owned by the president’s daughters.
  • Maria Imelda Marcos Manotoc, more popularly known as Imee Marcos, eldest daughter of the late dictator Ferdinand Marcos is now under investigation as the ICIJ investigation has revealed her tax haven holdings but she did not report her offshore trust on asset disclosure statements as required to file as a governor. Andres Bautista, the chairman of the Presidential Commission on Good Government says“We are duty bound to investigate and, depending upon informed preliminary findings, decide whether to pursue the matter”  The commission is tasked with recovering the Marcos family’s alleged ill-gotten wealth. The justice secretary, Leila de Lima, also said she will order a preliminary investigation into the reports if the matter is referred to her agency. “If there is a positive finding, that’s the time to make a formal probe,” she was quoted by the news web site of GMA 7 television station. A human rights lawyer said he will also initiate an investigation to find out more about Imee Marcos’ offshore trust and see if it can be seized to compensate human rights victims of the elder Marcos’ martial law regime.
  • Rothschild family multi-layered complex network of 20 tax havens exposed:  Anon Trust, Benon Trust, Denon Trust, Agate, Begate, Cegate, Degate, Egate and Fegate Trusts. The companies have a common shareholder called Mandalor Limited, an equally opaque company based in the Caribbean country of Saint Vincent and the Grenadines.
  • Russian billionaires who use BVI offshore havens are being mysteriously murdered in the UK
    • fleeing oligarch, the Georgian Badri Patarkatsishvili, – a partner of fellow exile Boris Berezovsky – was found dead in 2008 in his Surrey mansion.
    • refugee from the law is the Kazakh billionaire Mukhtar Ablyazov, who was last seen in February allegedly heading out of London on a coach to France. Ablyazov has been sentenced to 22 months in jail for contempt of a UK court as the BTA Bank in Kazakhstan attempts to pursue his maze of offshore assets. The bank’s lawyers claim Ablyazov, who denies it, has made off with an astonishing £4 billion using BVI and Seychelles companies, nominee directors and layers of front-men.
    • Vladimir Antonov fled permanently to Britain after his father, Alexander, was gunned down in a Moscow street in 2009. Another associate, German Gorbuntsov, narrowly survived a volley of shots in London last March. When Antonov bought a luxury yacht in Antibes, the Sea D, he was careful to register its ownership to an anonymous British Virgin Islands (BVI) entity, Danforth Ventures Inc.  He also got his hands on enough cash to try to take over the ailing Swedish car manufacturer Saab, though he did not take control. He did succeed for a while in owning Portsmouth FC, the even more ailing British football club.  Antonov is currently on bail in Britain. Lithuanian authorities are trying to extradite him for allegedly looting their collapsed bank Snoras, which he denies.

Top Echelon of Politics and Business using Secretive Tax Havens Exposed


Bidzina Ivanishvili
Prime Minister, Georgia
Details:Georgia’s richest man, with a net worth estimated by Forbes magazine at more than $5 billion. Was elected prime minister in October 2012, straight from the business world.

Offshore business: Director of Bosherston Overseas Corp. in the British Virgin Islands (2006). The company is still in existence, according to BVI records.

Comment: “For the reporting period of 2011-2012 Prime Minister Ivanishvili had no interest in the company you have mentioned in your inquiry and therefore there was no obligation to report it in his declaration. The Prime Minister takes these reporting requirements seriously and everything is done according to the law,” a spokesman said.

Jean-Jacques Augier, Publisher, France

Details: Campaign treasurer of François Hollande for the 2012 presidential elections. They studied together at the prestigious National School of Management (ENA). He’s also chief executive officer of investment holding company Eurane SA, mainly focused on the publishing field.

Offshore businessShareholder — through Eurane SA — and director of International Bookstores Ltd (2005) in the Cayman Islands.

Comment: Jean-Jacques Augier said he used the company to do a large investment in China in 2005. One of his partners in the offshore firm was Xi Shu, a businessman and a member of the Chinese People’s Political Consultative Conference, a political advisory body in China dominated by the Communist Party but with representatives from other parties and organizations

 Bayartsogt Sangajav
Politician, Mongolia

Details: Became his country’s finance minister in September 2008, a position he held until a cabinet reshuffle in August 2012. During those years he attended international meetings and served as a governor of the Asian Development Bank, pushing the case for his poor nation to receive foreign development assistance and investment. He was at the forefront of encouraging foreign mining and other companies to move into Mongolia. He currently serves as deputy speaker of the Mongolian Parliament.

Offshore businessBayartsogt Sangajav controlled Legend Plus Capital Limited, an offshore company administered from Hong Kong but incorporated in the British Virgin Islands (2008). The documents show the company was used to open a secret Swiss bank account, controlled by Bayartsogt, just months before he was appointed his country’s minister of finance.

Comment: Bayartsogt said the company and the bank account were set up as a syndicate by him and three unnamed business friends to trade in stocks. Both the bank account and the company remain in his name, and he did not declare them to Parliament, something he now describes as a “mistake.” He said he was considering resigning from Parliament over the issue.

Valery Golubev and Boris Paikin

Gazprom, executives, Russia

Detail: Golubev is the deputy chair of the management committee of Gazprom, with personal ties to Putin dating back to the 1990s. Paikin is the general director of a Gazprom construction subsidiary called Gazprom Sotsinvest that builds projects such as a $200 million stadium in St. Petersburg and an Olympic ski resort.

Offshore business: Golubev held half of the shares of Sander International Inc., which was registered in the British Virgin Islands in 2008 and was dissolved later the same year. Paikin also held Sander International shares.

Comment: Golubev and Paikin did not respond to ICIJ’s requests for comment.

For more breaking news about the ICIJ report fallout, go here.

Nominee Directors

Nominee directors are the key to hiding the true identity of the actual account holder. In the Tax haven world, they are akin to “mules” in the drug world. They usually don’t have a lot of money themselves but they sign a legal document with the actual account holder that allows them to use their names in their sham companies. Furthermore, they know nothing of the companies operation. Many companies have been used for terrorist activities and others to launder drug money and still others to transact billions stolen from the people of entire countries. The nominee director knows nothing about this. They sign another document that absolves them from any responsibilities with the companies actions. In the Cook Islands, it is actually illegal to reveal the name of the actual account holder! Here we take a look at some of the more notorious nominee directors.

The ICIJ, working with The Guardian newspaper in England and the BBC’s Panorama program, identified a group of 28 nominee directors who have represented more than 21,000 companies between them, with individual nominees representing as many as 4,000 companies. Here are some of those nominee directors:

Sarah Petre-Mears -Nominee Director Extraordinaire, the woman who directs 1200 companies – and her husband 1100

In another remarkable discovery unearthed by the investigation, a British couple who have played phoney director in over 2,000 companies. At the age of 38, Bradford-born Sarah Petre-Mears is running one of the biggest business empires on earth…on paper, that is. Official records from the ICIJ investigation show her controlling more than 1,200 companies across the Caribbean, the Republic of Ireland, New Zealand and the UK itself. Her business partner, Edward Petre-Mears, is listed as a director of at least another 1,100 international firms. Intrepid Guardian journalist David Leigh finally tracked her down to the remote island of Sark in the Carribean to a small home in the sun, where she officially claims to be masterminding 1200 international firms.

She also finds time to run marathons and cycle races in New York, Florida and Hawaii, and to bring up her two children on the island. Leigh tried to ask her about the allegations made against nominee directors but she didn’t want to talk about it. However, the evidence the ICIJ gathered suggests that her impressive directorships are a sham. A DHL courier has for years been making regular overseas runs, carrying batches of company papers for Petre-Mears simply to sign in return for cash. How much harm did to people and planet is still to be determined.

Stan Gorin and Rik Vanagels of Latvia

Another set of  nominee directors with names on hundreds of companies are Stan Gorin and Erik Vanagels. From a base in Latvia, a tiny nation in the Baltics, their names have been attached to hundreds of corporations around the world, some of which can be linked to “grand corruptions.”

The ICIJ investigation showed that Gorin and Vanagels names are associated with sham companies associated with Muktar Ablyazov. Mukhtar Ablyazov, the former head of Kazakhstan bank BTA  stands accused in his home country of embezzling up to $5 billion from BTA in what British media describe asone of the biggest frauds in history. He fled Britain last year, where he had been living, shortly before being sentenced there to 22 months in jail for failing to disclose full details about his wealth, leaving behind a string of luxury homes financed allegedly using fake loans, backdated documents and offshore accounts.

They were also directors of two Panamanian registered companies, Systemo AG and Cascado AG that owned another Panamanian company, Waterlux AG, which was listed as the owner of a merchant vessel, the MV Faina, that captured by pirates en route from Ukraine to Kenya in September 2008. The ship was carrying  33 Soviet-made T-72 tanks, plus grenade launchers and small arms ammunition, destined for the rebel government of South Sudan, then under a United Nations arms embargo.

On July 9, 2003, a Panamanian entity linked to Gorin, Star Group Finance and Holdings, was used to register an entity in Washington, D.C., called Elite LLC which was subsequently used by the CIA to  to buy a former horse-riding academy outside Vilnius, Lithuania, in March 2004. The CIA built a secret prison there which opened in September 2004 and was later the subject of a European Parliament inquiry after ABC News reported that it was used to covertly and harshly interrogate suspected al-Qaeda terrorists.

Other now-famous nominee directors are:

Jesse Grant Hester — a nominee director based on the English Channel island of Sark and later the Indian Ocean tax haven of Mauritius — was the director for an Irish entity Candonly Limited, which an official inquiry later found was used by the regime of Iraqi dictator Saddam Hussein to cheat the United Nations’ Oil for Food Program.

Another Sark resident John Donnelly who lent his name as director to an Isle of Man company, Mil-Tec Corporation Ltd., which shipped rifles, rockets, mortar bombs and ammunition to Rwanda that were used in the 1994 genocide.

Michael Andrew Gray runs the Alterego Group, a Cyprus company that boasts in one email obtained by ICIJ: “We at Alterego Management are the visible other self. … The desire to obtain complete privacy, often bordering on total anonymity, is a major reason why so many professional firms do use our services.”

In an example of how much the players in the offshore world overlap, the data obtained by ICIJ reveals that one of Gray’s other clients was Roger Alberto Santamaria del Cid.

In October 2010, Santamaria was named in press reports as the Panamanian contact for an Internet investment scam, Imperia Invest IBC, which defrauded 14,000 investors worldwide of about $7 million. They included about 6,000 deaf people from the U.S. states of Utah, Maine, Wisconsin and Texas.

These nominee directors themselves have no conscience as is proven when after a crackdown by the British government, many nominee directors from Sark relocated to other jurisdictions like Cyprus, the United Arab Emirates, Mauritius and Ireland and, as the secret documents obtained by ICIJ show, they simply resumed operations.

No reason for legal existence of Nominee Directors

report released in January 2013 by the nongovernmental European Network on Debt and Development, “Secret Structures, Hidden Crimes,” finds that opaque legal structures are one of the key ways to hide the real ownership of entities that can sometimes facilitate tax evasion, corruption and related crimes.

“Using nominees is a key way of hiding the real owners,” says the report’s author, Alex Marriage. Investigators, he says, have “found no persuasive reasons for nominee shareholders.”

A June 2012 report from the U.K.-based advocacy group Global Witness points out that one of the problems is that legal authorities in the United States, United Kingdom and many other countries don’t hold nominee directors responsible for the conduct of the companies they front.

In addition, documents setting up offshore companies often include clauses that shield nominees from financial liability if the companies get sued.

“It is perfectly legal in many countries to avoid having your name appear as the director or owner of a company by employing the services of a nominee, whose name appears instead,” the Global Witness report states.

“Nominees are, in essence, renting out their name, and in doing so, providing the anonymity that corrupt officials, tax evaders and other criminals require to move dirty money around the world.”

(Source: ICIJ)

How the British Virgin Islands (BVI) enables Deception


Figure 3: The trick used by Tax Havens to hide your true identity (Source: Guardian)


The trick that allows a companies real owner to hide behind “Nominee” directors involves the sleight-of-hand of 3 pieces of paper:

Nominee directors are not actually illegal, and can sometimes be useful, for example in preparing “off-the-shelf” ready-made companies. But the legal conjuring trick behind the BVI nominee system opens the way to abuses. It depends on executing three formal documents:

1. A promise by a nominee director only to do what the real owner tells them.

A characteristic “nominee director declaration,” used in 2010 by the Vanuatu-based Taylor organization, reads like this:

I, Ian Taylor, Director BRAD LAND LIMITED, having agreed to the appointment as Director of a company duly incorporated under the laws of the British Virgin Islands. . . . hereby declare that I shall only act upon instruction from the beneficial owners.

2. Under a “general power of attorney” the nominee secretly hands back all control to that real owner.

This typically allows them to:

  • transact, manage and do all and every business matter
  • open any bank account and to operate the same
  • enter into all contracts
  • collect debts, rents and other money due

That example, signed by a Nevis-resident nominee director in 2005, gives back control of a BVI offshore company, Kordwell Holdings, to its secret Russian owner, 36-year-old Vladimir Bugrov in Moscow.

Offshoring agencies assure their customers that the truth about such arrangements will never get out. One typical agency, Fletcher Kennedy of Haslemere in Surrey, explicitly advertises: “Both the power of attorney and nominee director agreement are confidential documents designed to ensure our clients’ privacy.”

The more brazen nominees favor residence in self-ruling havens such as Vanuatu or Nevis because they aim to be beyond the reach of the developed world’s tax and legal authorities. But they avoid the BVI itself. Because the BVI recognizes British law, local residents could in theory be vulnerable to claims of legal liability from creditors and others.

One offshoring agency owner told Russians, his biggest customers according to our sources, that the only people prepared to provide such secret general powers of attorney were those Britons who had emigrated from Sark to more far-flung jurisdictions across the globe.

3. The third commonly-used document is a signed, but undated director’s resignation letter.

This supposedly enables a nominee to duck liability in the event of any trouble.

Ted Cocks and Joseph Sparks, for example, who share a flat in London’s east end, say this was the only one of the three documents they ever signed, as nominee directors of more than 200 Russian companies, and that they were never involved with the more exotic nominee practices.

(Source: Guardian UK)


Tax havens are the scourge of developing countries. Global Financial Integrity is a leader in transparency, with focus on illicit capital flows. Not surprisingly, a lot of their work centers around tax havens and offshore accounts. Here are just a few of the reports and findings:

2011 Illicit Financial Flows from Developing Countries: 2000-2009, Update with a Focus on Asia

Finding: Illicit outflows have increased to a range of US$1.26 trillion to US$1.44 trillion in 2008 and that, on average, developing countries lost between US$725 billion to US$810 billion per year over the nine-year period 2000-2008.

2012 Illicit Financial Flows from China and the Role of Trade Misinvoicing

Finding: Over the period 2000 to 2011, cumulative illicit financial flows from China totaled a massive US$3.79 trillion, if one were to exclude the country’s intra-regional trade with Hong Kong and Macao . We found that if adjustments for such trade were not made, the resulting outflows due to trade misinvoicing were significantly understated due to trade data distortions. The sharp rise in illicit outflows, from US$172.6 billion in 2000 to US$602.9 in 2011, implied an increase of about 7.2 percent per year in inflation-adjusted terms, which was just below the 10.2 percent average rate of economic growth.

2012 Mexico: Illicit Financial Flows, Macroeconomic Imbalances, and the Underground Economy

Finding: Over the period 1970-2010, cumulative illicit financial flows from Mexico amount to a massive US$872 billion; The outflow of illicit capital has grown significantly from around US$1 billion in 1970 to US$68.5
billion in 2010 after reaching a peak in 2007 when the value was close to US$91 billion;

2011: Transnational Crime In The Developing World

Finding: The global illicit flow of goods, guns, people, and natural resources is estimated at approximately $650 billion. Though data is scarce and experts are constantly debating the relative merits and weaknesses of every new study, it is generally accepted that illicit drug trafficking and counterfeiting are the two most valuable markets. This report finds the illicit drug trade to be worth roughly $320 billion and counterfeiting $250 billion.These numbers reflect the potential for huge profits which is the fundamental driver of criminal trade.

2010: The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008

Finding: India lost a total of US$213 billion dollars due to illicit flows, the present value of which is at least US$462 billion based on the short-term U.S. Treasury bill rate as a proxy for the rate of return on those assets  In all likelihood, this estimate is significantly understated because economic models can neither capture all the channels through which illicit capital can be generated nor the myriad ways in which the capital can be transferred.

While this estimated stockpile of illicit assets held abroad by resident Indian nationals falls far short of  the US$1.4 trillion reported by the Indian news media in the run-up to the General Elections in AprilMay 2009, the figure still represents a staggering loss of capital. If India would have avoided the flight of capital over such a long period, it would have enabled the country to either contract less debt or pay off the existing debt at the time. A country that is still struggling to eradicate poverty with a shortage of capital relative to its development needs can ill-afford to lose funds of such magnitude. The total value of illicit assets held abroad represents about 72 percent of the size of India’s underground economy which has been estimated at 50 percent of India’s GDP (or about US$640 billion at end 2008).

Some Revealing Infographics


Global Losses to Tax Havens 

Some US Tax Dodgers

 Tax Havens around the world 

  Accounting Firms

Corporate Thieves

At a time when the poor are asked to undergo severe austerity measures, large corporations are enjoying record profits and taxpayer-funded bailouts. As the economy slowly recovers from a financial crisis, nearly two-thirds of US corporations don’t pay any income taxes by abusing tax loopholes and offshore tax havens. According to a study from the non-partisan Government Accountability Office, 83 of the top 100 publicly traded corporations that operate in the US exploit corporate tax havens.

Since 2009, America’s most profitable companies such as ExxonMobilGeneral ElectricBank of America andCitigroup all paid a grand total of $0 in federal income taxes! Tax havens alone account for up to $1 trillion in tax revenue lost every decade, money that could be invested for the public good. If we, the public must pay our taxes, why don’t they? If corporations profit  shouldn’t they pay here?

UK Public Accounts Committee grilling Google, Amazon & Starbucks 

The committee concluded a savage indictment of the world of international tax, in a system constructed and jealously guarded by the OECD, which is no longer fit for purpose. While it rapidly became clear to the committee that tax avoidance is fundamental to the business model of all three companies, not one of them had the faintest idea how to defend their behaviour.

“It was one of the great committee disasters, like watching the Titanic, the Bismarck and the R101 all go down in the same afternoon.
. . .
MPs became outright rude: “It beggars belief”; “you cannot be serious!”; and “I don’t know what you take us for!”. Small smiles were followed by smirks and then outright hilarity. The man from Amazon was told he was a waste of space, had no information to bring, and the committee would summon someone else who might know what they were talking about. The government’s chief auditor, Amyas Morse, is normally punctiliously polite but even he snapped. He found the evidence “insulting“. – from the Guardian newspaper

In 2013, the book The Great Tax Robbery, a highly anticipated expose on how the UK evolved to become one of the world’s great tax havens.

 Private Eye journalist and former tax-inspector Richard Brooks reveals the scandalous proliferation of tax avoidance among Britain’s fat cats and how new measures from successive British governments actually make it easier. From offshore companies in Luxembourg to deliberate exploitation of developing countries, Brooks shows how a host of High Street names – including Vodafone, Amazon, Barclays, Topshop, and Boots – legally pay almost no tax in Britain despite multibillion pound profits. Unpicking the loopholes and bonuses that bankers and top sports stars like Wayne Rooney use to legally reduce their tax burden, this is a shocking expose of how the richest deprive the state coffers of billions – leaving us to pick up the bill. – Amazon

 Treasure Island, Uncovering the Damage of Offshore Banking & Havens

From Nicholas Shaxton comes a tell-all book about the mechanics of how tax havens and offshore bank accounts work – the secret weapon of the political and criminal elite. Shaxton reveals the critical role tax havens play in continuing the subjugation of the 99%. Shaxton writes:

Tax havens are the ultimate source of strength for our global elites. Just as European nobles once consolidated their unaccountable powers in fortified castles, to better subjugate and extract tribute from the surrounding peasantry, so financial capital has coalesced in their modern equivalent today: the tax havens. In these fortified nodes of secret, unaccountable political and economic power, financial and criminal interests have come together to capture local political systems and turn the havens into their own private law-making factories, protected against outside interference by the world’s most powerful countries – most especially Britain. Treasure Islands will, for the first time, show the blood and guts of just how they do it.

Millions of people have a queasy feeling that something is not right in the global economy – but they struggle to put their fingers on what exactly the problem is. Treasure Islands at last tells the real story of where it all went wrong. This is the great untold story of globalisation.

Tax havens are not exotic, murky sideshows at the fringes of the world economy: they lie at its centre. Half of world trade flows, at least on paper, through tax havens. Every multinational corporation uses them routinely. The biggest users of tax havens by far are not terrorists, spivs, celebrities or Mafiosi – but banks.

Tax havens are the ultimate source of strength for our global elites. Just as European nobles once consolidated their unaccountable powers in fortified castles, to better subjugate and extract tribute from the surrounding peasantry, so financial capital has coalesced in their modern equivalent today: the tax havens. In these fortified nodes of secret, unaccountable political and economic power, financial and criminal interests have come together to capture local political systems and turn the havens into their own private law-making factories, protected against outside interference by the world’s most powerful countries – most especially Britain. Treasure Islands will, for the first time, show the blood and guts of just how they do it.

Tax havens aren’t just about tax. They are about escape – escape from criminal laws, escape from creditors, escape from tax, escape from prudent financial regulation – above all, escape from democratic scrutiny and accountability. Tax havens get rich by taking fees for providing these escape routes. This is their core line of business. It is what they do.

These escape routes transform the merely powerful into the untouchable. “Don’t tax or regulate us or we will flee offshore!” the financiers cry, and elected politicians around the world crawl on their bellies and capitulate. And so tax havens lead a global race to the bottom to offer deeper secrecy, ever laxer financial regulations, and ever more sophisticated tax loopholes. They have become the silent battering rams of financial deregulation, forcing countries to remove financial regulations, to cut taxes and restraints on the wealthy, and to shift all the risks, costs and taxes onto the backs of the rest of us. In the process democracy unravels and the offshore system pushes ever further onshore. The world’s two most important tax havens today are United States and Britain.

Without understanding offshore, we will never understand the history of the modern world.

Poverty in Africa? Offshore is at the heart of the matter. Industrial-scale corruption and the wholesale subversion of governments by criminalised interests, across the developing world? Offshore is central to the story, every time. The systematic looting of the former Soviet Union and the merging of the nuclear-armed country’s intelligence apparatus with organized crime, is a story that unfolds substantially in London and its offshore satellites. Saddam Hussein used tax havens to buttress his power, as does North Korea’s Kim Jong-Il today. Prime Minister Silvio Berlusconi’s strange hold over Italian politics is very much an offshore tale. The Elf Affair, Europe’s biggest ever corruption scandal, had secrecy jurisdictions at its core. Arms smuggling to terrorist organisations? The growth of mafia empires? Offshore. You can only fit about $1 million into a briefcase: without offshore, the illegal drugs trade would be a fraction of its size.

Private equity and hedge funds? Goldman Sachs? Citigroup? These are all creatures of offshore. The scandals of Enron, Parmalat, Long Term Capital Management, Lehman Brothers, AIG — and many more? Tax havens lay behind them all. The rise of multinationals, the explosion of debt in advanced economies since the 1970s is substantially an offshore tale. Complex monopolies, frauds, insider trading rings — these corruptions of free markets always have tax havens at their heart. As Treasure Islands explains in vivid, thrilling, horrifying detail, every big financial crisis since the 1970s – including the great global crisis that erupted in 2007 – has been a creature of the tax havens.

These problems all have other explanations too. Tax havens are never the only story, because offshore exists only in relation to elsewhere. That is why it is called offshore.
Without understanding the tax havens, or the secrecy jurisdictions as I often prefer to call them, we cannot understand the world. Treasure Islands at last starts to fill this gigantic hole in modern history.

Author Nicholas Shaxson, Treasure Island

How Big are Tax Havens?

Figure 1: Size of  UK, tax havens: 2/3 the entire country’s budget. (Source: New Economics Foundation)