Tuesday, April 14, 2009


Gibraltar is receiving unwelcome publicity over the involvement of some of its banks in the Madoff Ponzi scheme. The spotlight has first fallen on the Banque Jacob Safra just at the time the international Organisation for Economic Co-operation and Development (OECD) says Gibraltar has not complied with all its off-shore agreements.

First the trustee liquidating Bernard Madoff’s brokerage is seeking the return of $150 million that an offshore investor withdrew less than two months before the jailed swindler’s arrest, saying the money should be returned to other customers.

A lawsuit was filed last Thursday as trustee Irving Picard steps up his efforts to use bankruptcy law to try to “claw back” funds withdrawn by some Madoff clients. He has already appointed a Gibraltar law firm to act on his behalf.

In the lawsuit Picard argues that whilst Madoff was running his long-standing Ponzi scheme, some customers received fund distributions that were nothing more than fictitious profits. This money, says the trustee, should be returned to help reimburse Madoff’s many victims.

The complaint was filed in the U.S. Bankruptcy Court in Manhattan against Vizcaya Partners, described as an international business with main operations in the British Virgin Islands. It seeks the return of $150 million wired from the Madoff firm to a custodian for Vizcaya on about October 31, less than two months before Madoff’s arrest. The custodian, Banque Jacob Safra of Gibraltar, was also sued.

The lawsuit says Vizcaya, according to the Madoff firm’s records, opened an account with the company in December 2001. Since January 2002, Safra or its affiliates invested about $327 million with Madoff for Vizcaya's benefit, the lawsuit said.

Meanwhile in the official OECD list, Gibraltar is one of 30 tax havens, which are ‘jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented it.’ Gibraltar committed in 2002 to implement the agreed tax standard. Up to now it only has one agreement, the recent one with the USA signed just before the G20 summit in London.

Now a cynic (so that rules me out) might say that as Barack Obama has tax havens firmly in his sights Gibraltar’s actions were a ploy to take the president’s eye off their target. What is a fact is that after seven years of doing nothing the Chief Minister, Peter Caruana, rushed to London to sign the accord amidst much fanfare – so draw your own conclusions.

In the Gibraltar section of the OECD list are locations such as Andorra, British Virgin Islands, Cayman Islands, Dominica, Liberia, Liechtenstein, Monaco, Nauru, Panama, San Marino and the Turks and Caicos Islands, and others. Whilst the other British zones of Guernsey, Jersey and the Isle of Man plus the island of Malta have all been promoted above them in the OECD’s standing.

People on the Rock might question why the Gibraltar Government signed in 2002 an accord that it seemingly had little intention of implementing when it could have acted on it immediately and lead the pack of good guys in off-shore finance.

Furthermore the Gibraltar Government has argued that it is no longer a tax haven but the OECD says it is, and that organisation’s opinion that counts amongst world leaders when they view the off-shore banking scene.


Cybernest said...

When has the Organisation for Economic Co-operation and Development (OECD) said that Gibraltar has not complied with all its off-shore agreements? Not since 2001 when the OECD listed Gibrltar (along with many other jurisdictions) as a tax havens... and certainly not since a number of subsequent agreements have in fact been implemented!

Whilst Gibraltar may not yet have 'substantially implemented' the OECD's internationally agreed tax standard, along with around 30 other jurisdictions across the world, it has nevertheless gone a long way further than many!

According to the latest OECD Progress Report in April 2009, Gibraltar has implemented the internationally agreed tax standard, which was developed by the OECD in co-operation with non-OECD countries and which was endorsed by G20 Finance Ministers at their Berlin Meeting in 2004 and by the UN Committee of Experts on International Cooperation in Tax Matters at its October 2008 Meeting, which required exchanges of information on request in all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes.

It also provides for extensive safeguards to protect the confidentiality of the information exchanged.

As a result of having made a commitment in accordance with the OECD's 2001 Progress Report on the OECD's Project on Harmful Tax Practices, Gibraltar is not included in the OECD's list of uncooperative tax havens.

What's more, it has also never been listed on the FATF Blacklist of uncooperative countries in the fight against money laundering. This can be seen by visiting the Financial Action Task Force (FATF - GAFI) website, where a search for 'Gibraltar' will reveal... NOTHING... no document related to Gibraltar.

Furthermore, in 2007, the International Monetary Fund Report on the Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism once again endorsed Gibraltar’s robust regulatory environment.

According to the report:

"Gibraltar has a well-regulated financial sector.

The Gibraltar authorities are concerned with protecting the reputation and integrity of Gibraltar as a financial center, and are cognizant of the importance of adopting and applying international regulatory standards and best supervisory practices.

Gibraltar has a good reputation internationally for cooperation and information sharing."
Gibraltar's recent agreement to share tax information with the USA, during the G20 summit, is not the only tax sharing information agreement. Gibraltar has had similar agreements with the UK and the EU since 2002, through the OECD commitment.

As for attracting bad publicity through the Madoff affair, the reality is quite the reverse. The fact is that the Gibraltar authorities are co-operating fully with US agencies and with Irving Picard, the lawyer who was appointed by the Securities Investor Protection Corp to unwind Madoff’s businesses and to find his assets. Additionally, a firm of Gibraltar lawyers are also acting on the trustees' behalf, trying to ensure the recovery of these Madoff assets. This is all to the credit of Gibraltar's Finance Centre.

I'm certainly no lawyer or international finance expert, but I do think there's a lot of semantics going on here... and splitting of hairs. Having said that, I would hope that the Financial Services Commission and the Gibraltar Government would be more vigorous in ensuring that Gibraltar does meet fully with internatonal standards and I do hope it will be accepted by the OECD soon, as no longer a tax haven... but nevertheless still able to offer a more beneficial tax jurisdiction to high net worth individuals (HNWI's) and offshore corporations. A tricky balancing act I imagine, which is more what's going on here... rather than a wish on the part of Gibraltar to act illegally and cock a financial tax snook at the rest of the world!

Gibraltar authorities should be given credit for this... rather than be castigated. There are many much larger fish... tax havens, who do a lot less, indeed very little... to comply with international agreements or offer transparency in their tax sharing!

Cybernest said...

Following your post yesterday... and my subsequent comment yesterday, I thought you and your readers might be interested in this:

Gibraltar is well advanced in the process of signing up tax information exchange agreements and fully expects to be in the category of countries that have fully implemented the internationally agreed standard, by the time that the OECD issues its next progress report in November 2009.You can read more on this in my blog post today... Gibraltar committed to OECD 'tax haven' delisting and tax sharing agreements!

Saludos! :)