Thank havens

Maybe we should blame John Grisham. In his breakthrough best-seller The Firm, the young lawyer Mitch, played by Tom Cruise in the movie, has to make regular trips to the Cayman Islands where the corrupt law firm he works for creates hundreds of shell companies for the assorted cast of money launderers, tax dodgers and gangsters who are its core client base. Ever since then, the murky ‘offshore centre’ has become a staple of the post-Cold War thriller: a place where, amid the palm trees and skyscrapers, sharply dressed financiers salt away billions, safely out of view of any government.

As the latest offshore scandal broke last week, with the release of millions of documents from Bermuda known as the ‘Paradise Papers’, it was hard not to see echoes of Grisham’s 26-year-old book colouring the coverage. The Queen has investments offshore, we are told, in tones of shocked breathlessness. Lewis Hamilton has registered his private jet in the Isle of Man. Wilbur Ross (Donald Trump’s commerce secretary) is fingered in the cache, as is the Tory donor Lord Ashcroft. Inevitably, Apple is swooshing a few tens of billions around from one jurisdiction to another. So is
Nike. Even Bono, a figure more saintly than Her Majesty, turns out to be implicated, alongside — rather less surprisingly for someone who once belted out ‘Material Girl’ — Madonna. As the millions of papers are sifted through, no doubt many more famous names will be held up for public shame and ridicule. Inevitably, there are calls from politicians for clampdowns and inquiries and prosecutions amid sanctimonious lectures about how every deal routed through Grand Cayman is costing us all a school or a couple of hospital wards.

Yet there is a problem with this reaction. It is a very long way from the truth. In fact, there are lots of perfectly legitimate reasons why companies, funds, or even individuals might want to have an account or a subsidiary in an offshore centre.