Treasure Islands - Nicholas Shaxson [18]
Offshore financial structures typically involve a trick sometimes known as laddering—a practice also expressed by the French word saucissonage, meaning to slice something into pieces like a sausage. When you slice a structure among several jurisdictions, each provides a new legal or accounting “wrapper” around the assets that can deepen the secrecy and the complexity protecting the assets. A Mexican drug dealer may have $20 million, say, in a Panama bank account. The account is not in his name but is instead under a trust set up in the Bahamas. The trustees may live in Guernsey, and the trust beneficiary could be a Wyoming corporation. Even if you can find the names of that company’s directors, and even get photocopies of their passports—that gets you no closer: These directors will be professional nominees who direct hundreds of similar companies. They are linked to the next rung of the ladder through a company lawyer, who is prevented by attorney-client privilege from giving out any details. Even if you break through that barrier you may find that the corporation is held by a Turks and Caicos trust with a flee clause: The moment an inquiry is detected, the structure flits to another secrecy jurisdiction. Even if a jurisdiction cooperates with inquiries, it can drag its feet for months or years. “Even when they cooperate to eliminate the fraud,” Robert Morgenthau, until recently the Manhattan district attorney, said of the Caymans, “it takes so long that when the door is finally closed, the horse has been stolen and the barn has burned down.”43 At the time of writing, Hong Kong is preparing legislation to allow incorporation and registration of new companies within minutes.
In 2010 Luxembourg’s authorities pleaded this laddering as an excuse for potentially harboring North Korean money. “The problem is that they do not have ‘North Korea’ written all over them,” a spokesman said. “They try to hide and they try to erase as many links as possible.”44 That is, after all, the point. Magistrates in France only ever saw a limited part of the Elf system because of this saucissonage. “The magistrates are like sheriffs in the spaghetti westerns who watch the bandits celebrate on the other side of the Rio Grande,” wrote the magistrate Eva Joly, furious about how tax havens stonewalled her probes into the Elf system. “They taunt us—and there is nothing we can do.”
Even if you can see parts of the structure, the laddering stops you from seeing it all—and if you can’t see the whole, you cannot understand it. The activity doesn’t happen in any jurisdiction—it happens between jurisdictions. “Elsewhere” becomes “nowhere”: a world without rules.
I already mentioned some ballpark numbers suggesting how big the offshore system has become: half of all banking assets, a third of foreign investment, and more. But there have been very few attempts to quantify the damage that this system causes. This is partly because it is so hard to measure, let alone detect, secret, illicit things. But it is also because nobody wants to know.
Recently, however, a few organizations have sought to assess the problem’s scale. In 2005 the Tax Justice Network estimated that wealthy individuals hold perhaps