The Theatre Of The Absurd

I believe that the pandemic is a moment in history that can be compared with other momentous moments like the French and Russian revolutions, when the old order was challenged; and so, in 2021, as in centuries past, some crucial questions are being raised: what is the real role of government and can we trust our leaders as we tackle the social inequalities and the shortcomings of globalisation? How far the pendulum swings will impact the international financial services industry, particularly that segment known as "offshore", and whose reputation has been sullied in recent years, especially in the context of social inequalities that the pandemic has magnified.

Ever since the Organisation for Economic Co-operation and Development (OECD) issued its report “Harmful Tax Competition – An Emerging Global Issue” in 1998, the reputation of the particular cluster of Caribbean islands offering financial services has gone downhill. As the need for revenue from taxation to fill government coffers now becomes more extreme, so the criticism of such places, often known as tax havens, will surely increase.

Johann Wolfgang von Goethe observed: "There is nothing more frightful than ignorance in action” (Great Ideas of Western Man). The German poet and playwright's words are germane when trying to fathom the European Union’s logic in compiling the latest list of tax havens which has engendered outrage such that commentators have described the EU's behaviour as sheer lunacy.

There are other signs of madness, if one considers that the credulous Tax Justice Network believes that the United Kingdom’s Overseas Territories are the world’s most significant tax havens. I suggest that this organisation is in desperate need of a compass to guide it on a global tour that will reveal the fact that not every so-called tax haven is offshore.

As for the EU and other fumbling, bumbling bureaucracies, it is as if they live in a parallel world to those professionals working in both the offshore and onshore financial services sectors. Iolanthe, Gilbert and Sullivan's 1882 comic opera, highlights the inadequacies and farcical pretensions when the established order of things is challenged and which is in step with many of today's authoritative bodies involved with the supervision of the financial services industry.

International financial centres (IFCs) have been described as engine rooms of innovation. I couldn’t agree more. I have often likened IFCs to unique centres of specialised knowledge, just like Silicon Valley is, regardless of any tax advantages that might be derived from them. The trouble is, for reasons already suggested, these engine rooms have bureaucrats in the wings waiting to put a spanner in the works.

One of the important and positive results of the pandemic has been that conventional wisdom is under fire from all sides. Many are questioning previously accepted theories, assumptions and beliefs, just like Friedrich Nietzsche, who died at the turn of the last century, did. He had his own thoughts on the subject, describing the man who spurned new knowledge beyond the extremities of his own as foolish, refusing to discover new truths when there "are already too many old ones” (The Gay Science). I accept that Nietzsche, who famously said that God is dead, was one of the most revolutionary and subversive 19th-century thinkers in Western philosophy whose thoughts could shock the system. However, he did have a point: too many of us, including institutions of every stripe, are following old truths that no longer apply.

What is more, we assume a level of competence and knowledge within the international regulatory system that oversees the financial services sector. Having worn both a gamekeeper and poacher's hat during my career, and rubbed shoulders in the United Kingdom, Europe, and beyond with fellow regulators and government officials, I have concluded that in many instances, based on past and present-day evidence, this would be a dangerous assumption to make.

When, in the late 1970s, I moved to the West Indies, my mind was still full of boyhood impressions influenced by Robert Louis Stevenson's Treasure Island. Those were the days when it was accurate to describe the string of islands providing offshore financial services, most of them British Overseas Territories, as being part of the "Wild West Indies", a conclusion easily drawn when considering my previously conservative business background. Then, there were a lot more cowboys than sheriffs. No more. The change that has taken place, and for the better, has been profound. Not all of us, however, understand or appreciate this, and it is where perception once again clashes with reality.

Unfortunately, as we see in the case of the EU, too many are clinging to "old truths" and distorted perceptions. Jonathan Swift was right in saying that it is useless to attempt to reason a man out of a thing he was never reasoned into. When a former governor of the British Virgin Islands, speaking out very recently about local political corruption, declares to its citizens: "Your voices have been heard. We have received the message loud and clear - the people of BVI want better", this becomes music to the ears of the EU and supports their entrenched, blinkered views. Political corruption, which is to be found everywhere, is bad news but one should not automatically have a related regulatory system, especially in the Caribbean, tarred with the same brush. Having to continually comply with due diligence in one or more of the UK's Overseas Territories, I normally find this much more of a challenge than I do elsewhere. To counter the ex-governor's plea, on behalf of a beleaguered industry: the professionals working in the Caribbean offshore sector want better. I doubt, however, that they will get it.  

The problem in the Overseas Territories, in varying degrees, is that there are three - often conflicting - forces to contend with: the British government, represented by a governor; the island politicians; and the private sector. The British government is responsible for regulation but often gets it wrong by appointing those who may not have adequate, relevant experience. This malady, I should add, is not exclusive to the Caribbean. They may well be perceived as experts in some quarters, but like so many other words these days, the use of the word "expert" has fallen into common use and by doing so has had its meaning devalued. An anonymous consultant who worked for the United Nations at one time, once quipped: "Everyone's an expert if he's more than 5 miles from home".

In a new twist, one of the consequences of Brexit means that the UK is no longer a member of the EU and so, besides all other adverse developments such as fighting over fishing rights, it could find itself sitting alongside its Overseas Territories in the dock, labelled as an IFC but one, in Europe's eyes, that has the complexion of a tax haven and so is a candidate for more opprobrium from Brussels. This is an unfolding situation that will be worth watching, especially as John Kenneth Galbraith reminds us never to underestimate the power of very stupid people in large groups. A particular line from Iolanthe also springs to mind: “I did nothing in particular, and I did it very well”.

Transparency International, another organisation challenging the boundaries of credulity, fears that the British government could be establishing "onshore havens" in which illicit funds of criminals could be held anonymously. After all, the Tax Justice Network's Financial Secrecy Index suggests that if the UK's Overseas Territories and Crown Dependencies are included, then the UK is the biggest of the "secrecy jurisdictions". The UK's parliamentary Intelligence and Security Committee has already made mention of the London "laundromat".

When it comes to governments, if Nietzsche had been alive today, he may well have declared on behalf of citizens worldwide that "trust is dead". Where are Gilbert and Sullivan, in this theatre of the absurd, when you need them?

Derek Sambrook
Derek Sambrook is a member of the Society of Trust and Estate Practitioners in the United Kingdom and obtained the Trustee Diploma of the Institute of Bankers in South Africa in 1973, becoming a Fellow of the institute in 1996. He emigrated in 1977 from Rhodesia (now Zimbabwe) where he was branch manager of a trust company and continued his profession in North America (Miami), Europe (including London and the Channel Islands), and the Caribbean (including the Cayman Islands). He has lived in Panama since 1996 where he is the Managing Director of Topaz Services, S.A. (www.trustservices.net), a Panamanian financial services company. He was Treasurer of the British Chamber of Commerce Panama for several years. Mr Sambrook‘s regulatory experience began in the corporate division of the Rhodesian (now Zimbabwe) Ministry of Justice (1965-1970) and subsequently he was appointed by the British government (1989-1992) as the first Bank, Trust Company and Insurance Regulator in the Turks & Caicos Islands, British West Indies; he established a regulatory body and drafted trust and insurance laws, banking and other regulations including licensing guidelines. As a direct result of his innovative captive insurance law, the Turks & Caicos Islands at the end of his contract had more than 5,000 producer-owned reinsurance companies and was the leading domicile in the world for this service. During his tenure he was also an affiliated member of the Latin American and Caribbean Banking Commission and Chairman of the government’s Offshore Financial Services Committee. He was a columnist for a leading United Kingdom offshore financial journal for over 15 years. His newsletter, Offshore Pilot Quarterly, has been published since 1997. In 2021 he celebrated 50 years in the trustee profession.