Tax havens and money laundering

El Pais Spain | JOAQUIN ESTEFANIA

The first initiative President George W. Bush sought to impose after the September 11 attacks was that of financial vigilance, i.e. the control of money being handled by terrorists. This was easier said than done, given that much of this money is in tax havens, and there is no legislation to control it. With their usual pragmatism, the Americans made some changes. The Patriot Act placed banks under the obligation to report any "suspicious" activity; and the law reforming the secret services, enacted late last year, contained a clause that allows the government discreetly to inspect international bank transactions to detect supposed terrorist activities.

The laundering of "black" money is not just an illicit financial operation; it also stimulates criminal activities and spurs organized crime. The authorities have never really tried to make public opinion aware of its real significance. Right now, in Spain, the police and judiciary are forging ahead with the so-called "Operation White Whale," aimed at searching out the origins of a vast network of "black money," apparently of largely criminal origin, in the southern coastal resorts of the Costa del Sol. This network might appear to be unusual. But in fact these sorts of money laundering operations are an everyday occurrence.

According to data from the Association for Taxation on Transactions in Aid of Citizens (ATTAC), "the most prudent calculations, though difficult to verify in a field where the law of silence reigns, indicate that the global volume of dealings in money proceeding from the illicit activities of different criminal organizations, what may be called the Gross Criminal Product, amounts to no less than E 800 billion annually, equivalent to 15 percent of world trade."

ATTAC estimates that the quantity of money deposited in tax havens amounts to five trillion dollars, some 2.4 million front companies being registered in these places. Loretta Napoleoni, who has studied the economic theory of terrorism, speaks of a $1.5 trillion system, with this huge sum being made up largely of drug trafficking, but also involving oil, arms, precious stones and human beings.

Faced with this, the Spanish government has just implemented a European Union directive from 2001, with the aim of strengthening the coordination between different professional sectors of society (lawyers, notaries, banks, magistrates) in a bid to close all channels for the laundering of criminal capital.

Resolving the clear contradictions between this directive and the daily conduct of civil society (the professional secrecy or confidentiality of lawyers, notaries, etc.) was the stated objective of a well-attended debate held last week at the Madrid College of Notaries.

Here, the members of the Spanish notarial profession considered the absurd paradox involved in imposing more or less strict vigilance on companies registered in the offices of Spanish notaries, while at the same time allowing the operation - to all legal effects and in complete impunity - of some 100,000 implausible companies registered in Gibraltar, the final traces of which are always lost in some banking institution in the tax havens. Or the existence of front companies in Europe (Isles of Man or Jersey, Andorra, Liechtenstein, Monaco, San Marino, Malta, Cyprus) and in Delaware in the United States, which do not comply with the security and identification requirements normally demanded in most major states, and which have no controls or operative restrictions.

Some days ago, the ATTAC representative in Spain presented to the secretary of state for the economy, David Vegara, a set of proposals for tighter controls: the standardization of national legislation concerning financial crime via the adoption of preventive measures (registry and follow-up, European public control of financial clearing-houses, prohibition of banks accepting funds from tax havens, or opening off-shore subsidiaries); creation of a European agency dealing with tax fraud; lifting of bank secrecy, with the threat of punishment of non-cooperating states; and compulsory transparency by firms regarding the activities, subsidiaries and capital invested in risk countries.

Should these norms not figure among the basic standards of good corporate governance, which has recently been the focus of so much discussion?

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