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Article
Publication date: 5 July 2013

Mary Alice Young

The paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres – particularly following the recent…

Abstract

Purpose

The paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres – particularly following the recent publicity and BBC expose surrounding the criminal use of offshore financial centres. It proposes that there has long been concern over the illegitimate uses of offshore financial centres and that the continuing exploitation of them by criminals is, in part, attributed to the West's use of these financial hotspots. The paper outlines the previous attempts by global regulatory bodies to curb money laundering in offshore financial centres and explores some of the reasons for the continuation of money laundering in offshore financial centres.

Design/methodology/approach

The paper was compiled by accessing and analysing primary and secondary data which is publicly available. The analysed data were complemented by the author's new theory of the West's collusion with offshore financial centres as a possible reason for the superficial commitment to anti‐money laundering laws and guidelines.

Findings

The findings in the paper conclude that even though there have been global efforts to combat money laundering in offshore financial centres, there is little commitment from the offshore financial centres themselves, and the West, to effectively implement anti‐money laundering regulations.

Originality/value

This paper fulfils a gap in the literature by exploring the relationship between the West and offshore financial centres – more specifically the West's continued use of these centres acts as an incentive to avoid relaxing tight banking confidentiality laws. Further research in this area is needed to assess the full impact of the West's relationship with offshore financial centres.

Details

Journal of Money Laundering Control, vol. 16 no. 3
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 1 April 2002

Terry Dwyer

Offshore financial centres are coming under increasing pressure from both the OECD and the European Union. They are seen by many bureaucrats and politicians in OECD…

Abstract

Offshore financial centres are coming under increasing pressure from both the OECD and the European Union. They are seen by many bureaucrats and politicians in OECD countries as facilitating criminal activities such as laundering drug money as well as tax evasion and tax avoidance by residents of high‐tax welfare states. While there are good reasons for nation states to cooperate to suppress criminal activity, this is not true in relation to tax competition. The notion that by engaging in ‘harmful’ tax competition, offshore financial centres are damaging the legitimate interests of OECD nations has no sound foundation in economic theory. Competition in tax matters is beneficial and world welfare enhancing. Governments of offshore financial centres serve their own and the world's interests by providing zero or low tax environments for global business and investment and they are right to insist that treaties on criminal matters should not be used to enforce other countries' tax claims.

Details

Journal of Money Laundering Control, vol. 5 no. 4
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 1 June 2002

Richard J. Hay

This paper considers supranational initiatives ‐ particularly those emanating from the Organisation for Economic Co‐operation and Development, the Financial Action Task…

Abstract

This paper considers supranational initiatives ‐ particularly those emanating from the Organisation for Economic Co‐operation and Development, the Financial Action Task Force and the Financial Stability Forum ‐ proposing changes in the regulation of offshore financial centres. The implications of the withdrawal of US support for elements of the initiative are reviewed. The underlying rationales for change are considered, as are the probable and appropriate response for the stakeholders in the offshore centres, including governments, financial institutions and clients.

Details

Journal of Financial Regulation and Compliance, vol. 10 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 1 February 2001

Nand C. Bardouille

An offshore sector makes reference to financial services and non‐financial services frameworks in a country/territory. Clientele who make use of these services are…

Abstract

An offshore sector makes reference to financial services and non‐financial services frameworks in a country/territory. Clientele who make use of these services are non‐residents of the given jurisdiction. In these service frameworks assets can be diverted to, and business/financial affairs conducted in, an environment where a package of favourable regulatory incentives are in place to benefit clients who would ordinarily not be privy to such regulatory regimes in onshore jurisdictions. These regulatory incentives typically comprise incorporation mechanisms as regards commercial holding companies or overseas subsidiaries in client‐friendly fiscal and exchange control environments.

Details

Journal of Money Laundering Control, vol. 4 no. 4
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 20 July 2012

Philip Morris

The Isle of Man, a British Isles offshore jurisdiction located in the middle of the Irish Sea, has experienced three separate bank collapses during a relatively brief 26…

Abstract

Purpose

The Isle of Man, a British Isles offshore jurisdiction located in the middle of the Irish Sea, has experienced three separate bank collapses during a relatively brief 26 year period. These collapses have affected in excess of 20,000 depositors and inflicted significant damage on investor confidence in the Isle of Man as an offshore finance centre. The purpose of this paper is to trace the evolution of deposit protection during this time frame, teasing out the delicate balance required in small offshore jurisdictions between rigorous standards of investor protection on the one hand and the vital importance of remaining competitive with rival offshore finance centres on the other. It critically evaluates the recently enacted Isle of Man deposit compensation scheme (DCS) by reference to this organising principle.

Design/methodology/approach

The paper outlines the nature of the Manx jurisdiction and its offshore development. Focussing on the period 1982‐2010, it discusses the three separate bank collapses and insular regulatory and legislative responses. The focal point of the paper is a critical evaluation of the new Isle of Man DCS including comparisons where appropriate with deposit protection schemes in the Channel Islands offshore jurisdictions of Jersey and Guernsey and discussion of the extent to which the new Isle of Man DCS complies with specific features of recently formulated international best practice standards.

Findings

The paper reports that insular regulatory and government responses to bank collapses have tended to be distinctly short‐term and reactive. Despite being the first small offshore jurisdiction in the world to embrace the principle of deposit protection in 1991, there has been a conspicuous failure in the Isle of Man to develop related financial safety net policies, and the overriding motive for the introduction and indeed continuation of deposit protection has been to repair enduring reputational damage inflicted on its offshore finance centre by successive bank failures. The new Isle of Man DCS conforms to this model, reflecting insular anxieties regarding risks of lost banking business to rival offshore jurisdictions as opposed to rigorous standards of investor protection.

Originality/value

Analysis contained in this paper sheds light on the problem of effective deposit protection in small offshore jurisdictions, including tensions in policy terms between principled investor protection and finance centre reputational and competitiveness concerns. It also highlights, more broadly, the endemic problem of delivering optimum investor protection at (small) jurisdictional level in the context of international banking groups operating on a multi‐jurisdictional basis and deploying entrenched business models which operationalise offshore banking arms as essentially vehicles for the onward transmission of liquid funds to treasury functions located in parent groups' home jurisdictions.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 1 March 1993

Tajudin Bin and Isa

To stimulate the financial sector further, the Malaysian government has established an International Offshore Financial Centre (IOFC) on the island of Labuan. The…

Abstract

To stimulate the financial sector further, the Malaysian government has established an International Offshore Financial Centre (IOFC) on the island of Labuan. The setting‐up of the IOFC provides new challenges for the enforcement community. Recent financial scandals involving offshore financial centres have highlighted the need to protect the IOFC from crimes and financial abuses and at the same time to ensure confidentiality is adhered to. In the paper, the Malaysian Offshore Banking Act 1990 is examined. The Offshore Banking Act, under certain conditions, allows a public officer to gain access to banking information. Stringent entry requirements are applied to banks and businesses but the bottom line is that bankers are expected to exercise responsible banking and a high standard of prudence.

Details

Journal of Financial Crime, vol. 1 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 6 July 2012

Olatunde Julius Otusanya and Sarah Lauwo

In addition to contributing to the supply side of corruption in Africa, the West has historically played a major role in laundering the proceeds. The Offshore Financial

Abstract

Purpose

In addition to contributing to the supply side of corruption in Africa, the West has historically played a major role in laundering the proceeds. The Offshore Financial Centres (OFCs) are characterised as jurisdictions that attract a high level of non‐resident financial activity. The purpose of this paper is to examine how senior political figures, their relatives and close associates have used OFCs in moving funds that may be a product of foreign corruption into Western countries.

Design/methodology/approach

The paper locates the role of OFCs within the political economy theory of globalisation to argue that mobility of capital has been promoted by a number of advanced countries and micro‐states that use their sovereignty and law‐making powers to create an environment conducive to anti‐social practices by the major corporations and the political elite. The paper uses publicly available evidence to illuminate the role played by offshore financial centres in facilitating elite money laundering practices.

Findings

The evidence shows that, in pursuit of organisational and personal interest, the offshore financial centres create enabling structures that support illicit activities of the political and economic elite from developing countries. The paper concludes that the establishment of money laundering laws and the creation of anti‐money laundering agencies had not brought about ethical conduct within the global banking systems.

Practical implications

It is impossible to quantify the volume of money laundered, but it has been estimated that money laundering may account for as much as 5 per cent of the world economy.

Social implications

Substantial amounts of illicit money undoubtedly flow out of developing countries. Combating money laundering is a key goal in all democracies, due to its corrosive efforts on the rule of law, economic development, democratic principles, and its serious consequences for people everywhere.

Originality/value

The paper examines predatory practices of the international financial industry in money laundering activities.

Details

Journal of Money Laundering Control, vol. 15 no. 3
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 14 May 2018

Peter Yeoh

This paper aims to examine tax leakages in secrecy financial centres.

Abstract

Purpose

This paper aims to examine tax leakages in secrecy financial centres.

Design/methodology/approach

This qualitative study relies on primary data from relevant statutes and secondary data from the public domain and in particular academic sources. The study makes concurrent use of the case study approach.

Findings

The study reinforces existing suggestions that tax evasion is significantly widespread from advanced to emerging economies. It also suggests serious enforcement difficulties because of light-touch surveillance among competing tax havens and financial professionals. Further, while relevant laws are in place to deal with illicit activities, enhanced transparency is needed to quell the problem and, in this instance, public access to beneficial owner data such as exemplified by UK’s public registry approach. The US Foreign Account Tax Compliance Act is proving to be effective, and similar expectations are raised for the equivalent the Organisation for Economic Co-Operation and Development initiative from 2017 onwards.

Research limitations/implications

The paper is constrained with the general limitations associated with qualitative studies. These are, however, mitigated by triangulations of perspectives and so on.

Practical implications

The findings have implications for policymakers and the business community.

Social implications

The findings could help to narrow inequality gaps between and within economies.

Originality/value

The paper combines insights from high-profile cases with those from academic sources. The analysis is also undertaken from the combined perspectives of law, economics and accounting. It also focuses in secrecy issues in both offshore and onshore financial centres.

Details

International Journal of Law and Management, vol. 60 no. 3
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 1 April 2002

William Witherell

Offshore finance, the provision of financial services to non‐residents, includes the traditional bank activities of the borrowing and lending of money together with other…

Abstract

Offshore finance, the provision of financial services to non‐residents, includes the traditional bank activities of the borrowing and lending of money together with other services such as fund management, insurance, trust business, tax planning and international business corporations (IBCs). Defining offshore financial centres is more problematic, since practically all financial centres provide some offshore financial facilities. A recent IMF background paper gives a good working definition of an OFC:

Details

Journal of Financial Crime, vol. 9 no. 4
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 1 December 2002

Jackie Johnson

Offshore financial centres (OFCs) have again come under the spotlight. They have been accused of aiding terrorists by laundering their financial resources, allowing the…

Abstract

Offshore financial centres (OFCs) have again come under the spotlight. They have been accused of aiding terrorists by laundering their financial resources, allowing the funding of terrorism to go undetected. Their role as tax havens have also been highlighted in the collapse of Enron, a company that used OFCs to avoid paying millions of dollars in US tax. In response many OFCs have agreed to freeze terrorists’ assets, tighten money laundering legislation, provide a more open tax system and share information. There are, however, some OFCs that are resisting the mounting pressure to conform to international standards. These will become targets once more in June, 2002, when the Financial Action Task Force starts the process of identifying jurisdictions that ‘lack appropriate measures to combat terrorist financing’.

Details

Journal of Financial Regulation and Compliance, vol. 10 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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