Money Laundering, Terrorist Financing, and Tax Evasion: The Consequences of International Policy Initiatives on Financial Centres in the Caribbean Region , by Aretha M. Campbell

In: New West Indian Guide / Nieuwe West-Indische Gids
Bill Maurer University of California Department of Anthropology Irvine CA U.S.A.

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Aretha M. Campbell, Money Laundering, Terrorist Financing, and Tax Evasion: The Consequences of International Policy Initiatives on Financial Centres in the Caribbean Region. Cham, Switzerland: Palgrave Macmillan, 2021. xxxi + 339 pp. (Cloth US$ 139.99)

In 2008 I went to the British Virgin Islands to study the impact of recent multilateral efforts to curtail so-called “harmful tax competition.” The sign in front of the Financial Services Commission on Pasea Estate read, “Vision, Integrity, Accountability.” Paesa used to be considered “the boondocks,” and everyone knew the FSC itself to be “behind the paint factory.” Familiarized and made mundane, the FSC was part of the landscape—it even sponsored floats in the annual August Festival parade. Yet like so much in the Caribbean, behind a workaday façade was a “complete world” (see R. Price, “The Dark Complete World of a Caribbean Store,” Review 1985); at the time there were a million International Business Companies registered in the BVI. Fifty-six per cent of direct government revenue came from the financial services industry.

The front-page data leaks had not yet happened: Offshore Leaks in 2013, the Panama Papers in 2016, the Paradise Papers in 2017, the Pandora Papers in 2021. They revealed the vast network of political figures and high net-worth individuals using shell companies in jurisdictions from the Seychelles to Bermuda. The real story, however, was not about these jurisdictions themselves, but how the Who’s Who of the world’s most powerful saw nothing wrong with exploiting them. The naming convention that developed about the leaks, the alliterative references to paradises, Panama, and Pandora, lend an exotic air to business offshore. Yet the irony that many identified with the schemes are household names (Tony Blair!), and that some of the most interesting stuff seems to have taken place in South Dakota, illustrates one of the key lessons of Aretha M. Campbell’s important book: the so-called offshore is regulated, monitored, and subjected to all manner of review by international bodies, while the so-called onshore is more often than not a Wild West. My interlocutor at the FSC told me much the same: only “jurisdictions of color”—his term—ended up on the international financial regulators’ “blacklists.”

Campbell’s book surveys the recent history of multilateral approaches to offshore finance. Chapters 1–4 set up the historical background explaining how the Caribbean came to be a site of offshore finance, focusing on the BVI, Cayman Islands, Bermuda, and the Bahamas. Finance was a strategic choice in the wake of a still-incomplete decolonization process, the end of trade preferences, and the rise of the fickle tourism industry. Offshore centers took advantage of the liberalization of finance and the globalization of capital more generally, which they also helped support. Campbell charts how during the 1970s rise in drug trafficking, antimoney laundering rose to the top of policy concern, followed by organized crime and terrorist financing in the 1980s and 1990s. The same drive toward trade liberalization led countries around the world to lower taxes on capital, starving them of revenue and leading them to offer preferential treatment to foreign investment. Financial liberalization was enabled by (but also created) the kind of race-to-the-bottom international tax competition that has put welfare states in crisis even as the wealthy stash their funds offshore.

After a comprehensive review of the historical and legal evolution of the financial services industry in each of the four jurisdictions, the book explores the efforts of various international bodies and the U.S. to set standards and create solutions, from the Financial Action Task Force, an initiative of the G7, to the Organization for Economic Cooperation and Development, a membership-based international body, the Basel Committee on Banking Supervision, the IMF, and the EU.

The mechanisms proffered by these organizations are meant to ensure greater transparency of the activities taking place offshore, through the exchange of information and the refinement of financial legislation, but the operations of these organizations are themselves far from transparent. Indeed, they often seem to proceed from preconceived assumptions. The net result is an offshore world more subject to regulatory scrutiny than the so-called onshore.

This book will be valuable for anyone interested in the recent history of offshore finance, as well as the governmental and legal structures of the jurisdictions under consideration and the different sectors of the financial economies in each. The concluding chapter, co-authored by Don D. Marshall, outlines the consequences of the global policy initiatives against illegal activities offshore, forcefully concluding that the terminologies of offshore and onshore “animate negative predicates that cling to particular geographies of global finance” (p. 268). When the BVI is differentiated from and differentially scrutinized than, say Liechtenstein or Switzerland, or even the financial center of New York, its placement on a “blacklist” is not innocent. Democratic institutions and polities should demand transparency from international finance in general, not just in the “paradises” created by conquest, colonization, and slavery that continue to sustain an unequal playing field.

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