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The Cayman Islands Agrees to Share Tax Data with the Five Eyes Countries

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Screen shot 2013-11-29 at 5.18.17 PMApparently, the people at Treasury don’t need to take advantage of the Black Friday sales. Instead, they’re at work and announcing that the Cayman Islands (and Costa Rica) will share information on US taxpayers with the IRS. The move comes after the Brits rolled out a similar agreement earlier this month.

I assume we’ll see other advanced countries demand similar agreements. But for the moment, just the NSA and GCHQ’s home countries will be able to learn which of their citizens are stashing money in one of the world’s most important tax havens (and one that has been important to Anglo-American financial dominance).

There are two submarine cables serving the Cayman Islands. One — Maya 1 — carries telecom traffic to Hollywood, FL. It is owned, in part, by NSA spy partners AT&T and Verizon. The other carries traffic to Jamaica. Another of the cables that serves Jamaica lands in Boca Raton. A third carries traffic to British Virgin Islands. From BVI, cables carry traffic directly to several other landing spots in the US, as well as — by way of Bermuda — Canada.

Earlier this year, someone leaked massive amounts of data on BVI’s tax shelter clients and habits (though curiously, no US persons were identified among the most prominent culprits). As far as I know, no one has ever discovered how that data got leaked, and there seems little concern from the powers that be about this leaker who, after all, was as audacious as Chelsea Manning or Edward Snowden.

Now, I’m not saying that the US and UK were already stealing Cayman Islands’ data. I’m only saying that doing so would be perfectly within the known practices of America and Britain’s spy agencies.

Some Pigs Money Launderers Are More Equal Than Other Pigs Money Launderers

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Treasury is going to ratchet up sanctions against Iran today, designating it as a primary money laundering concern.

he Treasury Department plans to designate Iran as an area of “primary money laundering concern” on Monday, a U.S. official said, a move allowing it to take steps to further isolate the Iranian financial sector.

[snip]

The decision — which the official said was to be announced by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner on Monday — appeared designed as a warning about the risks of dealing with Iran’s financial institutions.

Maybe if the government would actually punish those who traded with Iran–like JP Morgan Chase–rather than imposing fines but then funneling them more money than the fines, it would have an effect on entities dealing with Iran’s financial institutions?

More importantly, the Treasury Department must think “money launderer” means something different than I understand it to mean. Because these guys are still operating as a favored financial jurisdiction for Americans and American companies.

A small group of Cayman Islands “jumbo directors” are sitting on the boards of hundreds of hedge funds as demand for independent directors booms in the Caribbean tax haven.

At least four individuals hold more than 100 non-executive directorships each, and 14 have more than 70 – each worth as much as $30,000 a year.

One has been listed as on the boards of 567 Cayman entities, almost all of which were hedge funds.

So long as we allow Cayman Islands and the hedgies to set up a kind of dangerous hybrid, where the hedgies themselves get to make sure the Cayman banks operate “ethically” as they launder the hedgies money, whatever concern we try to muster about Iran will ring false.

But I guess that’s increasingly par for the course.

KBR’s Cayman Island Scam

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I recommend you read the whole article detailing KBR’s Cayman Island scam. A lot of people have linked to the lede, explaining how KBR created a shell company in Cayman Islands so it didn’t have to pay social security and unemployment benefits for workers hired through the shell company. But there are several details of note that appear further down in the story.

For example, KBR would like you to believe that it set up this shell company to help you, Mr. and Ms. American Taxpayer. It saves you money, it claims, by making these workers pay their own social security and go without unemployment insurance.

It’s bogus on its face. But deep in the article, an anonymous former KBR exec reveals that it’s actually using the shell company so it can compete against its rivals Fluor and Bechtel.

A former Halliburton executive who was in a senior position at the company in the early 1990s said construction companies that avoid taxes by setting up foreign subsidiaries have obvious advantages in bidding for military contracts.

Payroll taxes can be a significant cost, he said, speaking on the condition of anonymity. "If you are bidding against [rival construction firms] Fluor and Bechtel, it might give you a competitive advantage."

So you, Mr. and Ms. American Taxpayer, can pay one fee to Fluor for drivers in Iraq who will will have some safety net when they return to the US. Or you can pay a slightly smaller fee–not enough to make a difference on the cost of the war, but enough such that KBR can beat out Fluor on pricing–and have that same driver return from Iraq with no unemployment benefits.

And KBR nets the difference.

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