The British Virgin Islands’ Struggle to Protect Its Dark Offshore Economy | Hacker News Reader

The British Virgin Islands’ Struggle to Protect Its Dark Offshore Economy

bloomberg.com

87 pointsucha22 comments

> Not surprisingly, many people in Road Town argue there are perfectly legitimate reasons to use a jurisdiction such as the BVI. The Panama Papers leak revealed, for example, that British actress Emma Watson bought her London house with a BVI company to prevent stalkers from tracing where she lives.

> But transparency threatens none of that.

It sure seems like transparency threatens Emma Watson's use case...

But we can and should have onshore mechanisms - convince a judge you need it, get an onshore anonymous trust whose details are sealed except to law/tax. Seems like a darn good idea, in fact.

(This is where a lawyer steps in and points out that something like this already exists, right? I know nothing about British law...)

Ya, totally. I just thought it was weird that the Bloomberg article contradicted itself about two sentences apart.

> get an onshore anonymous trust whose details are sealed except to law/tax

So you want to give government the unilateral right to determine who merits anonymity. What could possibly go wrong?

Well, it might be preferable to protecting only the super-rich. :)

but, just as seriously, it's not clear that we actually value anonymous property ownership when it has serious repercussions for our tax base and things like holding properties vacant. (See Vancouver). It's just another place that we have to walk a careful line between individual rights and not causing huge social problems.

In the US, in most if not all states, a stalking victim must present either court papers or a police report showing actual bodily harm before the victim may participate in the state's anonymity program. These programs also only cover the state's information systems, not commercial systems.

On the commercial side, if you finance anything at all, it will show up in your credit report, and your street address will as well. It is a quick Net search from there to find you through the aggregators.

To stay off the aggregators' radar, you need a willing volunteer who will let you use their residence address, own your home outright through a trust, put your utility bills in their name, and a few other tactics. Note that private mailbox addresses are now identifiable, and many financial institutions under KYC regulations tap those databases and will recognize and refuse to let you use such an address to sign up for services, demanding a real street address.

Source: I'm handling a female relative's stalking situation for them before it escalated to physical harm, and it was much harder than I thought it would be.

This usually exists. In the UK, there's a registry of persons with significant control over companies and individuals in it can be marked "super secure" if there is a sufficient reason to do it.

https://developer.companieshouse.gov.uk/api/docs/company/com...

It is trivial to hide your identity in the UK / US / Australia etc.

You must understand that the "City" (London's financial district) has different rules than the rest of the country. It is an off-shore jurisdiction in the centre of London.

I'd argue any article about "tax havens," that does not include a section on SPVs for insurance and other securities is un-serious agitprop. The "trillions" of dollars of assets registered in these countries is mainly collateral that secures agreements and contracts that yield income that gets taxed in the country where it is ultimately realized.

Writing about these countries without addressing how mainstream financial instruments work should be treated as very revealing.

There is no reason SPVs shouldn’t be supported onshore.

I'd say they cannot work onshore because it just substitutes a transparency problem with a much more complex harmonization problem for rules across borders, which creates new arbitrages and political leverage points. The offshore situation we've had for a couple hundred years now is a case of better the devil you know. The rules in haven countries are established, clear, and provide a foundation for all the value in international trade. The only problem is it limits the total dominion of one group via surveillance, which I think is a feature, not a bug.

For Special Purpose Vehicles to work onshore, you need something like income trusts, which barely exist anymore because of people who write articles like the one above. It is a custodian with limited liability that does not pay tax, so that you can hold assets in it and invest them to preserve the availability of the principle after a trigger event. Governments hated them because they diverted money out of income tax flows, and it is more politically expedient to solve revenue problems instead of spending ones. I think this aspect of the system works, and this sort of lazy propaganda needs to be recognized for what it is. I respect there are other views on this, but they should be held to a standard of financial literacy this article did not meet.

To say that the current system works (its current form is a few decades old at best) is to ignore the massive impact that secrecy jurisdictions have on virtually all developing countries. Offshores are used there to facilitate the extraction of trillions in wealth that often is directly stolen from public resource (such as direct tax revenue, procurement contracts, and, natural resource concessions).

Of course you can argue that any financial problem the public sector has is always a spending problem and never one with the tax base, but that strikes me as a fringe political opinion, and particularly as not a decision that the people of Ghana, Russia, or Ukraine got to make for themselves. Perhaps they're not small government ideologues and would actually prefer to have health care and schools.

Justifying all this by saying that very wealthy and powerful people and corporations need privacy to protect them is pretty cynical.

(Disclaimer: I'm an enthusiastic contributor to "lazy propaganda" like this)

The problem these and other less democratic countries have is that the government can stay in power using resource extraction wealth to pay their police and armies and they do not rely on direct taxation for their revenues. The reason the people do not have a say in how money gets spent is because there is no political reason to ask them. See De Mesquita and Smith on that dynamic.

The problem for developing countries is not foreign bank "secrecy," (a presumptuous term itself) it's their domestic resource curse and other governments propping these leaders up. For these third party countries to decline to sign surveillance agreements and tax treaties that disadvantage them is not "secrecy," its sovereignty.

Attacking the sovereignty of financial centres is a sordid attempt to bar the exits and prevent capital flight when large state governments impose ever more wealth destroying policies to buy votes.

If by "fringe," you mean that solving the spending problem before the revenue problem is beneath discourse - the policy makers of every Tory, Republican, and Conservative party in the western world would probably like to have a word. As would a number of Liberal parties as well. Contributing to lazy propaganda that advocates for soaking "the rich," seems rather more a fringe activity, and further, if it does not include an understanding of the mechanisms of finance, one that is intellectually dishonest at that.

You're mixing a few things up here. The set of countries that are affected by the resource curse, and those dealing in financial secrecy (what else would you call it?), are disjoint.

The phenomena are linked through money laundering: wealth generated from state capture in one country does not want to stay in the politically and economically unstable environment it has helped create. It therefore needs to be channeled into the western financial system, the UK or Europe. That's done using shell companies in the BVI, CY, SY, LUX, MT, CH, KN etc. This way financial secrecy creates impunity, where the wealth taken from developing countries evades domestic accountability.

Examples: the Aliyevs, Dos Santos, Karimova, Yanukovych, Roldugin, the cabinet of Goodluck Jonathan, and even the Guptas.

It's also a bit weird to describe this as in issue of BVI sovereignty. The BVI government is run by a governor appointed by the British queen on advice from the British government. It basically duck types as a colony. The same is even more true for IOM, GG, JE. If only there were some explanation for why it benefits the UK to have half a dozen financial secrecy jurisdictions in its sphere of influence. The system is clearly all about sovereignty.

Finally, I did not say that discussing spending was beneath discourse -- merely arguing that governments doing taxation was pretty much what makes them governments. Otherwise it's a golf club.

I'll remain eternally grateful for any further explanations of the mechanisms of finance and their benevolence you may have to offer.

Isle of Man government has a very independent government with just about all branches of government except defence independent of Westminster. The Lieutenant Governor is purely ceremonial, his only remaining role is granting assent of bills.

There _is_ no domestic accountability in those kleptocratic countries precisely because their governments do not make the majority of their revenues from a personal income tax base. I have doubts about the sincerity of western people who seem so terribly concerned about victimized peoples in distant countries when the net effect of the policies they advocate are really about domestic wealth redistribution. The kind of sanctimonious moral arbitrage that exploits "the people," of these countries as a pretext for influencing domestic policy with sob stories is utterly disingenuous.

Kleptocrats gonna klepto, and the reason they can is they can afford to pay the military to keep them in power, with funds that come from resources or puppeteer empires. Offering gratitude without demonstrating understanding or any meaningful benefit just tells people their shared experience was wasted on you.

So to be clear: "Kleptocrats gonna klepto" is the deep "understanding of the mechanisms of finance" and the cure to "lazy propaganda" that you advertise for?

Beyond that, thanks for going full ad hominem.

If by ad hominem you mean in regard to the disingenuous and sanctimonious basis for many arguments against the sovereignty of financial centres, it is in reference to the quality of argument, and mere sarcasm is not moral high ground. Regarding the mechanisms of finance, I heartily recommend reading up on topics like insurance linked securities, catastrophe bonds, and other event driven insurance contracts that require managing long term collateral.

I'll leave any final words on the topic to you.

Do you have a recommended source for learning more about SPVs, whatever those are? A book would be OK.

A really short explanation:

https://corporatefinanceinstitute.com/resources/knowledge/st...

An infamous use-case:

https://en.wikipedia.org/wiki/Enron_scandal#Special_purpose_...

strange that the locals don't benefit at all

The piece suggests that the (relative to taxes) small fees they charge make up a very large part of the government’s income.

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