The City of London - most important player in the global offshore system of tax havens

[dkf]

It seems to be that every big trading disaster happens in London,” U.S. congresswoman Carolyn Maloney observed last June. “And I would like to know why.” The disasters she was referring to were the ones that bankrupted Lehman Brothers and nearly bankrupted some other American firms, such as A.I.G. and MF Global, as well as causing JPMorgan Chase’s $6 billion loss at the hands of the trader popularly known as “the London Whale”—all of these happened to a high degree in the London branches of those firms and have cost the American taxpayer billions of dollars.

To answer her question and to understand why so much of the world’s money goes to London in the first place, you need to go back hundreds of years, to the emergence of what must be the most peculiar, the oldest, the least understood, and perhaps one of the most important institutions in the menagerie of global finance: the City of London Corporation. It is the local authority for “the Square Mile,” the pocket of prime financial real estate centered on the Bank of England and located about three miles to the east of Knightsbridge, along the Thames River. But the corporation is also much more, its identity embedded in—and slightly apart from—the British nation-state. The corporation has its own constitution, “rooted in the ancient rights and privileges enjoyed by citizens before the Norman Conquest, in 1066,” and its own lord mayor of London—not to be confused with the mayor of London, who runs the Greater London metropolis, with its eight million inhabitants. One sign of the City of London’s distinct identity is the fact that the Queen, on official visits there, will stop at the boundary of the Square Mile, where she is met by the lord mayor, who engages her in a short, colorful ritual, before she may proceed. Most Brits see this merely as a relic from a bygone age, a show for the tourists. They are wrong.

The lord mayor’s principal official role, his Web site says, is to be “ambassador for all UK-based financial and professional services.” He lobbies far afield, with offices in Brussels, China, and India, among other places, the better to “expound the values of liberalization” far and wide. The City Corporation and closely linked think tanks issue streams of publications explaining why finance should be less tethered by taxes and regulation. The corporation also has its own official lobbyist, with the delightfully medieval-sounding name of The Remembrancer (currently one Paul Double), lodged permanently in Britain’s Parliament. Local elections in the City are unlike any other in Britain: multi-national corporations vote alongside and vastly outnumber the tiny borough’s 7,400 human residents.

Over the centuries the City has thrived, thanks to a simple advantage: it has had money to lend when governments or monarchs needed it. So the City has been granted special privileges, allowing it to remain a political fortress withstanding the tides of history that have transformed the rest of the British nation-state. It has nurtured a British tradition of welcoming foreign money, with few questions asked, and so has for centuries attracted the world’s wealthiest citizens. “There the Jew, the Mahometan, and the Christian transact together,” Voltaire wrote in 1733, “as though they all professed the same religion, and give the name of infidel to none but bankrupts.”


The term “tax haven” is something of a misnomer, because tax havens offer escape routes not just from taxes but potentially from any of the rules, laws, and responsibilities of other jurisdictions—whether those be taxes, criminal laws, disclosure rules, or financial regulation. Tax havens are usually about parking your money “elsewhere,” in jurisdictions such as the Cayman Islands, beyond the reach of your home country’s regulators and taxmen. Or you park it in London: which is why some investment bankers have called it the Guantánamo Bay of finance. “The British think they do finance well,” says Lee Sheppard, a tax and banking specialist at the U.S. trade publication TaxAnalysts. “No. They do the legal stuff well. Most of the big investment banks there are branches of foreign operations. . . . They go there because there is no regulation whatsoever.”

James Henry, a former McKinsey chief economist, watched at close quarters the recycling of petrodollar wealth into Third World loans via London’s unregulated Euro-markets, which among other things enabled Wall Street to avoid New Deal-era banking regulations. Henry saw a global private-banking network emerge, following the money, “helping Third World elites abscond with hundreds of billions in diverted loans, illicit commissions, and corrupt privatizations, and park it in London and other tax havens.”


It comes as a surprise to most people that the most important player in the global offshore system of tax havens is not Switzerland or the Cayman Islands, but Britain, sitting at the center of a web of British-linked tax havens, the last remnants of empire. An inner ring consists of the British Crown Dependencies—Jersey, Guernsey, and the Isle of Man. Farther afield are Britain’s 14 Overseas Territories, half of them tax havens, including such offshore giants as the Caymans, the British Virgin Islands (B.V.I.), and Bermuda. Still further out, numerous British Commonwealth countries and former colonies such as Hong Kong, with deep and old links to London, continue to feed vast financial flows—clean, questionable, and dirty—into the City. The half-in, half-out relationship provides the reassuring British legal bedrock while providing enough distance to let the U.K. say “There is nothing we can do” when scandal hits.

http://m.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london

[Bill Ellson]

1. Conspiracy theories

Oh Dear! More conspiracy theorist codswallop from Geneva's Mr Shaxson. Very nice that he gives Switzerland a clean bill of health, but he should have mentioned that he lives there.

British financial regulators may be rubbish, but the London branches of US banks were meant to be regulated by US regulators.

The administrative county of Greater London is made up of thirty two boroughs and the City of London. It is not run by the Mayor of London. The Mayor is responsible for the London Fire Brigade, buses, main highways & some trains throughout the boroughs and the City. He is also responsible for policing in the boroughs. He has some say over town planning policy (zoning) and powers to overturn planning decisions made by the boroughs, or the City. Apart from policing his powers and responsibilities are the same in regard to the City as they are in regard to the boroughs. The vast majority of public services such as maintaining most roads and sidewalks, education, licensing of gambling & drinking establishment, social services, libraries, street cleaning, waste collection, provision of social housing are the responsibility of the boroughs or, in the square mile, the City of London Corporation. The Queen does not stop at the boundary on visits to the square mile.

The City Remembrancer is head of protocol at the City of London and his office is in the Guildhall. He is not lodged, permanently or otherwise, in Parliament. Businesses, a term that includes candy stores, churches, news vendors, public houses (bars), hotels and anybody or anything that trades can appoint voters but only in regard of elections to the Corporation (Voting is by secret ballot and nobody has more than one vote). Four of the City's twenty five wards are kept predominently residential (including a housing scheme on the eastern boundary), but they invariably elect much the same sort of people as the wards that have a large number of business voters

The City of London Corporation has no financial regulatory powers or responsibilities whatsoever. The British Government tolerates colonies operating as tax havens for the simple, albeit stupid, reason that it means the British taxpayer does not have to subsidise the various manky islands concerned. Stupid because the tax lost is far greater than the subsidy would need to be. Anybody who lives in the UK knows that our civil servants are more than capable of crass stupidly without any need for them to be lobbied by the City Corporation, the Illuminati or anybody else.

Vanity Fair trailed this article for weeks, leading people to believe that the owners of flats at One Hyde Park would be named. What we got is a rehash of speculation that has already appeared elsewhere (Anybody, anywhere can get the names of the offshore companies that the owners hide behind from the England & Wales Land Registry for a nominal fee.)

[kentuck]

2. Thanks for this link.

Good info