My knowledge of this case is limited to what I have read on the internet and elsewhere so my comments are of limited value. However I do accept that this is a powerful example of bad practice and I willingly concede that this particular case undermines much of my argument about the legitimacy of our financial services industry.

I would just say to Belinda, to the best of my knowledge, (and perhaps surprisingly) Indonesia does not appear to be on any blacklist. This does not justify the case but it is worth getting one’s facts straight before putting forward a forthright opinion.

From what I can gather, the Guernsey branch of the French bank BNP Paribas accepted some $55 million from Tommy Suharto’s (BVI registered) company Garnet Investments back in 1998. Even though this was ten years ago they must have known that Suharto was the man behind the company and the corruption of Indonesia’s ruling family was well known even then. Tommy Suharto is without question an evil gangster (in 2002 – 4 years after the BNP Paribas transaction took place – he was convicted of the murder of a high court judge). Doing business with him was wrong, end of story.

There are however a couple of points I would like to make (again I stress I am not in any way condoning the Suharto case).

Firstly, our industry’s due diligence regulations and client take on procedures have been changed radically in the ten years since BNP Paribas accepted this money. I am confident in saying this transaction would not be accepted by any Guernsey financial institution in this day and age.

Secondly, I have worked for different companies in various sectors of the finance industry for many years and I have looked after various portfolios consisting of – literally – hundreds of clients. I can honestly say I have never witnessed or been involved in any dealings such as the Suharto case, or indeed any other similarly nefarious business deals – this sort of shady business activity is (and I honestly believe this) truly exceptional.

The trouble is it takes only one such case to give ammunition to those who love to propagate the myth that these sorts of dealings are common practice in Guernsey – they are not. It is frustrating to see ill informed critics of our finance industry seize on this as a “typical” example of the sort of business we do here. In my opinion BNP Paribas deserve to be condemned for accepting this business – the vast majority of businesses and individuals working in our finance industry do not deserve to be beaten with the same stick.

Thirdly – while BNP Paribas were, in my opinion, totally wrong to have got involved with Suharto in the first place, it should be noted that they have since frozen those assets and the Guernsey courts have extended that freezing order while the Indonesian government puts together a case to recoup that money. The Indonesian Attorney General has even been invited as a third party in the trial. Yes, this is bolting the stable door after the horse has bolted, but at least justice is now being pursued.

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I apologise for having not answered all the questions addressed to me: I will try to do so but must be in Westminster all day today influencing those politicians in the way that you note that I seek to do.

I will post further comments over the next couple of days.

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“Lessons will be learned”, no doubt.

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We have an open and honest system do we? Explain that to the Indonesians living in poverty because of the theft of their property by wicked and corrupt regimes.

However, if our comments are not even able to be published on “your shout”, then what hope have we. Long live the myth of our super duper financial system.

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No problems as long as it’s all transparent and all tax is paid where it is earned. However if the product is being used to circumvent tax laws in home jurisdictions then, legitimate or not, it is morally dubious. As you say, and indeed I’m sure the TJN would say, the expertise in Guerney could be used equally rewardingly without having to sell ourselves as a tax expense mitigator.

Why do we need secrecy in global finances? What purpose does it serve other than to hide stuff? If things are hidden then it is open to abuse. What’s wrong with not wanting secrecy?

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You miss the point (possibly conveniently) that CD is making.

You appear to assume that all money depoisted in Guernsey is “bad” in some way. Also by implication you appear to condone Mugabi et al (perhaps I’m wrong there!). Obviously as all the worlds bad money is in Guernsey the rest of the world must be a pretty wonderful place – I don’t think so!

Refer to my post prior to CD’s excellent piece (mine I fear is not as eloquent). Guernsey does facilitate the free movement of capital for the benefit of many, many totally legitimate enterprises. Another example: US state pension fund wishes to invest in a specialised European portfolio, a Guernsey based investment bank sets up the vehicle, the fund is administerd locally. Money therefore flows from the US via Guernsey to various investments in Europe – these investments (will ultimately be companies) make money and employ people both of whom pay tax. The employees of the Guernsey administrators etc pay tax. The US pension fund increases in value and pays its pensioners who in turn pay tax.

Whats the problem with that?

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Capitalism relies on free movement of capital. Concentrations of capital in tax havens distorts this ideal.

How do you know we are not inundated by ‘criminal elements’? Just by using the tired ‘prove it or get a lawyer’ tantrum doesn’t mean to say you know anymore than anyone else.

You say “To say we employ professionals who are willing to turn “a blind eye to the regulatory requirements of the places where they undertake their trades” is simply not true and demonstrates a complete lack of understanding about what we do here.” How does that explain allowing millions from an Indonesian dictator to be deposited here?

Guersney may be good at what it does, but it doesn’t mean that what we do is nothing more than exploiting the poor and vulnerable around the world. It really doesn’t take much research. Your comeback just sounds like defending a job and a current system, a bit like I could defend the continuing dumping of sewage into the sea, it doesn’t make it correct.

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Strip away the waffle and it is apparent that The Tax Justice Network is simply arguing for the redistribution of wealth through taxation. Regardless of whether the proponents call themselves “social democrats”, this is essentially a rehash of that most basic of socialist arguments. As a low tax jurisdiction which actively (and legitimately) promotes offshore financial services, Guernsey, in their eyes, is an active participant in a capitalist system which they perceive as unfair and unjust. That is a matter of opinion, but dressing up what is essentially a political cause as a pseudo-economic debate is at best disingenuous and at worst propaganda.

Leaving aside the political and ethical arguments for a moment, the Tax Justice Network puts forward a number of basic assumptions which are either seriously distorted or just plain wrong.

They imply for example that Guernsey conducts its operations in secrecy to facilitate tax abuse and tax evasion. Lets get this straight, Guernsey goes to great lengths to counter financial crime and will willingly disclose any information to law enforcement agencies investigating criminal abuses. What we will not do however is disclose confidential client information to foreign tax authorities who have no legitimate or legal interest in that information. If we are dealing with an international client who has no tax connection with – say – the UK or the USA, why should we hand the UK or USA tax authorities confidential client information to which they have no entitlement and which does not concern them?

Guernsey deals with a great many international financial structures which are as complex as they are diverse. It is impossible to generalise about the tax planning behind these various entities (which TJN clearly do) but one thing they do have in common is that they have all been established to function legally and legitimately within the laws not just of Guernsey but of the international community as a whole. We do not knowingly engage in illegal tax evasion schemes – anyone who did would quite rightly stand to be prosecuted. To say we employ professionals who are willing to turn “a blind eye to the regulatory requirements of the places where they undertake their trades” is simply not true and demonstrates a complete lack of understanding about what we do here.

Other statements are equally disingenuous – for example they say that the object to Guernsey’s refusal to “participate in the EU savings tax directive as a full member, the sole reason for which must be the facilitation of tax evasion”. We do not participate in the EU savings tax directive as a full member because we are not a member of the EU. However, in spite of the fact that we have no legal requirement to do so, we have been voluntarily participating in this arrangement since its inception – we either withhold tax or disclose information to the relevant EU member state where a beneficiary is a citizen of that country.

The entities we administer do in fact pay their legitimate taxes in the countries where they hold their investments. For example, a Guernsey registered company with UK situs investments pays UK income tax on the income it derives from those investments. It does not pay capital gains tax because, as it is not a UK resident entity it is not liable for that tax. This is not tax evasion, this is the legitimate and entirely legal operation of an investor who is not resident in the UK.

Other arguments put forward by the Tax Justice Network are so generalised as to be meaningless. For example they say they object to “the use of offshore trusts, most of which we consider to be pure nominee arrangements undertaken solely to facilitate tax abuse…”. Trusts are not nominee arrangements, they are legally entities which have existed under British common law for centuries. And anyway…which trusts are they talking about, discretionary trusts, accumulation and maintenance trusts, charitable trusts, pensions schemes set up under trust, retirement annuity trusts, trusts set up to provide an income for a disabled child or to protect family assets from an heir with a drug addiction, trusts set up by Zimbabwean farmers in an attempt to protect their assets from theft by Mugabe, trust set up to avoid forced heirship rules in a country where only the eldest son could benefit from the family estate? I could go on and on – the point being that what we do is complex and each case is different – it is certainly not simply about tax avoidance (or “tax abuse” as the TJN choose to perceive it).

Above all, what really irritates me, is the wholly inaccurate presumption that Guernsey engages in practices which are used “by corrupt and criminal elements of societies around the world”. If they knew anything at all about what we do they would know that in recent years we have introduced incredibly stringent anti-money laundering and anti-terrorism regulations which are diligently overseen by the Guernsey Financial Services Commission. Our financial services business have employed dozens of compliance officers (at great cost) to ensure we operate within international law and actively join in the fight against crime. We are well ahead of the UK and most other jurisdictions in our implementation of these regulations and, while neither expect nor want praise for these efforts, it is bloody annoying to have some ill informed political lobbyists telling us that we are a hotbed of criminal activity. If they believe that to be the case then they should prove it – it is not good enough to call us criminals based on nothing more than innuendo and presumption.

I could go through the earlier posting and pick apart just about very statement and argue that it is either inaccurate or deliberately distorted to fit in with a predetermined political and ethical agenda, unfortunately I don’t have time. What is apparent however is that the Tax Justice Network has little interest in understanding the true and complex nature of what we do. They are railing against what they perceive to be the injustices of a capitalist system which recognises that a person or entity who is not resident in a specific country is not liable for tax in that country. Well, sorry, but that is the way the world works and as long as Guernsey continues to operate legally and with the highest possible professional standards I do not feel we need to apologise for our perfectly legitimate business practices.

I do not doubt that Guernsey will come under increasing pressure from the US, UK and EU Treasuries as they seek ways of extending their tax nets. As always we will act in accordance with whatever legislation they introduce. What we don’t need however is the spread of misinformation by bodies like the Tax Justice Network which serve only to distort the international perception of what we actually do.

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As usual the great and the good can only see as far as then ends of their noses. In many, many instances legitimate jurisdictions like Guernsey offer a service or portal (if you like) to investors from all over the world. An example of this would be where Middle Eastern investors use Guernsey vehicles to invest into US Private Equity LP’s – if the offshore vehicle didn’t exist the investors wouldn’t touch the US LP with a ten metre camel prod!

Without this type of financing many parts of the world would be deprived of huge sources of investment cash. Perhaps the anti tax haven lobby would like to take that on board.

Many other financial institutions are not here for tax reasons at all – we simply have the skilled workforce to manage and administer some pretty complex financial instuments.

It might also be an idea for the US (in particular) to get its own house in order before it has the effrontery to criticise and legislate against well run (generally!) and managed jurisdictions such as Guernsey.

In this debate don’t assume that all money is here for the sole purpose of avoiding tax – it isn’t!

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