OFCs and tax havens
The origins of money-laundering as a global phenomenon are closely tied to the international spread of offshore financial centres (OFCs) and the opportunities these provide for the spread of tax avoidance and evasion; the latter being of course a criminal offence. At the early stages of this development OFCs were primarily seen as opportunities for tax avoidance because of their low tax status; their transition towards offering tax evasion came later.
As noted last week, European countries had favoured the development of OFCs as an appropriate strategy for the diversification and development of its small, open low-income territories, dependencies, and ex-colonial possessions. In turn European connections to these jurisdictions provided investors with confidence in their political and social stability. Indeed, shortly after this process started, the Group of Seven leading industrial economies (G7) endorsed this strategy, especially for those OFCs located in small poor open economies. As also noted last week, this was aided by the relatively low start-up costs of these centres.
As events unfolded, however, more and more investors came to see these centres as offering not only opportunities for