The Panama Papers, a cache of 11.5 million leaked documents belonging to the law firm Mossack Fonseca in Panama, has implicated dozens of world leaders and celebrities in offshore banking and tax evasion. And yet these revelations are small when compared to the actual size of global financial crime. Panama, after all, is only one of more than 90 financial secrecy jurisdictions around the world today, compared with just a dozen or so in the early 1970s. Together, as of 2015, they hold at least $24 trillion to $36 trillion in anonymous private financial wealth, most of which belong to the top 0.1 percent of the planet’s wealthiest.

These “treasure islands” are not limited to sultry tropical paradises such as the Bahamas, Anguilla, Aruba, Barbados, Belize, Bermuda, BVI, the Cayman Islands, Panama, St. Lucia, St. Kitts, and St. Vincent. They also include much older traditional European havens, including Andorra, the Channel Islands, Cyprus, Gibraltar, the Isle of Man, Jersey, Guernsey, Liechtenstein, Malta, and Monaco. There are also many other newer, even more remote, havens, including the Cook Islands, Mauritius, the Marshall Islands, Nauru, the Seychelles, and Vanuatu. For certain purposes, several reputable “onshore” secrecy jurisdictions—the City of London, Switzerland, Delaware, Nevada, Luxembourg, Dubai, Singapore, Malaysia, and Hong Kong—have also become important members of the pack.

The basic role of such treasure islands is to rent their sovereignty to wealthy foreigners. They provide anonymity for financial and corporate capital, intellectual property, and non-financial assets, helping to put the foreigners’ offshore private wealth beyond the reach of taxes, regulations, and law enforcement.

But here is the catch: most of this wealth is not actually invested in the treasure islands themselves. The reason is simple: the very things that make the islands good places to stash money also make them dangerous places to do so. They generally have tiny capital markets and loose financial regulations; they are home to regulators, police, and judges who are not quite as impervious to back-door influences as First World enforcers. So offshore investors are generally unwilling to trust such places with large amounts of their financial wealth. Like ordinary domestic investors, tax dodgers like to be able to count on reliable legal frameworks and the rule of law when it comes to protecting their investments. They also prefer to invest in places with liquid markets, access to top-flight investment managers, and financial and political stability.

Most of these benefits are readily available only in the world’s most advanced capital markets. And that helps explain why most offshore wealth winds up being routed by way of treasure islands to the ultimate havens—First World financial centers such as New York, London, Zurich, Geneva, Frankfurt, and, to a lesser extent, Singapore, Hong Kong, and Dubai. It is these ultimate havens, and not the archipelago of offshore conduits or treasure islands, that is the final resting place for the vast bulk of so-called offshore private wealth.

What is more, the architects and network traffic controllers shaping the rise of the global haven industry have been the world’s largest private banks—giant brand-name institutions like HSBC, UBS, Credit Suisse, Citigroup, Bank of America, RBS, Barclays, Lloyds, Standard Chartered, JPMorgan Chase, Wells Fargo, Santander, Credit Agricole, ING, Deutsche Bank, BNP Paribas, Morgan Stanley, and Goldman Sachs. Since the 1970s, these banks have played a lead role in recruiting wealthy investors and senior officials as clients, helping them move their wealth abroad and invest it tax-free under the cover of offshore trusts and companies, providing portfolio management services, and also helping them access their wealth from afar.

The website of the Mossack Fonseca law firm, April 4, 2016.
Reinhard Krause / Reuters

The top 50 key players in the international private banking industry now account for at least half of all cross-border private financial wealth (at least $12 trillion to $14 trillion out of $24 trillion to $36 trillion, as of 2015). And the top dozen banks alone account for more than half of all these offshore private banking financial assets.

The concentration of all this shady money in a relatively small handful of blue-chip banks, hedge funds, insurance companies, and their affiliated asset managers is ironic. Of course, these institutions will tell you that it simply reflects the quality and efficiency of their services. But the real reasons are even more basic. The evidence is that many wealthy offshore investors are surprisingly risk averse when it comes to managing their offshore wealth, which they tend to regard as a nest egg, to be relied on if their base businesses go bust. To be cautious, therefore, they tend to favor larger, more established financial institutions that can usually—not always—be counted on to safeguard their wealth even at long distances. In other words, they look for the banks that are too big to fail.

In short, a handful of key rich OECD countries from which most of these giant banks hail—the United States, the United Kingdom, Switzerland, France, Germany, the Netherlands, and Belgium—are ultimately the true havens when it comes to where most of the capital flight from developing countries ends up.


Although there are no public estimates of the value of all the offshore private wealth that has been stashed in havens, it is possible to estimate it indirectly. Our methods, described in detail in a separate Tax Justice Network report, approach the problem like estimating the size of a black hole by triangulating data from other sources. These include data from the Bank for International Settlements on cross-border bank deposits by “non-banks,” almost all of which are from shell companies, trusts, and individuals; discrepancies in the “sources and uses” data on foreign capital flows that is published by the IMF, the World Bank, and central banks; direct estimates of cross-border assets under management, unmanaged deposits, and custodial brokerage assets for the top 50 international private banks, drawn from the these banks’ own financial statements and press releases; and data on large-denomination currency outstanding for major international reserve currencies, include the U.S. dollar, the Swiss franc, and the euro.

According to our estimates, the global stock of unrecorded private financial net assets—including currency, bank deposits, stocks and bonds, and other tradable securitiesinvested in or through offshore havens already totaled $21 trillion to $32 trillion by the end of 2010, about 10–15 percent of global financial wealth. And this “missing” wealth stock has continued to grow since then. Indeed, from 2004 to 2015, right through the financial crisis, it grew at a nominal annual average rate of nearly 16 percent a year. As of 2015, this “missing” stock of offshore private financial wealth was worth at least $24 trillion to $36 trillion.

In addition, the value of non-financial net cross-border wealth—real estate, gold and other precious metals, precious gems, art, rare books, cars, religious icons, photos, other collectibles, yachts, ships, submarines, private jets, real estate, farms, mines, forests, and oil fields—that is owned through anonymous haven companies, trusts, foundations, and private vaults—is now worth at least another $5 trillion to $10 trillion.

From a tax justice angle, the key fact about all this underreported wealth is that it is owned by very few people. More than 85–90 percent belongs to fewer than ten million people, just 0.014 percent of the world’s population. And the top 100,000 families on the planet, each of which has a net worth of at least $30 million, own at least a third of it.


Reining in such abuses will require many initiatives—not just measures such as automatic information exchange and beneficial ownership registration but also preventive, proactive regulation of the key players in the global haven industry; tougher penalties for tax dodgers, kleptocrats, and their enablers; mandatory offshore wealth disclosure for public officials; and stronger protection for financial whistleblowers.

But implementing such reforms will take time. And we should not be content merely with lobbying for technical amendments to the existing hodgepodge international tax system that might succeed in reforming this system some fine day. As we have argued, trillions in anonymous, largely untaxed, in many cases crime-related private wealth is just sitting there, invested in relatively low-yield offshore investments. If we can figure out how to levy a modest global tax against it, or at least encourage it to return to the surface where it can be more productively invested, all this wealth might at least begin to make a contribution while we wait for the more comprehensive reform.

Our proposal involves levying a transnational Anonymous Wealth Tax (AWT) at a modest 0.5 percent annual rate. If implemented carefully by a determined coalition of rich countries and key developing countries, even this modest rate could generate tens of billions of dollars per year—$50 billion to $60 billion, at most ten percent of the annual income earned by these hidden offshore assets—of badly needed revenue, either directly, or by providing an incentive for anonymous wealth to come back home, where it can be invested and taxed by local authorities.

Nor would any new revenue generated by the AWT simply disappear into the boundless ocean of generic government spending. Under our plan, reflecting the truly global origins of anonymous wealth, any incremental revenue would be dedicated to the global community’s most pressing needs—helping poor countries to pay for the costs of adapting to climate change; recover from natural disasters; manage epidemics; supply clean water and safe food; and backstop the First World’s shrinking foreign aid budget. A new international trust fund would be created to channel AWT revenue to critical projects and keep them free from corruption.

The wealth (not income) levy would be applied on a worldwide assets basis by the national governments of the countries in which the leading financial institutions and wealth managers have their corporate headquarters and major operations. Much like a value-added-tax or carbon tax, it could be levied on a pro rata basis on the financial institutions themselves, based on the global aggregates of reported quarterly customer assets under management. Financial institutions would then be free to proportion these charges to individual customers or to nominee account holders. One appeal of this emergency levy, therefore, is that we don’t have to know precisely who owns any specific accounts or specific assets, and that the tax will reach the 10 million to15 million or so high-net-worth investors who own all this wealth and are scattered all over the globe.

Since most financial institutions that are big players in private banking are already required to publicize the value of most financial assets under management, the cost of reporting such aggregate asset values should not be too high. This is especially true compared with the cost of collecting the Tobin Tax, a tax on literally billions of capital market or currency market transactions that was first proposed in 1972 by Nobel Prize–winning economist James Tobin. Financial institutions would be permitted to exempt small account holders from their proportionate share of this levy. AWT will not attempt to levy taxes against the value of less liquid offshore wealth, which raises trickier valuation questions, and is also already often subject to local property taxes.

Based on experience, there is no doubt that compliance will be imperfect. Indeed, there are notorious cases where the leading banks such as HSBC, Credit Suisse, and Wegelin have gone to extraordinary lengths to move assets off the books by using devices like storage vaults, omnibus trust accounts, independent trustees, foundations, and other gambits to specifically avoid new regulations designed to catch tax dodgers. In anticipation of the serious risk of institutional noncompliance, part of this initiative should include a special monitoring and enforcement arm with adequate resources for investigating and monitoring bank asset reporting and recommending appropriate penalties—including possible jail time for any bankers and senior executives involved.

Demonstrators hold placards during a protest outside Downing Street in Whitehall, central London, United Kingdom, April 9, 2016.
Neil Hall / Reuters

Despite the challenges, this particular withholding should not be any more difficult to enforce against major banks, accounting firms, and law firms than any other existing laws and regulations. Indeed, since 2014, in the case of the recently enacted March 2 US Foreign Account Tax Compliance Act (2010), more than 100,000 financial institutions, trusts, and companies that do business in the United States are required to register, in order to report any foreign assets of U.S. citizens and any income paid abroad to them or to companies that they control, and potentially withhold up to 30 percent of these payments. AWT’s requirements are much less onerous.

National authorities may decide to permit individual taxpayers to reclaim a portion of the withheld charges levied under this program, upon showing that they have paid all domestic taxes due in their home countries. This would effectively limit this to a “tax on anonymity,” which might help level the playing field between offshore and onshore taxation.

Of course, for such a plan to happen, we have to assume an unprecedented level of multilateral cooperation. So far, most other such multilateral taxing schemes, like the Tobin Tax, have proved to be difficult to win support for. The difference now may be, not only that we increasingly understand that all this criminal wealth is escaping taxation, but that over the next two decades, the world will become increasingly desperate for global tax revenue to tackle urgent problems such as climate change.

Moreover, a uniform global levy on offshore wealth, widely adopted and enforced, wouldn’t disadvantage any particular offshore center. So U.S., British, and even Swiss banks could continue to compete effectively for the funds of wealthy foreigners.

With respect to gaining the support of other tax havens, the key target is not the individual jurisdictions themselves but the financial institutions, accounting firms, and law firms behind them. Assuming strong leadership in the world’s key capitals, these conduit jurisdictions will fall in place.

In the end, however, no levy is foolproof. The right question is not “Is this complex and difficult?” Nor is it “Is it a perfect tax?” The right question is the economist’s: “Compared to what?” From this angle, compared with other alternatives for taxing the world’s elite, this one takes advantage of the fact that this wealth is not widely distributed all over the planet but concentrated in a comparative handful of leading financial institutions.

Will the world’s offshore elite scatter to the ends of the earth in response to such a modest wealth tax? Will the world’s largest financial institutions—which have already benefitted so much from government regulation, bailouts, low-interest loans, and subsidies, and which also happen to be big investors in projects and insurance companies that stand to lose from climate change—help them do so? They may try. But at some point I think they are more likely to say, “Hey, we’re talking about $100 billion a year out of $24 trillion to $36 trillion here. That’s just 0.5 percent a year. If we can’t figure out how to boost our investment yields by a half a percent in this great wide world, we shouldn’t be investment managers.”

That sounds fair to me.

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  • JAMES S. HENRY is an investigative economist and lawyer, a former Chief Economist at McKinsey & Co., Senior Fellow at Columbia University’s Center for Sustainable Investment, a Global Justice Fellow at Yale, and Senior Adviser to the Tax Justice Network. Since the 1970s he has authored and contributed to many books and articles on havens and the global underground economy, including Banqueros y Lavadolares (Tercer Mundo, 1996), The Blood Bankers (Basic, 2005), A Game As Old As Empire (Barrett Koehler, 2007), Global Tax Fairness (Oxford University Press, April 2016), and the forthcoming Pirate Bankers (Columbia University Press). He is the author of “The Price of Offshore Revisited” (Tax Justice Network, 2012), the most detailed study yet of the size and growth of the global haven industry.
  • The article is adapted from Global Tax Fairness, edited by Thomas Pogge and Krishen Mehta (April 2016, Oxford University Press).
  • More By James S. Henry