The chapter begins by tracing the origins of banking secrecy and links its exponential growth since the post-war period to the creation of offshore financial centres (OFCs) – sometimes called tax havens. This proliferation of OFCs situated against the backdrop and transformation of capitalism into a global over-financialised neoliberal system. OFCs are popularly identified as ‘tax havens’ but low taxation and planned tax avoidance are only one aspect of the operations facilitated by these jurisdictions. In fact, we argue, that it is not only the concept of ‘secrecy’ but the lack of connection between economic activity and financial presence with the intention of ousting the laws of the place of economic activity what remains problematic.
In the second section we trace the geopolitical context which harboured the origins of two types of OFCs: those based on traditional banking secrecy such as Switzerland and, a more complex model of OFCs articulated largely around corporate vehicles and secret trusts led by the United Kingdom and its many Overseas territories and Crown Dependencies. In the third part we examine international and national regulatory efforts during the last ten years addressed to end secrecy and situate them against the embedded regulatory framework that enables the continuation of ‘business as usual’ in financialised global capitalism. We argue that ‘secrecy’ and lack of transparency are at the centre of a very specific type of ‘regulation’ that enables private and corporate groups to interact with quasi-public agencies to derail any transparency reforms. Instead a variety of legal instruments operating largely within the offshore financial system (OFS) have created an opaque, red-circled area where regulation is used to insulate economic flows and capital from democratic scrutiny and taxation.
The fourth part focuses on the UK and the City of London which despite wagging a public war against banking secrecy in public operates a small empire of OFCs through its relationship with British Overseas Territories (BOT) and Crown Dependencies (CD). We discuss how the legacy of an imperial territorial network and the flexibility of the common law have facilitated the creation of the world’s most sophisticated and secretive offshore centre, just a few miles away from Westminster and the successive but ultimately unfruitful efforts to increase transparency and regulate the financial services industry. We conclude that regulatory proposals that could address the nefarious impact of tax havens on global development, democracy, public services and the fight against poverty are not difficult to implement but they lack political backing.
The main claim of this chapter is that it is regulation and not lack of it, as it is usually assumed, what enables financial secrecy and tax havens. The type of regulation we refer to is the product of a carefully calculated and pervasive policy of isolation of regulatory spaces from the democratic process (Sousa Santos, 1987; 2002) enabled by the institutionalization of an international constitution of and for capital (Gill, 2002; Gill and Cutler, 2014) that is at the core of the unaccountable, mostly corporate, capitalist elite that is ravaging the welfare state (Blanco and Grear, 2019). Offshore financial centres play a pivotal role in today’s globalised financial sector and enable the symbiotic relationship between questionable financial practices and global neoliberal techno-capitalism to the detriment of the poor and, ultimately, of democracy. We conclude by reflecting that while regulation continues to be sponsored by the financial and banking industry it would remain an enabler of privilege.