Ridley defends offshore business at industry forum

| 02/06/2011

(CNS): Offshore financial centres were to blame for the financial crisis, the movement of various dictators’ monies out of their countries and the US government’s ever-deepening budget deficit, according to speakers at this year’s OffshoreAlert Conference. Some of the biggest names for and against offshore financial centres came head to head during a panel discussion debating OFCs’ pros and cons, with Cayman’s own former Cayman Islands Monetary Authority chairman Tim Ridley up against the likes of Jack Blum, Chairman of the Tax Justice Network and long-time lobbyist against OFCs, as well as Nicholas Shaxson, the author of the OFC-bashingbook, Treasure Islands: Tax Havens and The Men Who Stole the World.

Blum said that OFCs had developed an industry which helped organised crime take advantage of the tax benefits they offered.  He pointed to the monies suddenly revealed as embezzled by Egypt’s former president Hosni Mubarak and Libya’s current leader Colonel Gadhafi and wondered how such monies could have been moved out of these countries and where it went. He wondered who set up these structures in the first place and said that there was a need to break such structures down.

Fellow panellist Tim Ridley said in response that there was no doubt that everyone was in agreement that no one supported corrupt dictators and that there would be no objection by OFCs when it came to attempts to trace the proceeds of these ill-gotten gains.
The idea, however, of nailing jurisdictions such as Bermuda, the Bahamas and the Cayman Islands as where the problem lies was “flat wrong” in Ridley’s eyes and he said that the problem was a global one and that crime needed to be rooted out wherever it was found.

“To suggest that small OFCs are a critical part of the problem and that can be dealt with by getting rid of them is a bit like saying if we never have any transactions globally we will never have any problems. To shut everything down so that you have walls around countries and eliminate the benefits OFCs provide to the global community purely to deal with these specific problems will end up making the world worse off,” he stated. “Turning the clock back would take you back to the bad old days.”

In response to Ridley arguments that, far from causing the financial meltdown OFCs played an important role in facilitating the movement of global funds, panellist Nicholas Shaxson said that this argument was “fallacious” and that big financial institutions were able to go offshore when they didn’t like regulations onshore, which was part of the reason financial institutions became so big that in the end they were “too big to fail”. Shaxson said that this was why such institutions now dominated the world.

Ridley urged panellists Blum, Shaxson and Robert Roach, Counsel & Chief Investigator of the US Senate Permanent Subcommittee on Investigations, to listen and read a bit more carefully, quoting an Oxford University study discussing the financial crisis which stated that the fact that many of these entities were located in OFCs created confusion about the role of tax havens in the financial crisis.

The study acknowledged that while off balance sheet vehicles in offshore jurisdictions did not contribute to the transparency of the system, the problems experienced by structured investment vehicles (known as SIVs) during the crisis were not due to their offshore location, but due to their off balance sheet status.

“Their business model was flawed,” Ridley argued, “i.e. they borrowed short and lent long.  That’s got nothing to do with offshore, that’s the business model. Learn from it and move on. But don’t say the flawed business model is the responsibility of the OFCs!”

Ridley and Shaxson will be sharing a plat form again later this month in Geneva at the Transcontinental Trusts Conference 2011

 

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Category: Finance

Comments (12)

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  1. Anonymous says:

    Tim & Tony doth protest too much, methinks.

     

  2. Justice for all says:

    OFCs are used by the rich to escape paying taxes to benefit the poor increasing the tax burden on the middle classes.  The G20 and the OECD should close these parasites down by making financial services transactions with these places taxed as if they were wholly domestic.

    • M says:

      Justice for all, but what do you think would cause the rich to not want to pay taxes in the first place?  Is it not government regulations and high taxes?

      Who is at fault with stiffling the growth of businesses and unemployment?  Is it not a big government that is a parasite to its private sector and the little man? 

    • Anonymous_A woa says:

      I totally dismiss this guy, he is just stirring the pot to get reactions from us here.  Clearly he's jealous about our wonderful home and the whole industry. Maybe he got teased in finance 101?

      • Justice For All says:

        Or maybe I spent a lot of my working life cooking up nice little schemes so the rich didn't pay tax and know the truth.

      • GitRDone says:

        Justice, in every country there are folks who spend their time cooking up schemes to benefit those who will pay. Recognizing this, OFC's like Cayman have gone to a great deal of trouble to protect the integrity of their financial services industries. Just look at how difficult it is just to open a bank account in Cayman due to the KYC requirements. Compare that to the same process in Florida, or New York. But then again, Justice, if you truly spent any time working in the offshore financial services industry, you would know the "truth"….

    • True justice for all says:

      The poor are a drain on society that need to start applying themselves and contributing their fair share to society.

      This overeliance on the rich and middle classes to fund their drug habits and too many children so they can claim moremoney from the state is the problem

      Stop the handouts and give hand ups and incentives to stop the sponging

      The lazy people who don't want to work are the parasites, look up what a parasite is and you will understand

      Offshore and onshore have more of a symboitic relationship

  3. Anonymous says:

    Thanks Tim. 

    The Cayman Islands is fortunate to have strong and solid such as Tim Ridley who can defend it against the ignorant, ill-informed and politically motivated attacks that it unjustly receives.  It is good to see Tim's insightful, measured and intelligent responses against the often sensationist accusations.

     

    • Anonymous says:

      Perhaps just as important as it being a measured and intelligent response was the fact that it was also well mannered.

      Tim Ridley is a gentleman, and his removal as Chairman of the Stock Exchange was a big mistake by the PPM, which I hope that will be corrected shortly.

      I can understand the pride of having a "local born" Caymanian appointed to high offices to prove that we are capable, but if backfires when someone is appointed who really isn't interested in doingthe job but only took it to appease a politician.

      CNS note: Tim Ridley was chair of CIMA, not the CI Stock Exchange.

  4. bradley says:

    The US / UK governments and big elites, conjoined by agreements and alliances, are the most corrupt scum on the face of the earth! 

    They are the People and Private Sector's enemy #1