Enablers and intermediaries

Corporate tax abuse and private tax evasion, capital flight, cross border illicit financial flows – and a wide range of abusive or illegal activities are facilitated by a global network of offshore tax havens and financial secrecy. This whole system requires a large infrastructure of intermediaries or “enablers” to operate. They must be tackled head on.

“Enablers” include:

• Tax advisers: tax attorneys and law firms, accountants, audit firms. The ‘Big Four’ accounting firms play a particularly strong role: PwC, Deloitte, EY and KPMG
• Financial institutions: commercial banks, investment banks, large global private banks, brokerage firms, trust companies and other financial institutions.
• Corporate and trust service providers: service providers set up, organise and/or administer corporations, limited liability companies, trusts and partnerships in tax havens and secrecy jurisdictions.

These intermediaries are not just passive facilitators of illicit financial flows and other abusive activities. They are often active, and sometimes aggressive purveyors of these facilities. Large global private banks have a long history of sending teams of client relationship managers out into countries rich and poor, winkling out trillions in cumulative capital flows from which they and their banks can profit. Very often, surges in illicit financial flows from poorer countries are very closely correlated with lending into those countries by those same global banks: the money is lent, looted, then spirited away offshore. (Read more about that here and here.)

Meanwhile, large scale tax abuse schemes by multinational corporations are often the result of high pressure sales tactics from the Big Four accountancy firms and others. In some cases, the same firms advising governments on new tax regulations are the same ones selling clients schemes to get around those tax regulations. Major banks are also sometimes involved in large ltax abuse scheme, but are so big and powerful and dominate the marketplace to such an extent that they have become “too big to jail” and “too big to fail”. Governments are reluctant to take action to withdraw their banking licences when huge tax abuse scandals reveal wrongdoing, such as with the FinCen files.

The time has come to campaign for large numbers of bankers and other enablers who are guilty of criminal activities to be prosecuted and spend time in jail if convicted. Governments must be called to account when they fail to enact decent laws to stop this activity, or fund enforcement of the law properly. Too often the very institutions involved in corrupt practices are embedded in government departments and wield disproportionate influence over governments through political party financing.

Watch this video to learn more about how Barclays promotes tax havens in Africa.

Learn more about the “Pin Stripe Mafia” in this video featuring Professor of Accounting Prem Sikka.