Tax justice group calls for global transparency push after Bahamas leak

A tax justice group has called for the urgent need for a global push to produce public registers of beneficial ownership, following the release of the latest data leak relating to offshore companies based the Bahamas. 

The call for action by the Tax Justice Network follows the news of the leak on Tuesday evening, as reported here, by the International Consortium of Investigative Journalists, Süddeutsche Zeitung and other media partners that has produced a free, online and publicly-searchable registry of offshore companies set up in the Bahamas.

In a statement released by the organisation it said that these latest leaks demonstrate the need for all nations to move ahead with “not only with full public registers of beneficial ownership of companies, but also foundations and trusts”. “It is unacceptable that the offshore industry continues to peddle secrecy to the wealthy and powerful that is at such great cost to societies around the world,” the statement read.

The UK is currently in the process of introducing such a register and the first batch of data on beneficial ownership of UK companies is now online. Other European countries such as the Netherlands have also committed to introducing such a register.  

US resistance

However, as reported, many offshore centres (including the United States) are resisting the global movement towards increased transparency. World leaders must now mount a renewed effort to open up the global financial system to greater public scrutiny, and they need to consider imposing meaningful sanctions on countries refusing to participate, the Tax Justice Network, said.

‘Tolerance of dirty money’

“Bahamas has taken an attitude of selective non-compliance with its own laws, and it is now pushing out this message with a nudge, nudge, wink, wink,” said Nicholas Shaxson of the Tax Justice Network. “The Bahamas is on a par with Panama in terms of its thirst for, and tolerance of dirty money.”  

Moran Harari of the Tax Justice Network, added that it has expected a leak from the Bahamas for some time. “For many of us who study tax havens it was just a matter of time before a major scandal hit the Bahamas. The country has been a world leader in tax havens for decades,” he said

“Our research shows that the Bahamas is one of the most secretive countries in the world in terms of financial services. And it is aggressively resisting international efforts to create a more responsible financial services sector.” 

The Bahamas has been a concern for many years according to the Tax Justice Network’s Financial Secrecy Index. 

The Bahamas offshore legacy

According to the Tax Justice Network’s report The Bahamas was one of the pioneers of the offshore finance industry with Al Capone’s money launderer Meyer Lansky playing a crucial role in setting up the legal framework of the country to transform it into a haven for money launderers in the 1960s. 

“Today the country is one of the most secretive jurisdictions in the world when it comes to offshore finance”, the Tax Justice Network’s statement read. 

The firm’s Financial Secrecy Index (click here for link) combines the secrecy of a country with its size as a global player in terms of the amount of money flowing through it. In total the Bahamas was ranked 25th out of the ninety-two jurisdictions globally that the company investigated making it a “significant offshore jurisdiction”. 

The country hosts more than 90,000 offshore companies, 6,000 trusts, 500 foundations, and 700 investment funds. It is thought that the majority of clients in the Bahamas come from Latin America, but since data on this is not published, the Tax Justice Network said that it can “only speculate”. The Bahamas was controversial law firm Mossack Fonseca’s third favourite jurisdiction where they set up 15,915 entities. 

A growing problem 

The Tax Justice Network statement added that recently it has seen the Bahamas take an “increasingly aggressive stance” against global efforts to improve governance of the financial system. Along with Singapore and Panama, the Bahamas is one of the few countries which has not signed up to multilateral automatic information exchange. This is a process that would allow government authorities from around the world to share financial information about who holds offshore accounts in their jurisdictions.

Instead, the Bahamas has signed up to a bi-lateral approach, which will allow it to pick and choose which countries it shares information with and the Bahamian government is also actively promoting itself as an offshore destination of choice, sending delegations around the world to market the country as an offshore centre, the statement said.  

Markus Meinzer, a director of Tax Justice Network, said: “With Panama now increasingly cooperating with automatic exchange of financial information, there is no other secrecy jurisdiction that is so openly seeking to attract dirty money to its shores.” 

 “However, more cooperation between tax authorities is not enough to deal with the problem. The high profile leaks from tax havens we have seen over the last few years demonstrate that action only happens when the issue is brought out into the open.”   

“What we urgently need now are public registers of beneficial ownership, so that hiding money offshore becomes much more difficult for the world’s financial, political and criminal elites,” added Meinzer.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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