Drawing on the Panama Papers, this article examines the underground financial ties between Britain and China that explain the UK’s early decision to join the AIIB against U.S. wishes.

2016-05-04

The following is from page 44 of this month’s SAPIO. Emphasis in the text, except for headings, is mine.

The Panama Papers appear to have opened a truly astonishing Pandora’s box.
While newspapers focus mainly on individuals and companies that sought tax avoidance, the leak struck directly at the City of London, an international financial center, and has the potential to shake global finance.

Based on data obtained by the International Consortium of Investigative Journalists, reports revealed that among offshore companies established between 1977 and 2015 by the Panamanian law firm Mossack Fonseca, the British Virgin Islands overwhelmingly dominated, accounting for about 114,000 companies, or 53 percent of the total.
“Illicit money from around the world flows into the City via such tax havens, and British authorities turn a blind eye to it,” said an executive of a major British bank.

Approximately 310,000 companies headquartered in tax havens have invested a total of 26 trillion yen in British real estate.
“Nearly half of that is Chinese money,” the same executive noted.

As the scandal surfaced, it became clear that the City had served as the “heart” of a global money-laundering network.
A senior executive at a major French financial institution stated that there is a strong possibility Britain, as a state, assisted money laundering, with British banks fully cooperating.

Moreover, the Panama Papers also exposed the clandestine ties binding Britain and China beneath the surface.
This explains why Britain, ignoring the wishes of its ally the United States, was the first among Western advanced nations to announce participation in the Asian Infrastructure Investment Bank initiative promoted by China.

The City sought to play a central role in renminbi trading and had worked persistently, both openly and covertly, with Chinese authorities, offering various conveniences to the leadership of the Chinese Communist Party.
It was therefore no surprise that the Panama Papers revealed asset management in the name of relatives of Xi Jinping.

Financial scandals originating in the City are likely to continue expanding.