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Jenkins: An Oldie—The 'Offshore' Witch Hunt

What public interest is served by invading the financial privacy of innocent citizens?
Much attention has been placed by the international media on the Virgin Islands lately since reports that information related to the operations of two BVI Trust companies, were obtained by an international consortium of journalists and have led to widespread reporting of stories in the international media about the BVI Financial Services Industry, many of which are innacurate according to Premier Dr the Honourable D. Orlando Smith. Photo: VINO/File.
By HOLMAN W. JENKINS, JR.

(Wall Street Journal)- Anyone collecting similarities between our times and the 1930s might pin a photo of Fabien Albertin to his bulletin board.

Monsieur Albertin, a French deputy, appeared on the floor of the National Assembly claiming to have received details of secret Swiss bank accounts held by French politicians, celebrities and industrialists. Not long after, the Swiss made a point of enacting a law to impose criminal penalties on bankers who betray client secrets. As Europe descended into chaos and war, the Swiss knew a business opportunity when they saw one.

Monsieur Albertin's modern-day counterpart is Gerard Ryle, an Irish-Australian journalist whose International Consortium of Investigative Journalists has been flogging information from a purloined hard-drive containing details of the mostly Caribbean accounts of 130,000 depositors from 170 countries.

Among Mr. Ryle's collaborators is the Guardian newspaper, last seen decrying invasions of privacy in Britain's phone hacking scandal.

Another collaborator is the Washington Post, which insisted on Sunday: "Among the 4,000 U.S. individuals listed in the records, at least 30 are American citizens accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct."

That's a ratio of 0.75%. One wonders what percentage of account holders in domestic banks would have to be accused of something in a lawsuit to justify all account holders having their records ransacked by the media.

Mr. Ryle has said he's still deciding whether to release his data generally. Let's presume journalists are not interested in invading the financial privacy of innocent citizens. Oh wait. The Post describes the Cook Islands holdings of a Baltimore real-estate family, "a transfer they disclosed to the IRS." Why is the family's data fair game? Apparently only because they were once victimized by a swindler.

The Post's logic: If you were ever mugged in an alley, the paper can publish your stolen bank records.

The implicit tone of all such reporting, of course, is that anyone who uses offshore accounts must be a criminal. But this cannot be sustained as an intellectual matter. "There's nothing illegal per se about owning an entity in a tax haven," Mr. Ryle himself has said.

"Many people use the offshore world for legitimate purposes," the Post acknowledges.

One who appears cheerfully to have answered questions is author and Gulf Oil heir James Mellon, who tells Mr. Ryle he once used a "whole bunch" of offshore accounts for tax and liability reasons.
 
Another rationale also lurks behind the lines of stories based on the stolen records appearing in the media from Germany and Ireland to the Far East: Governments everywhere are hard-up for money. This gets causation nearly backwards. The paranoid rich are assumed to be too cheap and greedy to pay the taxes they are assumed to be dodging. In fact, many are obviously prepared to incur considerable cost to keep a pot of money somewhere they hope it will be safe. These fearful rich are in search of jurisdictional diversification, and willing to pay for it.

Why? Maybe because populist attacks on the wealthy, predatory government and sleazy lawsuits are not unknown in our world. It's true criminals often use offshore accounts to hide their loot. Criminals also use onshore accounts and brown paper bags to hide their loot. But notice that the "investigative" method used by reporters here apparently consisted of Googling the names of account holders to see if they were linked to questionable activities. That is, those whom the media found an excuse to name could be named precisely because the existence of an overseas account hadn't stopped them being prosecuted for crimes at home.

And what is the solution? To ban transactions across borders would be to restore the world to medieval poverty. To require all governments to adopt identical tax laws would be to lose an important incentive for governments to tax responsibly.

What should really disturb readers is the number of politicians and civil servants named in the secret files. One is the campaign finance chief of French President François Hollande, last seen canvassing for populist votes by promising confiscatory taxes on millionaires.

What should disturb readers is the number of governments now not trying to protect the rights of violated account holders, but trying to get their hands on Mr. Ryle's data for tax-fishing purposes.

Mr. Ryle has said he obtained the secret cache in connection with his exposure of the Firepower fraud in Australia, involving investors and politicians who were bamboozled by promises of a magic pill to increase fuel mileage.

The scamster allegedly stashed some of his loot offshore. Surely, though, the larger lesson is that everyone in Australia should move their money offshore to get it away from politicians and regulators who can't see through a scam as shopworn as the magic fuel-mileage pill.

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