In the City, however, the Bank of England loved the idea of setting money free, so it did. “It is par excellence an example of the kind of business which London ought to do both well and profitably,” a Bank official wrote in 1963. “If we were to stop the business here, it would move to other centres with a consequent loss of earnings for London.”
At that time, the market was worth around $5 billion. Within four years, it was worth $13 billion. By the end of the Sixties, it was worth $40 billion. That was when other countries started to surrender, to scrap their own efforts to stop their banks from leaving, and the market really took off. Now, it’s the biggest in the world: all dollars are offshore, so are pounds, euros, Swiss francs and — with a few exceptions — pretty much every other currency in the world.
This business model did not stop there. Our financial professionals looked for countries whose governments were imposing limits on wealth that its owners found onerous, and undercut them. In the Cayman Islands, Americans found a ready haven for all the money they didn’t want to pay taxes on, and this once-obscure turtle-fishing archipelago is now a world class financial centre. In the British Virgin Islands, tycoons from China and criminals from Latin America found cheap, opaque shell companies to hide their ownership of assets behind. And in Britain itself, generations of oligarchs — from the oil-rich countries of the Gulf, from the ex-colonies of Asia and Africa and, of course, from the post-communist countries of Eastern Europe — found a warm welcome.
What we offer them is a haven: not just a tax haven, but an everything haven. They can buy property here and they don’t need to tell anyone about it, because they can hide their ownership behind a shell company. They can manage their liquid wealth here too, either in a discreet bank or a boutique private office. They can send their children to one of our world-class schools, buy their art at one of our auction houses, and meet their friends at a ritzy restaurant while their wives and/or mistresses shop at Harrods (because, let’s be honest, these oligarchs are pretty much all men).
If a business rival complains about them, they can settle the dispute in our commercial court, thanks to our world-leading legal sector. And if they want to keep an eye on how their adopted country is run, they can dine with a minister for not much more than they’d spend on a holiday. They can buy anything in London and, thanks to the way politicians have starved our enforcement agencies, no one with the power to do anything about it will ever know if the wealth was honestly acquired.
Politician after politician has stood up in parliament to insist there is no place for dodgy money in London. But then the lobbying starts. Every one of these sectors — finance, law, estate agencies, auction houses, education — starts arguing for exceptions and loopholes, and nothing gets done. In 2014, for example, after it was revealed that specific shell structures called Scottish limited partnerships had been used to launder money stolen from Moldova, politicians from the Scottish National Party campaigned for the law to be tightened. Not only did this not happen, but the Treasury actually deregulated the structures further, so as to protect the competitive advantage of the City.
This is a supercharged version of that same business model cooked up by Moscow Narodny and the Midland back in the Fifties. It is reliant on British regulations, enforcement and oversight being weaker than those of other countries, so wealth comes here, and we can earn fees from it. It is not just oligarchs that benefit from our offshore services, but corporations too: the City earns fees from any wealth, whether honestly or dishonestly acquired.
The risk is obvious. If it isn’t enough that Britain is depriving other countries of money they need, and driving down levels of tax and regulations everywhere by providing a haven for the wealthy, we are also acting like a giant Florida for an magnified version of Al Capone’s gangsters, and giving them a playground from which to threaten the world. We are privileging the interests of the few over the wishes of the many, whether those happy few are evil, naughty, or just publicity-averse.
This is not a revelation. Multiple parliamentary enquiries have revealed the seriousness of the problem in recent years, including the Intelligence and Security Committee’s (ISC) 2019 probe into Russian wealth in the UK. Truss should be commended for saying she will do something, but let’s wait until the laws are on the statute books before congratulating her. After all, Boris Johnson battled to prevent the ISC’s Russia Report being published at all — and that is not the action of a man looking to put democracy before money.
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