Tax havens are not money laundering centres

It is frequently alleged that tax havens – small, low-tax countries with stricter financial privacy – are money laundering centres for tax evaders, organised crime and terrorists. On the contrary, according to a new study from the Centre for Freedom and Prosperity Foundation, dirty money is more likely to be laundered in high-tax countries because that is where the illegal activity is most likely to occur.

The U.S. State Department, Central Intelligence Agency (CIA), Internal Revenue Service and the international Organisation for Economic Cooperation and Development's (OECD) Financial Action Task Force, each independently assess whether countries are money laundering centres and/or have financial systems that make them vulnerable to dirty money. All of these agencies have come to similar conclusions. For example,

According to the CIA, only four out of the 41 OECD-identified "tax havens" are money-laundering centres, whereas 11 non-tax havens are.

The State Department estimates that 14 tax havens are a primary concern for money laundering vulnerability, compared to 38 non-haven jurisdictions; also, 16 low-tax jurisdictions are of "secondary" concern, compared to 33 high-tax countries.

The OECD Task Force lists eight "tax havens" as "non-cooperative" in anti-money laundering efforts – fewer than the 11 "non-cooperative" non-havens, and not including the four OECD members that its recent self-assessment gave failing grades.

According to the International Monetary Fund, the biggest money laundering centre in the world is the United States, where about $300 billion of an estimated $600 billion globally is laundered each year.

Tax havens attract wealth, but most of the money is institutional investment.

Criminals, on the other hand, go where the money is, and launder it quickly. The U.S. Treasury Department estimates that 99.9 percent of the criminal money in the United States is laundered successfully.

Source: Daniel J. Mitchell (Heritage Foundation), U.S. Government Agencies Confirm That Low-Tax Jurisdictions Are Not Money Laundering Havens, January 15, 2002, Centre for Freedom and Prosperity Foundation, P.O. Box 10882, Alexandria, Va. 22310, (202) 285-0244.

For text http://www.freedomandprosperity.org/Papers/blacklist/blacklist.shtml
For more on Regulation of Financial Institutions http://www.ncpa.org/iss/reg/

FMF Policy Bulletin\21 January 2002