Monday, October 01, 2007

Guernsey and Jersey abet Africa fraud

The UK's Guardian newspaper reports the apparent looting of Kenya's treasury by senior politicians, all with the gleeful assistance of an arms dealer and the British tax havens of Guernsey and Jersey. As the article says:

The Serious Fraud Office has begun a fresh investigation into British links with one of the biggest corruption inquiries in Africa. UK firms won huge contracts from the Kenyan governments of presidents Daniel Arap Moi and Mwai Kibaki, but anti-corruption investigators have discovered that many were fictitious and amounted to state-sponsored looting.

Financing for some of the suspicious weapons contracts at the heart of the investigation into the now well-known Anglo Leasing scandal was apparently administered through a company called Investec Trust, based in Guernsey. Investec handled business for a group of companies called LBA (short for Lightweight Body Armour) through accounts with the banks HSBC in Guernsey and Standard Chartered in Jersey. Two of the suspects, who once held extensive property interests in the UK, have disappeared from their Nairobi villa and are on the Kenyan police wanted list.

Investec staff claim that their suspicions were aroused as early as April 2002, but they took no action at that time. Instead they delayed until 2004, when Kenyan anti-corruption investigator John Githongo raised concerns in his report on corruption in Kenya, and then - acting on belated recommendations from their lawyers - they submitted a suspicious activity report to cover their backs. Proof, if it was needed, that the culture of the willfully blind professional is live and kicking in the Channel Islands.

Tax havens like Jersey and Guernsey routinely claim to have cleaned up their act, and their cheerleaders, including The Economist magazine, say they believe them, and claim that a race to the bottom among tax havens is a myth. We don't buy this rubbish. Nor does the Wall Street Journal. The newspaper says that Jersey is now relaxing some of its rules yet further.

It is a shift that could trigger a race to the bottom among offshore financial centers . . . Jersey's decision to introduce a new regime "was based on demand from the hedge-fund and other alternative-investment management community, which wanted an unregulated product," said Robert Kirkby, a technical director at Jersey Finance.

The behaviour of Jersey Financial Services Commission, headed by Colin Powell who also chairs the Offshore Group of Banking Supervisors, is disgraceful. And its timing isn't so clever either.

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