Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
Nicholas Shaxson
(London: The Bodely Head, 2011), 329 pages.

For decades, criminals of all stripes—from gunrunners to money launderers—have stashed their accounting books in a murky, global, offshore library. For example, mob boss Meyer Lansky used banks in Switzerland, Cuba, and the Bahamas to hide mafia money. The Colombian Medellin cartel used the Cayman Islands’ confidentiality rules to protect its cocaine trade. Such offshore sandboxes are preferred by wealthy elites and even some too-big-to-fail banks for similar reasons: low taxes and strong secrecy rights. Treasure Islands, Nicholas Shaxson’s readable take on the offshore financial network, takes a broad lens to dubious tax evasion and the associated public complacency. It also stops to occasionally acknowledge the advantages that a half century of international deregulation has handed to contemporary transnational criminals.

Shaxson, who was formerly with the Economist and Thomson Reuters, argues that international tax competition fosters a race to lower tax brackets, where the wealthy pay less and the poor are left to manage society’s tab. But set aside for a moment the offshore system’s less obvious externalities, such as the erosion of public trust in government or its role in the draining of Africa’s natural resource wealth. Consider instead the more stereotypical types of organized crime highlighted by the Palermo Convention: drug trafficking, money laundering, arms trade, human trafficking, or the trade in endangered species. Offshore havens’ extreme investor protections—originating in part from a tiny, oddly fascinating central London financial district—and ultralow tax rates may have been built by and for wealthy elites, but the offshore system’s servants wound up aiding illicit interests more recognizable to fans of crime movies.

Shaxson weaves a story that is accessible to readers unfamiliar with finance, but Treasure Islands also has plenty for those who know Wall Street and can scribble bond price estimates on a napkin. He works for the Tax Justice Network and clearly knows his subject. His concise recommendations call for curbing uncontrolled deregulation. Without reform, Shaxson tells his reader, the financial elite will keep spreading the seeds of mischief and criminals will take greater shelter in subsequently taller fields. His tale is an indictment of the entire offshore financial network and of our collective failure to discipline powerful special interests behind it. The result of this negligence has been the growth of a “network of guilds in the service of unaccountable and often criminal elites.” With this book, Shaxson’s likely intention may have been to anger his readers, and with such compelling evidence, he probably will succeed.