Treasure Islands - Nicholas Shaxson [54]
The most important part of the modern British spiderweb, from the point of view of the United States, lies in the Caribbean: the City’s gateway to the vast markets of North and South America. Visit any of these territories and it becomes clear that they are, while half-British, set up to target the United States first of all. Eat out at an outdoor grill or beach restaurant, and your dinner will likely be overshadowed by a giant television screen fixed on a baseball game, and your food may be served by young American waitresses. Each either uses the U.S. dollar as its official currency or has a local currency called “dollar” that is pegged firmly to the greenback.
Offshore finance in the British Caribbean has old roots: Financial interests in Britain and their selected political representatives had learned the basics of tax havenry long before the British empire fell apart.
Organized crime in the United States began to take a serious interest in the U.S. tax code after the mobster Al Capone was convicted of tax evasion in 1931. His associate Meyer Lansky became fascinated with developing schemes to get Mob money out of the United States and bring it back, dry-cleaned. A slick Mafia operator—the inspiration for the figure of Hyman Roth in the film The Godfather—Lansky would beat every criminal charge against him until the day he died in 1983. He once boasted that the Mob activities he was associated with were “bigger than U.S. Steel.”
Lansky began with Swiss offshore banking in 1932,1 perfecting the loan-back technique. This involved first moving money out of the United States—in suitcases stuffed with cash, diamonds, airline tickets, cashier’s checks, untraceable bearer shares, or whatever. Next, he would put the money in secret Swiss accounts, perhaps via a Liechtenstein anstalt (an anonymous company with a single secret shareholder). The Swiss bank would loan the money back to a mobster in the United States, who could then deduct the loan interest repayments from his taxable business income there. Lansky opened operations in Cuba, outside the reach of the U.S. tax authorities, where he and his associates built up gambling, racetrack, and drug businesses, becoming what the author Jeffrey Robinson called an “anti-Disneyland . . . the most decadent spot on the planet.” Lansky’s close ties to Cuba’s right-wing leader General Fulgencio Batista helped stoke the violent anger that eventually brought Fidel Castro to power in 1959.
When Castro came to power Lansky moved to Miami, from where he plotted to find his next Cuba, with a pliable tyrant. “It would have to be small and close enough to the U.S. mainland to get tourists and gamblers in and out easily,” Robinson explained. “It, too, would have to come furnished with a thoroughly corrupt political regime, held together by a despot greedy enough to welcome the Mob with open arms; the tyrant would have to be so firmly in place that the political environment would remain stable no matter what. And the Mob’s money would have to be spread so thick and wide that, if some other tyrant seized power, he’d need them to maintain his own stability.”2
The Bahamas, then a British colony, was perfect. Formerly a staging post for British gun-running to the southern U.S. slave states of the Confederacy, and loosely governed for years by laissez-faire members of British high society,3 the Bahamas were effectively run by an oligarchy of corrupt white merchants.4 It would quickly become, through Lansky, the top secrecy jurisdiction for North and South American dirty money.
This much is well known. What is not widely publicized is the British authorities’ reactions to this burgeoning criminal activity on its territory. A trawl of the archives reveals a curious pattern involving periodic expressions of concern, followed by a seemingly resolute lack of action. A quaint memo from a Mr. W. G. Hulland of the Colonial Office to a Bank of England official in 1961, just as Lansky began major operations in the Bahamas, gives a flavor of such worries. “We feel