Worldwide: The Conspiracy Of The OECD Against The Financial Offshore Centers

Last Updated: 11 September 2008
Article by Eduardo Morgan Jr.

The Organization for Economic Co-operation and Development (OECD) is a cartel conformed by the countries of the European Union, plus Australia, New Zealand, Norway, Canada, Japan, Korea, Mexico, Switzerland and the United States. So it is, basically, a club of wealthy countries that includes the members of the G7 who, in turn, have created organizations such as the Financial Stability Forum and the Financial Action Task Force (FATF), and with decisive influence in the economic organizations of the United Nations.

The genesis of the so-called "black lists" is found in documents of the OECD which evidences that they came to existence as a reaction of its members to the lawful competition that small countries and jurisdictions, aided by the technological revolution, started against the traditional financial centers, mainly England and the United States. Fearing competition, the brains of the OECD designed strategies that may only be called Machiavellian, seeking total destruction of the viability of emerging financial centers. To such end, they resorted to all kinds of imaginable resources, without any moral considerations, among them, the fabrication of fallacies and all sorts of tricks to hinder and discredit their new competitors. These plans, designed in the seventies, were kept secret until the year 2000 when the Committee of Financial Affairs of the OECD decided to make them public in a document called, Improving Access to Bank Information, which may be consulted at the OECD's Internet site ( The plot's confession is particularly obvious in paragraphs 36, 37 and 38 of this lengthy document where they state, with the impudence characteristic of their arrogance, that the liberalization of the financial markets was promoted by them as "a response to the threat to financial markets posed by offshore financial centres. Such financial centres in the 1960's and 1970's were able to attract foreign financial institutions by offering a minimally regulated banking system and minimal taxation at a time when technological advances made them more readily accessible. As capital flows to offshore financial centres threatened to undermine the traditional financial markets, a number of regulatory reforms were undertaken to level the playing field between onshore and offshore banking. Exchange controls were eliminated. Some countries established markets to compete directly with the offshore financial centres. In addition, efforts were made to harmonise the regulation of financial markets on a global basis." (36) In paragraph 38, they acknowledge that "although the liberalization of financial markets has facilitated economic growth, it also has increased opportunities for non-compliance with the tax laws. Once most of the non-tax barriers to the integration of financial and capital markets had been removed, individuals and legal entities gained access, at little or no cost, to banking systems around the globe through which to conduct both legitimate and illegitimate transactions. This access has made it easier for them to avail themselves of the benefits offered by jurisdictions that limit access to bank information for tax purposes. It also has made it harder for tax administrations to detect non-compliance unless they have adequate exchange of information with the relevant jurisdictions."

It was a two-phase plan. First, to compete on equal terms, to which end they created the international banking system in the USA and in almost all European financial centers, with the same conditions and advantages offered by Panamanian law to International License Banks –zero taxes on international operations and foreign account holders. But this wasn't enough. The offshore financial centers had to be eliminated and nothing better or easier than to damage their reputation and make it difficult for them to do business. This is how the black lists, which started in the USA with the infamous "ANNUAL CERTIFICATION" of countries, were created under the excuse of the global fight against the traffic of illegal drugs and laundering of money therefrom. For example, in 1996 and 1997, they accused Panama of laundering TEN THOUSAND MILLION DOLLARS of drug money through the Colon Free Zone. They proceeded haughtily and shamelessly to accuse Panama in an official document circulated throughout the world of something that is not just a big fat lie but an absolute absurdity, as proven by the mere fact that at the time Panama's total GDP was seven thousand million and the Free Zone business was nowhere near that amount. In addition to the accusations to the Free Zone, they also criticized the Financial Center and the Panamanian corporation, alleging that both allowed for illegal transactions.

Since the unilateral nature of the CERTIFICATION, they then decided to attack the offshore centers through the Financial Action Task Force (FATF) created by the executive committee of the OECD, which is conformed by the G7. And so, FATF produced the black list of non-cooperative countries in money laundering matters and included Panama despite the fact that this country is a pioneer in the implementation of controls to avoid money laundering through its banking laws (it is the first country in Latin America to regulate the obligation to Know your client and has an independent Financial Analysis Unit), and unlike the USA, Panamanian corporations are constituted only by lawyers (that are required to know their clients as well). Despite all that, we repeat, and without any justification, FATF included Panama in its discriminatory list alleging that Panamanian laws failed to include money laundering as a stand alone crime. And they did this although in the last 10 years, there had not been in Panama a single scandalous case of money laundering, as there have in fact been in OECD countries (let us remember the scandals of Raul Salinas de Gortari, Benazir Buttho, Sani Abacha, the 7 billion dollars of the Russian mob and lately, the accounts of the notorious Vladimiro Montesinos, which were discovered in banks in Miami, Switzerland, London and New York). Quickly and with the utmost cooperation from the civil sector, the Executive and the Legislative Assembly of Panama approved the new laws and regulations they demanded, leaving them with no choice but to take Panama out of the list.

But the attacks did not end there and almost immediately they placed Panama in a new list, prepared by the OECD itself, with the ostentatious name of NON-COOPERATIVE TAX HAVENS. They didn't care that Panama had none of the characteristics that they attributed to tax havens and that its territorial tax system was perfectly legitimate. They PERCEIVED, I repeat, PERCEIVED Panama as a tax haven and that perception was enough for them. In view of the undeniable truth that many of its members, if not all, were tax havens and the United States the largest, they said that the difference between Panama and them was that they did cooperate with the provision of information; that before a certain date we had to change our laws and, in addition, sign with any country that so requested, treaties for the exchange of tax information and of transparency, on banks, corporations and other elements of Panama's service economy. As it is well known, without privacy and confidentiality, there cannot be any kind of commercial activity let alone an international service center.

In short, the failure of the conspiracy they concocted at the beginning of the '70s to destroy and prevent countries like Panama from competing in the international service sector, has kept them in constant alert. They know that Panama has all the components to become a service center par excellence: a Canal that moves 4% of the world commerce; the best ports on both oceans; the Continent's largest Free Zone; a Regional Financial Center regulated by the best international rules; the dollar as currency; a territorial tax system; the best international communications; a first rate aerial hub; democracy and political stability well established in three exemplary elections; but above all, a capable, efficient and professional labor force.

The attempts by the OECD were frustrated by the equal treatment demanded by countries classified as Tax Havens (Panama among them, of course) known as: the Level Playing Field. This means that the financial centers affected refused to provide tax information unless all financial centers did so, including OECD member countries, such a Switzerland, Luxembourg, Belgium and the United States.

This became an impossible task for the OECD so they introduced the issue of cooperation in tax matters, continuing to demand from small countries the signing of tax information exchange treaties. It is clear that countries such as Panama with a territorial tax system don't have to sign treaties that will in the end be one sided. But, in addition, it cannot concede to the underhanded attitude of the OECD that is seeking nothing but to eliminate the competition of what they call offshore centers. The banner of "harmful tax competition" used by the OECD to allege evasion of tax payments is nothing more than a subterfuge that withstands no analysis whatsoever. For instance, the largest tax evasion by foreign taxpayers takes place within the most influential member of the OECD, the United States, that does not tax foreign deposits in their banks, much less the multimillion investments of foreigners in their Stock Exchanges, neither provides information on these investments to any country other than Canada. Why doesn't the OECD pressure them to tax the profits of these investments or banking interests and deliver the money to the corresponding countries as does Switzerland with the European Union countries, instead of signing an information agreement that they will not enforce? What does the OECD think of the scandal that took place not long ago when the Internal Revenue Service tried to have banks provide this information? And what about the protest of Florida's governor, Jeff Bush, brother of President Bush, and a Congress majority that refused to approve this measure? Does the OECD ignore the arguments of US Senators and bankers in that giving such information would cause an alarming exodus of trillions of dollars from the American economy?

So, which is then the country that most contributes to tax evasion in the world? Obviously, everything points to the United States, the most conspicuous member and greatest contributor to OECD´s very fat annual budget of 340 million Euros.

It is hard to believe that the OECD ignores that it was the United States Government Accountability Office itself, that made the following statement: "Criminals use the lax state requirements to set up shell companies to avoid taxes or launder money. Shell companies formed in the U.S. are used to launder as much as $36 billion in ill- gotten gains from the former Soviet Union, according to FBI sources cited in the report. The FBI has 103 open investigations into market manipulation, the majority of which involve U.S. shell companies." If that statement isn't enough to worry about, we ask whether the OECD is aware of the following paragraph on the same statement: "Law enforcement officials interviewed for the report said a lack of information can kill investigations. Customs officials told the congressional investigators they couldn't prosecute the Nevada-based corporation, which received more than 3,774 "suspicious" wire transfers totaling $81 million over about two years, because they didn't know who the owner was." And to top it all, does the OECD ignores this last piece of information? "Last year, the U.S. Justice Department received 75 requests for assistance from Ukranian law-enforcement authorities seeking to determine the owners of U.S. shell companies. Russian authorities made 30 such requests. In all cases, the Justice Department was hindered by lack of information." The foregoing statements can be consulted in GAO's web page ( And for a more productive search, I remit readers, and the OECD members, to the USA TODAY issues of February 23 and March 19, 2007, explaining how easy it is to open accounts in some of their banks and how much more difficult it is to open them in, for example, Panamanian banks. Finally, we recommend reading The Economist, issue of April 19, 2007, which carries a very interesting and revealing article regarding the OECD intimacies. Perhaps we can find here the explanation as to why all that the bureaucrats who run it do, is to safeguard the interest of the countries who pay them their juicy salaries free of taxes, in addition to other benefits, like the remodeling of a luxury apartment in Paris for the Director General. What an irony that the Director General used to be Mexico's Ministry of the Treasury, a fellow country that was one of the first to include Panama in their black list. The Economist reads: "Many of the envoys had been unhappy at the pay deal Mr. Gurría landed on top of the rent-free residence. His basic pay of €183,000 was boosted by a confidential package; an expatriate's allowance of €33,000 (unprecedented for the top man), a household allowance of €11,000 and a "representation" allowance boosted to €50,000. That latter can be spent as he thinks best and is not subject to audit. A rather loose definition of "normal expenses" led to some raised eyebrows among officials who saw an invoice for a wedding anniversary dinner for Mr. Gurría with his wife, according to a document seen by the Economist. Officials has pointed out to him that this type of expense could not be reimbursed. A spokesman says these were personal expenses and were not processed."

It is public knowledge that Panama's economy is based by more than 80%, on the service sector. This is so, basically, because of its geographical position, which made the Canal possible, and has made Panama an axis for communications, not only for the Americas but between other continents as well. This geographical position was sequestered all throughout the past century, since the Canal was not returned to Panama until the year 2000 and the ports, until 1979. Both required and continue to require significant investments to make them suitable for global commerce. Being deprived of its geographical position, Panama had to be inventive to survive and thus, its forefathers created in 1919 the Open Ship Registry, complementing it in 1927, with the corporation law. Both have been essential vehicles since the beginnings of the globalization by allowing different countries to do business through a neutral instrument (at present the Open Ship Registry represents close to 20% of the world merchant marine). At the beginning of the '70s, Panama created the first International Financial Center outside the traditional financial centers of the OECD countries. The development of telecommunications has reduced distances and spaces. Everything is in the Internet, and the universal language is no longer English or Mandarin but the binary system. This technological revolution and other elements offered by Panama, such as the new law of Regional Headquarters, afford Panama the possibility of becoming a Financial and Service Center of the same stature as London, New York, Tokyo, Hong Kong and Singapore. There is ample proof, as the information collected in this document shows, that the OECD wants to prevent this.

The purpose of writing about these findings, is to alert the community of the perverse goals and methods of the OECD and to convince our governments that the OECD's attacks to force countries like Panama to sign tax information exchange treaties with all its members, are immoral and groundless under International Law and unacceptable within the context of relations between countries of the OECD itself. We also believe to have proven that what they seek is to prevent small nations such as Panama, from competing with the large International Financial and Service Centers. With the strength of this truth, we must encourage the Governments to take all measures within their reach, based on local and international laws, so that the OECD countries cease their attacks and exclude them from their infamous black lists.

Since Presidential and the Foreign Affairs Ministry negotiations have proven fruitless, Panama should now put into motion the instruments in its Law of Retaliation. There are two aspects to this law: retaliation and reciprocal measures. Retaliation consists in excluding companies with capital from those countries that keep Panama in the black lists from participating in bids for government contracts. Reciprocal measures, as its name says, is the application of the same or similar measures to those applied by such countries against Panama, its individuals or companies.

The Law of Retaliation was modeled after the "Retaliation Statute" of the United States and its goal is to use these measures to discourage countries from discriminating again its products and services. In Panama, the law was the answer to the black lists, and the upcoming multimillion dollar works for the expansion of the Canal was taken into account, so companies interested in participating in the juicy contracts which come from countries that keep Panama in their black lists, would put pressure on their governments to exclude the country from them, given the threat of being barred from participating in this grand endeavor. The delay in applying the retaliation measures has caused that it is no longer appropriate to do so as it may interfere with the bidding for the expansion works of the waterway and because it is in Panama's interest to have the largest concurrence of international companies without restrictions whatsoever. But Panama should apply the other variant of the law that is, the reciprocal measures. These measures would not affect the large participation that is sought for the Canal works but it would be a legitimate instrument for companies operating in Panama that come from countries that keep us in their black lists, to put pressure on their governments to exclude Panama from such black lists, given the threat of being subjected to the same discriminatory measures that their governments apply to Panama and its companies. These involve, mainly, the obligation to withhold surcharges or taxes above those applied to ordinary transactions in case of currency remittances to Panama. In the case of Mexico, for example, any remittance to banks, companies or Panamanian individuals would carry the obligation to apply and withhold a surcharge of 40% as a special surtax. If such measure were to be applied by Panama, Mexican companies like ICA and Cemex, would have to withhold similar additional surcharges and pay them to the Panamanian Treasury, as well as a special withholding tax would have to be levied over all remittances made to Mexico. In the case of Spain, the surtax by virtue of the Black List is 20%, which would apply to Union Fenosa, Spanish banks and the telephone company. We feel certain that by applying such reciprocal measures, the law would serve its purpose, which is that before the withholding becomes effective, the companies from such countries would pressure their respective governments to keep Panama out of their black lists. These black lists are an insult to the dignity of our countries, and prevent us from fully developing our service economies, specially, our Financial Centers. It is here where the true wealth of countries like Panama lays, which would help to reduce poverty levels and raise them to the first world, as is the case of the Panama Canal. Our governments have the moral strength of the mandate conferred by a broad number of voters to face the OECD, whose only arguments are arrogance and double standards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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