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Hurricane Irma: The victims are the priority, but financial secrecy must not be ignored

Written by Robert Barrington on Tuesday, 12 September 2017

As some of the UK’s Overseas Territories face up to the devastating impact of Hurricane Irma, is it right that conditions should be placed on aid?

In a humanitarian crisis, immediate aid for the victims must be the first priority.  That should certainly be the case, without conditions, for the UK’s Overseas Territories affected by Hurricane Irma.  Later, comes the question of what sort of longer-term development is appropriate to help individuals, societies and economies recover and flourish.  We also know from experience of previous disasters that the questions asked and decisions made in the early stages can be critical to a successful long-term outcome.

What does that mean for the UK’s Overseas Territories, in the immediate aftermath of a natural disaster?  We are used to hearing those territories, such as the British Virgin Islands, cast as villains in the global fight against corruption.  Their provision of secret financial services to all-comers has long been identified as a weak link in global anti-money laundering efforts.  The Panama Papers revealed quite clearly how such secrecy has been exploited by dark money and that the misuse of global financial services by corrupt and criminal individuals is not something marginal at the fringes of the system, it is at the heart of the system and provides much of its raison d’etre.

The governments of the Overseas Territories, and their sister group the Crown Dependencies, have argued that if they are unable to sell secrecy (described in their marketing as privacy or confidentiality) the business models of their economies will fail, and the UK taxpayer will be left to pick up the bill.  At the moment, certain Overseas Territories are over-dependent on the provision of financial services built on secrecy and lax oversight, and this has indeed made it difficult for those islands to be advocates for a transition to cleaner economies.  But the world is moving in that direction, and it is arguably only a matter of time before the Overseas Territories and the UK need to face up to the question of how to run a financial services industry that meets modern standards.  The hurricane, tragic though it is, may accelerate a change that was inevitable.

The hurricane has led to widespread destruction, and the UK taxpayer will now, in any event,  be asked to pick up the bill – and rightly so, as these are small economies and closely linked to the UK.  The elephant in the room is whether the aid should be paid unconditionally.  Here are some principles that might help inform the UK government’s decision making to try and square the circle of helping the victims while also helping the island’s future economic development:

1 – Victims in immediate need should be helped without any pre-conditions.

2 – As the UK invests in rebuilding the BVI and other OTs it should be working with them on a plan about how to make sure those economies are not dependent on providing secret services that can easily be exploited by criminals.  There is simply no way that a 21st century economy should provide a convenient safe haven for corrupt capital.  The corruption that is facilitated by the UK’s Overseas Territories has itself hundreds of thousands of victims around the world – for example, ordinary people dying through lack of healthcare because health officials have stolen the budget and stashed it in offshore accounts.

3 – If investment is required in re-building the Overseas Territories’ financial services industry, then it would be both fair and right to require that industry to operate to international good practice standards with regard to anti-money laundering; this is an opportunity to take stock and invest in systems for the future and not hang on to the failing systems of the past.

4 – If the financial services have survived intact, and investment is required elsewhere, the islands’ governments and the UK government should be working out how to invest in developing sustainable economies that reduce reliance on selling services to criminals, such that those activities can be rapidly phased out.  To be clear, this means the element of secrecy, not the provision of financial services.

This is a terrible natural disaster.  But that does not mean it needs to become a terrible long-term disaster either for the citizens of the islands or those people around the world who are the victims of corruption.  Once the immediate humanitarian needs have been met, the governments concerned, both of the islands and the UK, need to plan for a future that is different to the disreputable recent past.

Image: kansasphoto

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Read 14 times Last modified on Tuesday, 12 September 2017 16:50
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Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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