WEBVTT - Financial Secrecy System Dominating Capitalism

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<v Speaker 1>These sees Bloomberg Business Week with Carol Masser and Tim

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<v Speaker 1>Stanovic on Bloomberg Radio. Our next guest has a dire warning.

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<v Speaker 1>He writes that we are at a quote inflection point.

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<v Speaker 1>The two basic components of the democratic capitalist system are

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<v Speaker 1>at risk of splitting apart. This poses an existential threat

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<v Speaker 1>to human progress in the century, paralleling the importance of

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<v Speaker 1>climate change. This is how this new book that is

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<v Speaker 1>out begins. The book Invisible Trillions, How financial secrecy is

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<v Speaker 1>imperiling capitalism and democracy and the way to renew our

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<v Speaker 1>broken system. The author, Raymond Baker, is founder and president

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<v Speaker 1>of a Global Financial Integrity. It's a think tank based

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<v Speaker 1>in Washington, d C. That focuses on illicit financial flows, corruption,

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<v Speaker 1>illicit trade, and money laundering. Good to have you with

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<v Speaker 1>us this after congratulations on the book, Raymond, I want

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<v Speaker 1>to start with the title. The subtitle here financial secrecy.

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<v Speaker 1>How do you define financial secrecy? It is It's a

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<v Speaker 1>It's a series of of mechanisms that work together to

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<v Speaker 1>allow capitalism to operate in secrecy. UM tax havens, secrecy jurisdictions,

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<v Speaker 1>disguised corporations, anonymous trust accounts, fake foundations, um falsified trade

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<v Speaker 1>trade that is conducted where um invoice values and revalues

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<v Speaker 1>do not match UM. And then there are all sorts

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<v Speaker 1>of money laundering techniques that are used to handle particular

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<v Speaker 1>kinds of transactions. And then to be honest in another

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<v Speaker 1>part of the system is holds that governments leave in

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<v Speaker 1>the laws of their countries that facilitate the movement of

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<v Speaker 1>money through this financial secrecy system and ultimately into their

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<v Speaker 1>own economies. The US is the recipient of more illicit money,

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<v Speaker 1>more dirty money than any other country. So raven one thing,

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<v Speaker 1>you know, is it the case of as long as

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<v Speaker 1>there's money and there are some people who have more

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<v Speaker 1>money than others, that this is just going to be

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<v Speaker 1>a problem. This is just the way capitalism works. Interesting question, Um,

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<v Speaker 1>this is not the way that capitalism worked at the

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<v Speaker 1>turn of the century. I'm sorry, at mid century, at

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<v Speaker 1>the mid uh twentieth century, there was a fifteen year

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<v Speaker 1>period in there between the end of World War two

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<v Speaker 1>and nineteen sixty when capitalism operated at a very high

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<v Speaker 1>level of responsibility. UM. In fact, at that time, the

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<v Speaker 1>ratio of of income for the executive class and the

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<v Speaker 1>workers class, the ratio at that time, let's take nine

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<v Speaker 1>was only one. Today that ratio is more than three

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<v Speaker 1>to one. And the reason it has exploded is because

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<v Speaker 1>we have set up so many mechanisms that enable money

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<v Speaker 1>to move in in hidden ways, in disguise ways. Uh

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<v Speaker 1>and it it therefore inevitably moves to the top. So

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<v Speaker 1>who's responsible for creating a system? We are a lot

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<v Speaker 1>of people. What do you mean by we? Though? I mean,

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<v Speaker 1>is it we in the wealthier Western countries. A lot

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<v Speaker 1>of people think that this is something that has been

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<v Speaker 1>done to us by drug dealers and traffickers and counterfeiters

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<v Speaker 1>and terrorismanen seers and so forth. That's just not correct.

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<v Speaker 1>We in the richer Western countries have created every single technique,

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<v Speaker 1>every single of the financial secrecy system that is today

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<v Speaker 1>used to move trillions and trillions of dollars around the world. So,

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<v Speaker 1>you know, it's interesting. I feel like you can see

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<v Speaker 1>the white board in the cycle, right. You know, individuals,

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<v Speaker 1>companies make money and they ultimately then have the power

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<v Speaker 1>to support political candidates and initiatives that lead to whether

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<v Speaker 1>it's tax breaks or policies that benefit them. And you know,

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<v Speaker 1>politicians listen because that gets them elected, that gives them

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<v Speaker 1>money to run campaigns. That are expensive, and so the

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<v Speaker 1>cycle continues. Is that the basic cycle that's the problem,

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<v Speaker 1>or is it something more or different. You hit it right,

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<v Speaker 1>You've hit it right. You've hit the nail right on

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<v Speaker 1>the head. That's exactly what happens. The wealthy are able

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<v Speaker 1>to buy the kinds of laws that perpetuate the financial

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<v Speaker 1>secrecy system. Just to give you wanting sample, I mentioned

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<v Speaker 1>tax havens. There isn't a single tax haven that figured

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<v Speaker 1>out themselves. I'm talking about the Cayman Islands and Guernsey

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<v Speaker 1>and Jersey and uh um um other tax havens. They're

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<v Speaker 1>in a single one of them that figured out what

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<v Speaker 1>how to be a tax haven. No, uh, we from

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<v Speaker 1>the richer western countries came to them and said, please

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<v Speaker 1>adopt these kinds of laws and then we will shift

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<v Speaker 1>a lot of business uh through the tax havens. I

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<v Speaker 1>repeat what I said. Every single element of the financial

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<v Speaker 1>secrecy system has been created by us. Not a single

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<v Speaker 1>piece of it was created by others. So does that

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<v Speaker 1>mean we can fix it? Exactly? Since we, uh, we

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<v Speaker 1>created this, we can de create it. And I think

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<v Speaker 1>that's what has to be done um in the capitalist

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<v Speaker 1>system going forward. We have to de create this financial

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<v Speaker 1>secrecy system that is driving crime and corruption and kleptocracy

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<v Speaker 1>and even terrorist financing and authoritarianism, and worst of all, Raymond,

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<v Speaker 1>I have to jump in because we're running out of time,

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<v Speaker 1>just got about thirty forty seconds. How do we do it?

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<v Speaker 1>Because this is not a new issue. We've talked about

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<v Speaker 1>it a lot here at Bloomberg, and I think it's

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<v Speaker 1>great that you are, you know, drawing more attention to it.

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<v Speaker 1>But it's not a new necessarily idea. We kind of

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<v Speaker 1>understand it. So what what one step could we take

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<v Speaker 1>that would change it dramatically and just quick The broad

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<v Speaker 1>the broad answer is increased transparency and accountability. Let me

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<v Speaker 1>just give you one example of that. There are millions

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<v Speaker 1>of disguised corporations around the world. Get rid of disguised corporations,

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<v Speaker 1>get rid of shell corporations. And that can be done

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<v Speaker 1>with a simple law that says it's illegal for banks

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<v Speaker 1>to receive money uh from shell companies. Um, we did

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<v Speaker 1>exactly that with shell old banks. There used to be

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<v Speaker 1>one of the elements of the financial secrecy system was

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<v Speaker 1>shell banks. We took shell banks off the table, just

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<v Speaker 1>like that. We do the same thing Michelle. Companies if

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<v Speaker 1>we choose to not. It all makes I think a

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<v Speaker 1>lot of people are probably listening saying, yep, I get it,

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<v Speaker 1>it makes sense. Raymond Baker, thank you, Founder President of

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<v Speaker 1>Global Financial Integrity, his new book, Invisible Trillions have Financial

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<v Speaker 1>Secrecies and parallel in capitalism and democracy and the way

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<v Speaker 1>to renew our broken system. Joining us there from d C.