Let’s track the vacations of our Congresspeople and Senators in Caribbean countries. Why is that important? There are 17 bank secrecy jurisdictions in the Caribbean: Bermuda, the Bahamas, St. Martens and the Caymans, to name a few. People with secret bank accounts always visit their money.
There are over a hundred bank secrecy jurisdictions in the world, including the vacation islands off our eastern shores–convenient for elected officials, cabinet members, agency heads, other sleazy pols, business people, multi-national corporations, judges, dictators, drug lords and others who wield enough power to peddle their influence for large payoffs.
It is so easy to take untraceable bribes! And Congress has done nothing about it for decades. After 9/11, the U.S. got some concessions from Caribbean banks for verifiable terrorist accounts, which has obviously not affected the sleazy depositor growth of these banks. There are plans to do something (finally) with a bill called the Illicit Cash Act, which would allow regulators to require the true ownership of shell corporations. Congress hasn’t meaningfully addressed money laundering since the Bank Secrecy Act of 1970. We’ll have to see if they actually do something meaningful about it. I’m skeptical. In fact, I doubt it. I will place the bet that a number of these Congresspeople and Senators have secret off-shore bank accounts. There’s an undisclosed conflict of interest, if ever there was one! The only question is how many of them are conflicted? Life experience informs me. I believe there are many.
Average Americans believe Washington politics is corrupt. So do I and, I believe, it’s not Republicans or Democrats. It’s both. Corruption has no political party. Too many of our elected official are guided by self-interest. They are perpetually focused what it will take to get re-elected, keeping their ride on the gravy train. Wouldn’t that explain Trump Republicans who trashed The Donald as a candidate and have kissed his ass ever since? Most politicians seem to leave Washington as multi-millionaires. Few Presidents have left office without a high net worth. Harry Truman and Jimmy Carter jump to mind as exceptions.
We are all familiar with Swiss banks, the long-time haven for illicit wealth. Like Swiss banks, the bank secrecy countries, by law, will not disclose any bank account holder’s information: account balances, transaction history or even the identity of the account holder. Any bank officer or employee in such countries who provides any information about a bank customer is guilty of a felony, punishable by imprisonment. Officers in those banks have been convicted and given lengthy prison sentences, as an example to others.
U.S. subpoenas from Federal courts are rejected and ignored. U.S. wrongdoers are immune to scrutiny for taking bribes, avoiding U.S. taxes and hiding or laundering dirty money.
Years ago, I half-jokingly said, I’m going to run for President with the platform that I would invade the Caymans, sending a destroyer with a battalion of Marines and dozens of IT specialists aboard. After the Marines take over the banks, the IT people would do a deep dive into each bank’s account records, identifying all U.S. citizens with accounts.
We would find many Americans with accounts that were not identified on their yearly tax returns. (The 1040 form requires disclosure of any off-shore accounts.) The Caymans banks alone would likely produce billions of dollars in unpaid taxes. The Caymans have an estimated trillion dollars or more in assets. Staggering.
The International Consortium of Investigative Journalists (ICIJ) dropped a bomb in 2016, the so-called “Panama Papers”, and the shock waves still continue. In 2017, they released the “Paradise Papers” with information on many more accounts hidden in these tax havens.
Working with off-shore attorneys and receiving 11.5 million secret files, the Panama Papers reveal that 140 politicians from more than 50 countries, worldwide have accounts in these tax havens. To date, more than $1.2 billion in back taxes and penalties have been collected by governments around the world due to the revealed documents in the Panama Papers. Believe it or not, that’s chump change.
In the Paradise Papers, released in late 2017, the ICIJ acquired massive data on other bank customers the world over. Jeffrey Epstein’s fortune, or a lot of it, has been found in those files. There will be more to come on Epstein and others.
An economist, Gabriel Zucman, who has reviewed the ICIJ data, estimates Swiss banks account for $2.4 trillion from foreigners. Estimating lost tax revenue from U.S. citizens, Zucman believes we are losing $30 billion a year and U.S. multi-national companies are avoiding $120 billion, by shifting profits to Bermuda. Luke Harding, a Guardian reporter who was involved with ICIJ on both the Panama and Paradise Papers, commented that we thought this shadowy, off-shore world was part of our economic system. It is our economic system. See https://www.icij.org
If we are to reveal the scoundrels among us, we need to understand how this sustainably corrupt system works–and so does Congress. Otherwise, Federal remedies will be inadequate and perhaps purposely so. Here’s how it works.
Off-shore accounts in a Caribbean bank secrecy jurisdiction are commonly set up by local lawyers who have a monopoly on work with those banks. U.S. lawyers and other foreign counsel cannot practice in those countries. Local lawyers have created “shelf corporations” which are made-up companies with no assets or officers. They sit on a shelf until a new depositor arrives at the lawyer’s office. They are empty “shell corporations,” as they are more commonly called, awaiting new bank customers who don’t want their deposits in their names. The phony shell corporation is the depositor and its incorporators and initial officers are lawyers in the law firm. Nowhere in the incorporation papers is the real depositor named.
How, then, does someone seeking to bribe an American Congressperson or Senator execute the payoff?
A hypothetical will be illustrative. Suppose that Putin, through one of his oligarchs, wants to bribe an influential Senator– Mitch McConnell, for example. How would the Putin puppet make the payoff without detection? Putin’s stooge might go to George Town in the Cayman Islands, work with one of the law firms on the island and choose one of many banks and trust companies as a place to do business. (There are almost 600 banks and trust companies in the Caymans.) Putin’s buffer would use a phony shell corporation, created by the lawyers, as the new depositor. He would deposit, say $50 million, take a signature card for the account to McConnell, have him sign it and return McConnell’s signature card to the bank. McConnell would receive the account number and contact information for the bank officer on his next vacation in the Caymans.
A $50 million bribe takes place and the funds never moved from the bank of deposit. No paper trail to McConnell, no ability to follow the money. Best of all, no Federal subpoena could require the bank to disclose Senator McConnell’s ownership of the account.
The use of offshore banks is an issue of enormous magnitude, world-wide. The International Consortium of Investigative Journalists has accessed massive amounts of data, opening up a window to secret depositors who come from many parts of our economy, just about any super-wealthy individual who wants to avoid taxes is a potential customer. The worst of it is the corrupt politicians who get payoffs to comply with their benefactor’s needs and demands, not those of their constituents and dictators who rape their countries’ economies, without regard for the poverty of their own people.
Congress may pass more laws requiring the shell corporations to disclose their true owners, but if you don’t use your shell corp as an investment vehicle in the U.S., no one would know the name of the buffer corporation. The law would be a band-aid coupled with a lot of political self-congratulations. In the hypothetical above, no one would know Mitch McConnell’s corporate name and they wouldn’t get it from the bank. His identity would not be visible to Federal regulators. The Senator could invest outside the U.S. or launder his American investments through other entities. A toothless Act of Congress would be ineffective.
The trove of data the Investigative Journalists acquired was likely from hackers and limited to some banks. The possibility that the good Senator’s secret account is discovered is very minimal.
Lost tax revenue is billions of dollars a year, and may be a great deal more than the $30 billion a year estimate. These banks must be shut down globally. Confiscating account records of a few Caribbean banks will create instant flight of account balances to secrecy havens elsewhere in the world. This would take a concerted and unrealistic effort, worldwide.
The best we can do, near-term, is to concentrate on American depositors’ records close to home in the Caribbean. The recovery to the U.S. Treasury would be tens if not hundreds of billions of dollars. We need legislation but we’ll also need enforced cooperation of these Caribbean nations. That may require economic sanctions and strong-arm negotiations. Either that, or send in the Marines.
We will either succeed with recovered taxes and penalties or make it harder for American depositors to hide money than the ease of vacation trips so close to our shores.