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TV Review : 'Frontline' Focuses on Offshore Tax Havens

November 01, 1994|ROBERT KOEHLER | SPECIAL TO THE TIMES

Tax loopholes are the classic case of "if you provide it, they will come." And come they have to the tax havens of the Caribbean islands from the Caymans to the Virgins.

But as tonight's "Frontline" report "Hot Money" indicates, the offshore islands have sheltered more than accounts meant to elude the tax man. For years, especially in the boom time of the 1980s, scores of banks in these British protectorates wittingly or unwittingly served as conduits for money-laundering operations crucial to the global drug trade.

Despite supposed crackdowns on phony paper companies set up for the laundering, the number of companies registered in the British Virgin Islands alone has jumped from 5,000 to 120,000 in 10 years.

Isn't the offshore haven merely a nice perk of making money? Yes, but it permits a brazen flouting of U.S. laws by U.S. citizens. When $300 billion due in U.S. tax revenues is redirected to the island banks, or when insurance company customers discover that their carrier is a paper company without real assets, or when criminals have such a safe spot for their cash, then it's time for the law to step in.

But the FBI cannot simply swoop down on the islands and nail the bad guys. The law in the protectorates, overseen by British authorities, enforces complete secrecy in financial transactions. The law not only created the offshore business industry, it also brought wealth to the islands. According to Shaun Murphy, who once administered a large money-laundering operation, the island governments have no interest in snooping into the banks or firms that set up shop.

Nevertheless, some U.S. pressure has caused a little reform movement by British overseers, and the FBI and Scotland Yard have begun a joint investigation. The joint powers of the BBC and "Frontline" also manage to expose the schemes of John Matthewson, founder of Guardian Bank on Grand Cayman Island, who is recorded explaining how to launder cash.

But the report suggests that any further reforms to completely wipe out the account-secrecy laws are likely to be sunk by British political stubbornness.

* "Hot Money" airs at 9 tonight on KCET-TV Channel 28, and at 8 on KVCR-TV Channel 24.

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