In 1956, with its Empire collapsing in the wake of the Suez crisis, Britain faced political and economic crisis. As Sterling came under intense pressure, the Bank of England took an extraordinary step; without fanfare or public scrutiny it allowed London-based banks to shift their international lending from pounds to dollars.
Importantly, the Bank chose to not regulate this new ‘offshore’ market since these transactions could be deemed to be happening ‘elsewhere’, even though in reality the trades occurred in British sovereign space. Quite where ‘elsewhere’ is was of no concern to the Bank; the important thing, from the point of view of London banks, was that no other regulatory authority – not even the U.S. Federal Reserve – had the power to regulate this new market, which became known as the Eurodollar market.
I was born in 1956 and grew up in the British Channel Island of Jersey. As a teenager I witnessed Jersey’s transformation into an offshore satellite of the City of London. In the 1960s, as the Eurodollar market exploded in scale, British banks (not to mention banks from Canada, France, Germany, India, the Netherlands, Switzerland and the United States), rushed to take part in this unregulated bonanza, and then established offshore subsidiaries and branches in Saint Helier where they could book their profitable trades without paying UK taxes.
Business boomed. And not only in Jersey. With support from British government departments, other British dependencies vied for a slice of the action. Bermuda chased the offshore reinsurance market. The British
Cayman Islands chased business from North America. Anguilla, the British Virgin Islands, Gibraltar, the Turks & Caicos islands, and others, also piled in to offshore financial services.
By the mid-1970s, as I left school, the Eurodollar market had grown so big that it was larger than the global stock of foreign exchange reserves. And with wealth pouring in from across the planet, London and its offshore satellites were booming. For the City bankers and their colleagues in Cayman and the Channel Islands it seemed you truly could have your cake and eat it.
But not everyone was convinced about the merits of this exercise in unregulated financial markets. In February 1978 I joined a working group of Oxfam policy wonks in London. They were discussing the roots of poverty in resource-rich countries African and Latin American countries, and had noticed huge unaccounted outflows of wealth from these continents, almost all of which appeared to head northwards to Europe and North America via offshore secrecy jurisdictions.
While we didn’t fully understand the mechanisms that enabled these outflows, we had no doubt that the scale of capital flight was so enormous that it was thwarting the development of entire nations. We also had no doubt that the City of London was a major player in this process of looting poorer countries of their wealth and in protecting Britain’s secrecy jurisdiction satellites from political attempts – at the United Nations, for example – to rectify the policy and regulatory flaws that enabled capital flight and tax dodging on such an immense scale.
In 1979, after finishing my professional training as a forensic investigator, I decided to make tax havens the focus of my research, first at university and subsequently as an offshore practitioner. That explains why, in 1985, I headed south from London on my motorcycle to Portsmouth and then on by ferry to Jersey, where I worked undercover as an insider for almost thirteen years.
This was the start of a journey into the dark heart of tax havenry, taking me from working for one of the global Big Four accounting firms to being appointed economic adviser to the government of Jersey. Along the way I spoke with hundreds of bankers, lawyers, accountants, officials from the senior Whitehall departments, at the OECD in Paris, and the IMF in Washington, seeing at first hand the downright criminality of the pinstripe infrastructure of professionals who operate from secrecy jurisdictions like Jersey.
I also discovered that secrecy jurisdictions had moved from being minor players on the economic periphery to becoming the beating core of financial capitalism, with London as its epicentre.