CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Magnitudes and Misunderstandings 191
• Some $17 trillion lodged in private banks catering to tax evasion.
• Assets of $11 trillion or so parked offshore, outside the reach of
regulation.
• In the Cayman Islands itself, foreign deposits of more than $1 trillion.
• Cross-border dirty-money flows estimated at $1 trillion a year, with
half—$500 billion a year—coming out of poorer countries.
• Hundreds of billions of dollars in lost tax revenues for rich and poor
countries alike.
• Drug dealers, racketeers, thugs, kleptocrats, terrorists, and corporate
CEOs using precisely the same structures.
• By some accounts, half the world’s money sitting in or passing
through systems designed to handle illicit proceeds.
This structure is capitalism’s darkest accomplishment. How did we
get here? We created this parallel system that operates largely beyond the
rule of law. It therefore needs to be better understood. I address two aspects
of the structure’s origins and supports. First, tax havens and secrecy
jurisdictions bringing money into western banks, and second, falsely
priced transactions shifting revenues and avoiding taxes for multinational
corporations.
HAVEN AND SECRECY STRUCTURE
The Swiss, profiting off hot money in Europe, sanctified bank secrecy:
Threatened by the depression of 1929 and in particular by the series of
bankruptcies in Austria and Germany in the early 1930s, the Swiss financial
industry managed to persuade Swiss authorities to adopt the
stricter principles of bank secrecy. In an amendment to the Swiss Banking
Law of 1934, for “the first time in history the principle of bank secrecy
was put under the official protection of the penal law.” It became a
criminal offense for bank officials to divulge any information regarding
a customer’s identity, even to the Swiss, and the protection was extended
to foreign nationals as well. 36