By Lucy Komisar
Sept 27, 2010
China is the major international power blocking a global solution to the offshore bank and secrecy problem. It is doing so because of its own secrecy jurisdiction, Hong Kong, says José Manuel Barroso, the president of the European Commission.
Barroso told me this privately at the Council on Foreign Relations in New York last week. Before that, at his public speech, I asked his strategy for dealing with the offshore system which facilitates tax cheating, corporate corruption, organized crime and terrorism.
He said some countries hadn‘t been reacting positively to efforts to change the system , to establish a level playing field.
After the meeting, I asked him why the major financial powers hadn’t been able to achieve a solution. He said the problem was China, because of Hong Kong.
It’s no secret that offshore banks that have operated out of Switzerland and other traditional offshore financial centers now targeted by western law enforcement have moved to Hong Kong and to Singapore. For Beijing, it’s a way to suck hot money into Chinese investments. It was unusually frank for a Western European official to acknowledge this to a journalist.
QUESTIONER: Lucy Komisar. I’m a journalist.
Various European countries — Germany in the lead — are cracking down on massive tax cheating, much of which is affected through the secret bank accounts and offshore financial centers such as Lichtenstein. The OECD effort has failed to significantly change the system.
Do you have a strategy for dealing with the global offshore system that facilitates not only massive tax cheating but corporate corruption, bribery, the movement of terrorist money and money of organized crime throughout the world?
BARROSO: Yes. Very important point. In fact, that’s one of the issues that the G-20 should look at. And we are precisely trying to go on with that fight against this kind of activity in Europe and some of our partners because of some laws of bank secrecy that, in fact, make it easier, this kind of behavior.
And we are doing it, also, in a bilateral context with those countries. Myself …have been discussing with some of our partners, European partners and non-members of the European Union. But it will be important to have it not only OECD but also globally.
And so far, it has been a difficult issue. It’s been a difficult issue. Some of our partners are not reacting very positively with the idea of having, as much as possible, a level playing field globally in that matter. But, of course, we will keep our negotiation efforts on that.