City of London: Tax haven in the heart of Britain (2011)
newstatesman.com
newstatesman.com
Anecdotally - I spoke to a Goldman Sachs guy who quit - he made software to flag “suspicious” transactions. He said it flagged millions everyday. Money coming in from Saudi Arabia, Gibraltar, Panama, Jersey etc.
I asked him why did he quit? This seemed like a useful thing. Stopping such transactions is a good thing, no?
He said “you don’t understand. All the software did was flag the transactions. It didnt stop them. It just marked them as ‘suspicious’”
I was blown away. “Why have a piece of software that just flags the transactions and does nothing??”
He said “Because that’s what the law demands. And so that when we get caught, we can go to the Parliament in the inquiry and say ‘you’re absolutely right, our software did mark this as a problem!’”
Even when the opportunity cost of doing so was in the billions...
The software OP mentions probably flagged transactions internally to another team to review, any genuinely suspicious ones would have then had a SAR submitted.
[0] https://www.nationalcrimeagency.gov.uk/what-we-do/crime-thre...
But generally: everyone has implemented US FACTA. All the old-style tax havens bar one or two have implemented (all the BOTs have). Laundering your money through London is an unbelievably bad idea, and has been for a long time (FATCA was the end, the US applied this extraterritorially so any bank that wanted to operate in the US had to comply globally).
What people get confused about is: it is perfectly legitimate to have money in any of the locations you mention (it helps you avoid exactly zero tax) but it isn't legitimate to not report those accounts to your tax authority (and all UK institutions, even in BOTs, are legally obliged to report the names/details of people involved in transactions...no question), and if that local tax authority chooses not to act on that information there is not much that can really be done (some places have said they won't comply i.e. Russia but most tax authorities aren't communicating tax information back to banks anyway).
Btw, software that flags suspicious transactions is used everywhere and that information is acted on (the FCA has regulators who check this, for what should be obvious reasons banks tend to be careful about who exactly does these investigations...if you work in this job, the FCA goes through your personal emails, they investigate your family, they investigate your friends, all your bank accounts are monitored...it isn't a joke). The issue is more often that the software doesn't work (i.e. a certain location has been flagged as high-risk but the software doesn't flag it)...and even then, firms are fined tens of millions on the spot if faults with their software are discovered. It is difficult to say that the UK is soft (particularly when most of the large scale tax loss is governments collaborating with large corporations to funnel profits).
Moving money from Jersey isn't a crime.
We also did this with the Bribery Act 2013.
Why even bother write a detection software then? Just flag all transactions, and you get the same level of plausible deniability.
/s
Flagging is nothing, it would flag based on name similarity and all kinds of stuff but a human would have to review it. They use scoring, review clients and transactions while prioritizing on that score. Half of their time goes on optimization of the scoring and detection as the human review process is resource intensive.
If they had a system rising millions of flags, the first thing they would do is to reduce these flags to a manageable level. There’s no way that so many transactions are high risk, they would get rid of clients rising that many red flags if those are legitimately risky transactions.
If they don’t do good job in the compliance department, they receive multiple billion dollar fines. Simply, no client is valuable enough to risk these fines. Rise some flags and you’re out and reported to a regulator, they’re not going to let you flood the system with questionable transactions.
Do you folks realize being able to read everyone's communications and being able to see, verify and control all financial transactions is the exact same curtailing of liberty?
Despite being intangible like communications, transactions are perhaps better evidence that something tangible has happened or is about to happen.
It's absurd in a lot of big cities, simply because land is scarce and governments fail to see that this leads to a failing market. On top of this, they fail to plan the construction of new houses.
If I were someone who needed defensible transfers of large amounts of wealth in discreet transactions, London real estate laws certainly are convenient.
Not sure if this is still going on, but it was pretty big a decade or two ago.
https://www.middletemple.org.uk/about-us/freedom-information...
https://londonist.com/london/things-to-do/middle-temple-hist...
lol. The only ones selling bank secrecy these days is Hollywood action movies. It died out in the real world years ago. All the major offshore locations report holdings to the US tax authorities (FATCA) and the EU tax authorities (CRS).
> Then there is the City’s Cash, “a private fund built up over the last eight centuries”, which, among many other things, helps buy off dissent. Only part of it is visible: the Freedom of Information Act applies solely to its mundane functions as a local authority or police authority. Its assets are beyond proper democratic scrutiny.
Tax laws aren't the sole way of ensuring financial transparency.
It's not exactly a coincidence that the City is in the center of London. Or rather the rest exists around it. London's prosperity is linked to it's existence to some extent. Services account for 77% of London exports & a big chunk of that is financial services.
“An investigation into the world of Britain’s secrecy jurisdictions and the City of London. Today, up to half of global offshore wealth may be hidden in British offshore jurisdictions and Britain and its offshore jurisdictions are the largest global players in the world of international finance.”
I'm not an expert on the topic but I found the book hard to put down.
edit: The book: https://smile.amazon.com/Treasure-Islands-Uncovering-Offshor...
So now, like in old good times, UK plays on par with US.
Secondly, it's not beneficial to the UK in the mid and long term because this money flows into assets like London real-estate without providing any actual jobs or innovation, thus not providing any value to ordinary British citizens while pricing them out of the city.
It's endemic corruption on both sides, and a direct result of the lack of British competitiveness in most other fields for decades now. The UK is well on its way from being the world's most inventive nation to an oversized Canary Islands.
So, it will increase rents for the landlords. Good for the UK overall? No. Good for people on the real-estate business (a lot of them very well connected politically)? You bet)
> it will increase rents (received by) the landlords
might be a better wording
Some examples:
> The term “tax haven” is a bit of a misnomer, because such places aren’t just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering.
There are no laws, rules, or taxes which apply everywhere else in the UK which don't apply in the City.
> A few examples illustrate the carve-out. Whenever the Queen
The queen is a purely ceremonial figure.
> The Remembrancer, whose position dates from the reign of Elizabeth I, is the City’s official lobbyist in parliament
That particular official is unique to the City, but other local authorities have their own lobbyists in parliament:
https://www.local.gov.uk/parliament
> The City Corporation is different from any other local authority. Here, hi-tech global finance melds into ancient rites and customs that underline its separateness and power with mystifying pomp. Among the City’s 108 livery companies, or trade associations
The livery companies don't play any role in the government of the City.
> They were astonished to find that the corporation was a big shareholder in the development - a public authority acting as a private company, outside its jurisdiction.
I can believe that this was something unique back in 2002, because that was before local authorities were granted the "general power of competence". But they got that in 2011, and now it's routine for them to make investments in all sorts of things.
https://www.local.gov.uk/sites/default/files/documents/gener...
> Unlike any other local authority, however, individual people are not the only voters: businesses can vote, too.
Nope. Businesses can appoint some of their employees as voters, and the voters can then vote. The businesses get to chose who is a voter, but votes are by secret ballot as usual, so they have no real influence on the actual voting. You can read the rules here:
https://www.cityoflondon.gov.uk/about-the-city/voting-electi...
> Political parties are not involved - candidates stand alone as independents - and this makes organised challenge to City consensus all but impossible.
It's not that political parties are banned or anything, just that they so far haven't managed to unseat independents. Mostly - Labour won five seats in the 2017 elections.
> This “missed time” is significant, Glasman says, because it means the City’s rights pre-date the construction of modern political Britain, and this has placed it outside parliament’s normal legislative remit.
The City has various rights and privileges that don't stem from legislation, because they're so old. But that doesn't mean they're outside parliament's legislative remit. If parliament passed an act changing something in the City, that thing would change. It's a similar situation to royal prerogative powers.
> So, the corporation has two main claims to being a tax haven: first, as a semi-alien entity, floating partly free from Britain (just as the Cayman Islands are), and second, as the hub of a global network of tax havens sucking up offshore trillions from around the world and sending it, or the business of handling it, to London.
Neither of which make it a tax haven in any sense at all.
> Not only that, but the Lord Mayor and colleagues promise to “take up cudgels on behalf of the City anywhere in the world on any subject which is of concern to the City”.
Yes, in much the same way as every local authority will work to advance the interests of its local businesses - including Cornwall:
https://www.cornwallti.com/about-us/
Honestly, this article is sensationalist nonsense.
Those are indeed formal powers the crown has, but in practice, they are used strictly in accordance with convention, rather than at the queen's discretion. The crown is a sort of legal machine which operates through the physical body of whoever the monarch happens to be at the time. It would be much better if all that was properly set down in law, but in practice, it works smoothly enough that nobody has bothered.
Except in Australia:
https://en.wikipedia.org/wiki/1975_Australian_constitutional...
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