Financial fraud in the Virgin Islands: Money laundering by the filthy rich

Published: June 27, 2013
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The tiny British Virgin Islands may be hosting one of the largest financial fraud of current times. PHOTO: REUTERS

Located within the larger Caribbean region, the British Virgin Islands (BVI) are a British dominion, resembling paradise on earth and attracting over a million tourists annually.

Famous for their enchanting landscape and white beaches, the Virgin Islands host wealthy vultures who have made these islands their second home by laundering money in to evade taxes in their countries of residence. In fact, these tiny islands may be hosting one of the largest financial fraud of the current times. Trillions of dollars are stashed into bogey financial institutions run by middle men and front men on behalf of the global money launderers. As described by Washington Post in a recent article:

“Today, there are between 50 and 60 offshore financial centers around the world holding untold billions of dollars at a time of historic U.S. deficits and forced budget cuts. Groups that monitor tax issues estimate that between $8 trillion and $32 trillion in private global wealth is parked offshore.”

Interestingly the offshore business is nothing new. The rich and wealthy around the globe have always been finding ways and means to bluff their governments and stash money in distant lands. Whereas it may be pertinent to put the blame on individuals stashing huge amounts in foreign countries, host governments are equally responsible for this game of sleaze that greatly benefits them. No wonder the British Prime Minister, David Cameroon is under tremendous pressure by the media and the European Union to check financial fraud being committed under the very nose of the British exchequer.

The system operates through a complicated network of dummies. These dummy companies are set up to lure the filthy rich. Money laundering vultures may even create dummy companies on demand to maintain full secrecy. This system of middle men, money swindlers and lawyers is a good shield against legal complications. That is why it took almost three years for International Consortium of Investigative Journalists (ICIJ) to detect this grand fraud and blow the whistle. ICIJ ended up obtaining 2.5 million records of more than 120,000 companies and trusts created by  tax evaders.

In a recent development, big wigs from developing countries from Asia, Latin America and Africa have joined the bandwagon, turning tax fraud into a global game. The Indian finance ministry has already ordered an inquest into the reported discovery of more than 600 wealthy Indians having secret accounts in the Virgin Islands.

Asian countries involved in money laundering include the Philippines, Mongolia, Iran, Indonesia, India and yours truly, Pakistan. Whereas India has inquired into allegations of money laundering in the British Virgin Islands, Pakistan remains silent. A fair estimate suggests that Pakistan may be able to net vultures with millions of dollars stashed in these islands.

The case against dubious offshore accounts can be summarised in the words of The Independent, which came down hard on the morality of tax havens:

“Tax havens epitomise unfairness, cheating and injustice. They replace the old morality embodied in the Golden Rule of reciprocity – that we should do as we would be done by – with a new version that insists that those who have the gold make the rules.”

The newly elected government must set up a mechanism to investigate and prosecute tax evaders. Only then can an equitable, growing economy be established.

 

adeela.naureen

Adeela Naureen

A freelance columnist for the Herald newspaper in Zimbabwe who is working on socioeconomic and political issues confronting South Asia and Southern Africa as well as Cost of the Long War in Afpak region.

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • http://. Abid P. Khan

    @Author:
    “….The newly elected government must set up a mechanism to investigate and prosecute tax evaders. Only then can an equitable, growing economy be established.”

    .
    I love your sense of humour.Recommend

  • IK

    Imran Khan has been suggesting the solutions for long time. Lets implement it

    Declaration of assets and tax returns of all MNAs and other govt. officials
    End ‘Benami’. Any unnamed or non-declared asset can be confiscated by the govt.
    Spend money on the govt. and obtain measures of austerity so that the public realizes that their money is spent on them.
    Recommend

  • Namo4PM

    “David Cameroon”?
    really not a great article, Straight off wikipedia.
    Recommend

  • http://EU Genius

    No government in the world will be seen to be doing anything about it as it is the same governments who have never done anything about it as yet. The understandable reason is that the god i.e. “Money” is worshiped by the people and money can buy everything. Money buys those people in the government. So how can anyone in those governments around the world will be prepared to bite the hands that feed them? Just think about it.
    We all can see there are some very brave people in the world. They are whistle blowers. They put their career and life on line in the service of the people. But what do the people do in response for the bravery of such people. Nothing. So what message people give to such brave people by their inaction? So we can see it is the people like us who are the real culprit and our own enemies. What have we the people done to put pressure on the officials to rectify the wrongs? Nothing. Is it not bad time that people everywhere in the world started to organise themselves. Charity begins at home. They need to start organising themselves from their home localities. Do I need say any more. I am I the only one who has brain? Are there NOT miillions of very bright brains out there. There is need for these brains come out to join hands to work to bring people together. Together to look after their interests and organise to put a stop to all the loot going on in broad day light. Loot of our hard earned money. Does anyone care?Recommend

  • khurram kaleem

    even shaukat khanum made investment in one of BVI based funds.Any PTI voice on this issueRecommend

  • I am a Khan

    why are the international governments and the G8 countries silent on this? I do not think this even featured on the agenda of the recently held G8 summit :(Recommend

  • waqar khan

    Pakistan may start netting the dirty fish from the landd of pure so that money stashed in Swiz Banks and places like Virgin Islands may be used for common good of poor masses. Unfortunately it may not be possible with a leadership who is yet to absolve itself of corruption cases.Recommend

  • Arzoo

    A very childish blog with very little pertinent information on money laundering or tax havens. It seems like a cut and paste job. I wonder what criterion ET is using in allowing publications of writings which are at par with high school composition. Asking “the newly elected government” to “set up a mechanism to investigate and prosecute tax evaders” makes sense but does not seem likely since their past two stints in government were rife with financial misdealings and tax evasion.Recommend

  • Majid Urrehman

    He invested Shaukat Khanum donations in Virgin Islands and LOST. He may have other projects running their together with his sponsors from establishment and parties . They are powerful people and might be the reason behind Pakistan’s no interest in investigating this fraud.Recommend

  • Baba Ji

    Even the name seems a fraud … Virgin Islands !!!! Recommend

  • Parvez

    In Pakistan’s case I doubt the rich, high and mighty need such havens to avoid tax…….that’s almost laughable as they just make the laws / rules ‘ SRO’s to suit themselves.
    In my view these havens allow money in without questions asked, then when needed, it legitimately flows out to any corner of the world…………the 1% rule while the 99% look on in anguish.
    Recommend

  • http://. Abid P. Khan

    @Majid Urrehman:
    “He invested Shaukat Khanum donations in Virgin Islands and LOST. He may have other projects running their together with his sponsors from establishment and parties . They are powerful people and might be the reason behind Pakistan’s no interest in investigating this fraud.”

    .
    As they say, in a democracy some are more equal than the others. That sort of game is reserved for the elite only. Generals lose their soldiers in battle. Gamblers bet wrongly and lose on roulette. If IK lost money (which was transferred how?) from Pakistan, by investing wrongly, why should he care? It was not his to start with. You should get back to where you belong to.
    .
    Fraud is some one who is not clever enough but gets caught.Recommend