You can see a larger version of the graphic showing where these tax havens are HERE.

“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments.”
~James Henry, former chief economist at consultancy McKinsey

It is important to understand that those very same loopholes that high net worth individuals are using to hide $21 trillion in offshore banks safe from taxation and leaving the undue burden on the rest of us …. those loopholes are also being used by drug cartels and terrorist organizations to fund their organizations.  These loopholes have a term – it’s called money laundering … and apparently the banks are not aware that this is illegal.  This makes me think of four separate points:

#1 – Romney’s $100 Million IRA in Offshore Accounts
It i’s precisely this use of money laundering and manipulation of the banking system and laws that leads one to step back and reflect on the recent story that Mitt Romney has as much as $100 million in his IRA’s and offshore tax havens (source).  Since we have yet to see Romney’s tax returns – we are unable to determine whether or not his actions were legal or illegal and I submit that it’s very unpatriotic for a presidential candidate from one of the leading political parties to hide behind these tax havens that offer almost no transparency.  How does one amass $100 million in an IRA?  If Romney has nothing to hide – why would he not show all of his cards proudly like his father and like President Obama?  Is he embarrassed that he potentially used the same methods as that of terrorist organizations and other tax cheats who are laundering their money?

#2 – Tax cuts for the rich
We know that the rich, corporations, terrorist organizations and drug cartels are hiding their money in offshore tax havens free from taxation and transparency.  If we know that at least $21 trillion is being hid by the global elite in these secretive bank accounts – how can anyone continue to espouse the idea of greater tax cuts for the wealthy without eggs being thrown at them in public?  The rich are doing very well; in fact – much better than they would have us know.  Why should we be giving MORE tax cuts?

#3 – The Gloves Are Off
There is zero question about the legality of this behavior.  Failing to pay taxes on offshore income is against the law and a person is subject to jail time if they are found in violation of this law.  In 2009 – the IRS gave criminal amnesty to American tax cheats if they would openly acknowledge their overseas hidden accounts and in return paying the appropriate back taxes.  Many people have stepped forward, but the IRS will not publish the information of WHO did or did not.  I’m ok with that.  But – now that people have been given an opportunity to claim responsibility and take their hicky … it’s time to twist the screws on these tax cheats.

It’s time to go after these people breaking the law … line them all up in one room like we treat common thieves and try them all for tax fraud and money laundering.  Throw the largest legal book we have directly at their face.  Put them in jail … confiscate property for failure to play nice … do whatever is legally available to penalize and punish, punish, punish these tax cheats.  We need to send a message and punishment will be painful and not worth trying to game the system.  And if you don’t like it – go live in another country … someone else will take advantage of the tremendous market opportunities available in the U.S.

#4 – These tax cheats are hurting you
Most people do not understand the flow of money and the inter-reliance between individuals.  Not only are these tax cheats hurting you by paying less in taxes and leaving a larger tax burden to the average middle class person … they’re also taking important money out of the system which leads to economic decline and lost jobs.  Every dollar taken out of the American financial system hidden to avoid taxes is a dollar that isn’t stored in a bank …. that money is then not used to loan money to people to start businesses etc.  Not only are these rich folks failing their responsibility to pay taxes … they’re contributing to the downfall of our economic system by taking money out of the system.

“This new report focuses our attention on a huge ‘black hole’ in the world economy that has never before been measured – private offshore wealth, and the vast amounts of untaxed income that it produces.”
~James Henry 

The Guardian has a must read story HERE:

He shows that at least £13tn <$21 Trillion U.S.> – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy“. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.

The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry’s calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.

And Heather Stewart adds this about the offshore funds HERE:

In total, 10 million individuals around the world hold assets offshore, according to Henry’s analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world’s movers and shakers like to use as homes for their immense riches.

“If we could figure out how to tax all this offshore wealth without killing the proverbial golden goose, or at least entice its owners to reinvest it back home, this sector of the global underground is easily large enough to make a significant contribution to tax justice, investment and paying the costs of global problems like climate change,” Henry says.

He corroborates his findings by using national accounts to assemble estimates of the cumulative capital flight from more than 130 low- to middle-income countries over almost 40 years, and the returns their wealthy owners are likely to have made from them.

And just Tuesday – HSBC based in London – was busted for it’s willful ignorance using these loopholes to launder money for terrorist organizations in part thanks to a U.S. Senate Permanent Subcommittee on Investigations led by Senator Carl Levin (D-MI).  In other words – they were turning a blind eye; they knew what was going on but it was too profitable to stop.  In short – they were complicit in these illegal activities.

You can watch the long but dramatic hearing HERE.  If you don’t have the time to watch a 3 hour hearing … you can watch a four minute recap by the Wall Street Journal below.  Another important point of topic is that almost every international bank if not EVERY international bank is very likely in engaged in this type of unscrupulous behavior.

Deutsche Welle has the story HERE:

The charges against HSBC were severe. “Global banking giant HSBC and its US affiliate exposed the US financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls,” an official Senate statement began.

The report had five separate charges against HSBC, including servicing high-risk affiliates, circumventing US safeguards, clearing suspicious bulk travellers checks, and offering accounts to so-called bearer share corporations – companies considered to be particularly prone to criminal dealings.

But possibly the Senate’s most damaging charge is that HSBC ignored possible terrorist financing links, particularly in its dealings with banks in Bangladesh and Saudi Arabia. One of these, according to the report, was Saudi Arabia’s Al Rajhi Bank, a known al-Qaeda financier.

The Guardian adds more on the HSBC investigation HERE:

But while the headlines have been about cocaine cartels, the most troubling aspect of the Senate’s investigation is that the criminal, often violent, activities of the drug lords were facilitated by a byzantine, albeit legal, infrastructure that made tracking their activities near impossible.

This is particularly true of the subsidiary set up in the Cayman Islands by HSBC’s Mexico division that handled some 60,000 accounts. According to the report, the drug lords used these accounts to fuel their jet-set lives. But, staggeringly, HSBC’s oversight was so lax it knew nothing about who was behind 41% of the accounts.

This lack of transparency is troubling. Tax avoidance is big business. A report by the TUC found that the UK’s four largest banks – HSBC,Barclays, Lloyds and RBS – have some 1,200 subsidiaries in tax havens. At a time when the banks are in the dock following a spate of scandals that have exploded the arguments for “light-touch regulation”, the lack of oversight afforded by structuring transactions through tax havens threatens further scandals.

The Wall Street Journal reports that the compliance officer from HSBC is resigning HERE:

During a daylong hearing before a Senate subcommittee, HSBC’s top antimoney-laundering executive announced he is stepping down. Bank officials outlined millions of dollars in increased spending on compliance efforts.

A yearlong investigation by the Senate Permanent Subcommittee on Investigations alleged HSBC’s U.S. bank became a conduit for money-launderers and potential terrorist financiers, and for the evasion of sanctions against Iran and other countries. The committee’s report, released before the hearing, also found “systemic failures” at the bank’s main U.S. government regulator, the Treasury Department’s Office of the Comptroller of the Currency.

Irene Dorner, chief executive of HSBC’s U.S. bank since January 2010, delivered an official apology to lawmakers. “We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public,” Ms. Dorner said. “HSBC’s compliance history, as examined today, is unacceptable.”

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