Erosion of Confidentiality in Offshore Financial Centres
| Author | Dr Peter D. Maynard |
| Pages | 186-213 |
6
THE EROSION OF
CONFIDENTIALITY IN
OFFSHORE FINANCIAL CENTRES
Condentiality in oshore centres has not only eroded; it is
practically non-existent. It was always a marketing tool of nancial
centres; the perception of condentiality was quite dierent from the
reality.1 Today, its use even for marketing is of questionable value.
e erosion of condentiality in so-called2 “oshore nancial
centres (OFCs)” involved much more than corporate misconduct, the
subject of this book. Indeed, the erosion was associated with a sea
change in international business transparency exposing the misconduct
of not only companies and individuals, but also of governments and
supranational agencies, in surprising ways that one might not otherwise
expect.
e subject is largely in the realm of political economy or even
geopolitics, and only to a limited extent on the turf of positivist law
more familiar to lawyers. A thin façade of purported best practices
does not mask the erce defence of self interest of individual states and
various supranational institutions. For example, the most signicant
oshore nancial centres, such as London, New York, Delaware, and
Zurich, and newer oshore centres such as Wyoming, Nevada and
Hawaii are not ‘oshore’ at all. Also, supranational agencies, such
as the Organisation for Economic Cooperation and Development
(OECD) – biased and conicted because they have not and cannot
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e Erosion of Condentiality in Oshore Financial Centres
enforce their edicts against their own members – in eect tended to
shift the comparative advantage in nancial services in favour of their
own members by blacklisting and preying upon politically weaker and
more compliant non-members. us, these agencies undermined their
own credibility in this eld.
Further, US political candidates have proposed legislation
which could seriously damage the prospects not only for illegitimate
international banking but any major banking at all in these centres,
at least as far as US citizens are concerned.3 In addition, where new
laws have been adopted, the result, if not the objective, has been to
introduce political discretion or at, to circumvent the courts and
to promote the use of executive governmental agencies to determine
nancial privacy issues.
Historically, scal authorities in metropolitan countries have
sought to lift condentiality in the so-called ‘oshore nancial centres’
for tax reasons. However, in more recent times, the drug trade and
terrorism have also been spearheading issues in the assault against these
centres. With the increasing concerns about drugs and terrorism, the
right to nancial privacy and even an individual’s right to minimise
the amount of taxes he is legitimately required to pay, have receded
as actionable issues just as the court’s jurisdiction and capacity to deal
with such issues has been decimated by a bundle of new laws.
What is an ‘oshore nancial centre?’ What is condentiality? e
questions will be examined with reference to four spheres: nancial
institutions; companies; banks and trust companies; lawyers and legal
professional privilege, in particular advice and litigation privilege, and
communications by in-house counsel. We attempt to dene the terms
and therefore the scope of the discussion. Was there ever complete
secrecy? What relief could be obtained, in order to obtain disclosure
before 2000, when blacklisting and other measures were imposed?
What was their impact on condentiality?
erefore, this chapter is divided into the following parts: oshore
nancial centres, condentiality, nancial institutions, companies,
banks and trust companies, legal professional privilege, and other
measures eroding condentiality. e Bahamas4 is used throughout as
a specic case study, although other countries are also discussed.
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