Nigerians have heard the term “offshore registered company” only too often over the last month or so, and as such, this piece aims to demystify the term and shine a searchlight on the concept while providing the origins of this invention by the British state.
On May 5, 2023, the organized crime and corruption reporting project (OCCRP) released a report linking Bola Ahmed Tinubu to 20 London properties in addition to the £11 million home purchased by Seyi Tinubu through Aranda Overseas Corporation, an off-shore company registered in the UK Virgin Islands.
Following the Second World War, the balance of power in the world experienced yet another transformation. Eastern Europe was cordoned off behind the “Iron Curtain” and administered through a close alliance with the then Soviet Union, and the onset of the cold war had started and resulted in new alliances being established and some old ones taking on a new form.
Great Britain’s economy had been exhausted, resulting in the Anglo-American Loan Agreement, which was reached on July 15, 1946. A total of $3.75 billion and $1.2 billion were provided by the US and Canada, respectively, at 2% interest and only paid off fully in 2006. Bear this in mind for later in the story.
The British Empire, the largest ever known empire to date, had existed for 300 years up to this point and was beginning to show cracks due to the independence movements and agitation for freedom from colonial rule, initially in India and later in Africa, starting with Ghana in 1957.
The British elite, or those who had profited from the post-slave trade boom and now, through the extraction of resources from the vast colony, suddenly experienced a dwindling of their vast fortunes. The city of London, which had been the biggest financial center in the world, naturally started to decline too as the inflow of cash from being the banker to the colonies rapidly declined.
The Pan-Arab independence movement had gained momentum and resulted in President Nasser of Egypt, who had fought against British exploitation, nationalizing the Suez Canal in July 1956. The US, vying for a position as a leader of the new world order, saw this as an opportunity to drive home the Atlantic Charter of February 1941, which stated that all nations had a right to self-determination. Removing the UK’s access to the wealth gained from draining its colonies was most likely going to end the enviable position of a nation that built its great wealth by plundering its colonies.
President Eisenhower, in no uncertain terms, demanded France and Britain cease the attacks on Egypt to repossess the Suez Canal, resulting in yet another large loss of revenue. As mentioned earlier, the Anglo-American loan may have formed part of another bargaining chip for the UK, which was heavily indebted.
The result of the disappearance of the colonies and Britain’s access to their wealth with little in return to those nations saw the UK economy shrink drastically; there was a run on the pound (sterling), and Britain quickly saw its currency devalue. As a result, all outflows of sterling were stopped, and loans to foreign countries and business ventures outside the UK ceased to help stabilize the currency.
The City of London, mentioned earlier, is Britain’s banking district and covers one square mile of central London. The businesses located there, primarily banks and financial institutions, run it and are subject to different laws from the rest of the country.
The city has a permanent representative in the House of Parliament and is tasked with lobbying the government for preferential policies to be passed to help protect the banking sector by ensuring that the policies are always beneficial to the banking sector.
A new means of generating wealth had to be found for a country that had lost its colonies and the means of looting their natural resources, and the timing is no coincidence; this was the substituted machinery that would help Britain remain a big player in the world. The concept of offshore banking was born.
The Bank of England, which is the UK’s banking regulator, granted banks the right to act as an intermediary between two “external entities” and mandated that it could only do so for foreign currencies and not pound sterling so as to protect it by keeping its outflow to an absolute minimum.
Secondly, and even more importantly, the operations would have to be moved to a location that didn’t fall under the direct jurisdiction of the Bank of England. This resulted in a number of British-protected overseas territories (former colonies that hadn’t become republics or independent nations). These included the British Virgin Islands, Cayman Islands, Bermuda, Guernsey, and Jersey.
Lawyers, accountants, and bankers were rapidly dispatched to draft what forms the basis of this new invention, the offshore secrecy laws, and the offshore bases of operations were referred to as secrecy jurisdictions. A rather sinister plan to provide a structure of criminality cloaked in secrecy for the dirty money of the world to be hidden.
Strong language, one may think, but considering this has been the mechanism for tax evaders, drug dealing cartels, illicit arms traders, illicit political campaign funding, plundered funds from the national coffers of many developing countries, and the proceeds from numerous other unsavory activities, it’s hard not to label it as such.
From the 1960s (note how this period coincided with the end of the British Empire), the British off-shore banking industry began to attract capital from across the world, with secrecy being its main selling point. It was based on the concept of trust, a devious mechanism by which the concept of ownership can be disguised. The “trust,” which is at the top of the structure, is under the control of a trustee, who is typically a lawyer.
The settlor makes the capital, or funds, available. The trust can then set up a number of shell companies or private investor holding companies, just like Seyi Tinubu’s Aranda. These companies can then purchase assets and maintain secrecy as to who owns them. These can include properties, as seen in the cases of the Tinubu’s, yachts, aircraft, expensive works of art, bank accounts, stocks and shares, and any other items of great monetary value that can also produce an income.
The income generated from the sale of these assets or the profit they yield can then be distributed to the named beneficiaries of the trust by the trustee that manages it. There is no requirement for financial reporting or accounting, which means no auditing and thereby providing no transparency whatsoever as to what exactly the trust owns in the form of assets or the amount of cash held.
Based on this arrangement and mostly for secrecy purposes, these structures belong to “nobody,” and where the funds come from an illegal source, they’re hidden from prying eyes as well as non-taxable by the nation of origin of the settlor (owner of the funds invested in the trust).
It’s important to note that there are no registries of trusts and their owners, meaning it’s impossible to trace the true ownership of assets without a Panama Papers leak scenario, though the newly passed UK law that states that registries must now be made available for those that purchase UK properties is also accompanied by a ready-made loophole that states “where an individual owns more than 25% of the property, the name of the individual should be available. This simply means a criminal puts the names of three other family members on the ownership deed held by the trust to remain anonymous.
The above example of the UK’s unwillingness to undermine its trust structure in offshore banking by breaking the code of silence by passing meaningful legislation gets even more interesting, or should we say calculating?
One wonders why and how this benefits the UK; it’s simply that the off-shore capital held in the lightly regulated jurisdictions flows into the UK economy, providing an inflow of cash that isn’t generated within the UK economy but helps strengthen it.
The claim made by the UK government is that it can’t do much more to regulate this off-shore practice of hiding money obtained from unknown sources and belonging to nobody in particular because the territories that it holds are “independent “and outside its jurisdiction. The same cunning and guile they used to dominate a third of the earth’s surface is again the same underhanded and manipulative stance they adopt to avoid having to address this problem.
We refer to it as a problem based on the fact that the UK does have control over its overseas protected territories because it appoints its Governor Generals, it is ultimately responsible for their defense (as seen during the invasion of the Falkland Islands), and most interestingly, the UK Government has the power of veto over the legislative decisions of the said territories. If that is not control, then the word requires a new definition.
The truth is that the UK Government keeps this power hidden by avoiding any public statements, publication, the release of formal commentary, or any paper trails whatsoever when it comes to how it exerts its power over these territories when the topic surrounds off-shore banking regulations.
In Nigeria the Head of the nation’s ports Mr Koko Bello, according to a report by International Center for Investigative Reporting ICIR has used this means to buy properties hidden in the UK. The reports states ” Mr Bello-Koko, with his wife, Agatha Anne Koko, enlisted the services of financial secrecy seller, Cook Worldwide and Alemán, Cordero, Galindo & Lee (Alcogal), an offshore law firm, to secretly register Coulwood Limited (reg. number: 1487897) and Marney Limited (reg. number: 1487944) in the British Virgin Islands (BVI), one of the world’s most commonly used tax havens, in 2008. Both companies were registered the same day, June 19, 2008.
However, Mr Bello-Koko remains a director of the two companies even as a public servant in violation of Nigeria’s Code of Conduct Bureau and Tribunal Act (Sections 5 and 6). The regulators in the BVI also had his companies under watch for suspected money laundering, a problem Alcogal appeared to have helped him avoid with some misinformation provided to the regulators”.
Mr Koko is just one of the many Nigerian political elites fleecing the country and hiding their proceeds in tax havens abroad. In the last three decades at least 233 houses and apartments were bought by 166 offshore companies secretly owned by Nigerians with a combined worth of £350 million. Behind these companies were 137 wealthy and influential Nigerians, according to an investigation by Finance Uncovered and Premium Times.
The bulk of purchases happened between 2010 and 2015 when Goodluck Jonathan was president of Nigeria. Jonathan’s government has been accused of allowing corruption to run rampant. He has always strongly defended his record in office and denied any wrongdoing. This trend is now a regular occurrence till date.
Many of the deals are made in London and then sent off-shore for the fraud to be executed or enabled. It’s no surprise that the UK is the world’s largest provider of financial services to non-residents, with 25% of the market share compared to the US, which owns 19% of the market.
The industry of secret banking and financial services is a problem for developing nations. Access to cheap money for the British economy continues despite the colonial plunder having ended. The money flows have continued, but this time by the British Government providing safe sanctuary to the plundered funds of our corrupt leaders, thus still enriching the British elites, establishment, and economy.
This is robbing Nigeria and many African countries of their ability to maintain significant and sustained developmental social and infrastructural programs. When it’s said that some Western nations are instrumental in keeping Nigeria where it is, the following statistics will explain further.
Between 1970 and 2008, the flight capital from Sub-Saharan Africa (capital that has left the continent through theft by African leaders) was estimated at $944 billion, while over the same period, the region was in debt to the tune of $177 billion. This means the net losses from illegal transfers are five times as much as the foreign debt figure.
The beneficiaries (Western nations) know this, yet they’re quick to saddle us with even more IMF loans and World Bank bailouts instead of making it impossible for these crimes to continue unchecked. Those who would prefer to keep Africa in debt for their own selfish purposes are primarily to blame for the continent’s debt problem.
Furthermore, the US and UK vetoed recent attempts in Addis Ababa by some African countries to negotiate an agreement for the setting up of an international monitoring arrangement to eradicate or drastically reduce cross-border tax evasion, by which we mean the vast amounts of stolen money that should be subject to taxation or, in some cases, the avoidance of taxation by some mining or oil corporations operating in Africa by off-shoring their real profits.
The mechanisms in place to avoid holding our leaders accountable and established by countries like Britain and the US outweigh the mechanisms for preventing such theft, and if anything, the secrecy offered them simply incentivizes their plunder of our commonwealth. It is estimated that developing countries as a whole lose up to $1 trillion a year through capital flight (the transfer of stolen money to offshore banking or tax havens).
Wale Tinubu had mentioned at one of the inauguration dinners recently that the public-private partnership approach to financing projects would be leveraged during the Tinubu administration. An interesting point is that in the UK, the PPP finance models have been exposed as a corrupt depiction of state capture by the financial sector.
Over a 30- to 40-year period, the repayment by the government amounts to three times more than it would have cost if the money had been borrowed from the central bank. The City of London’s accountancy firms and banks developed the PPP models once more, and it appears that they are once more selling the goods to Africa with a significant markup.
The financial industry, which actively shapes financial policies, has penetrated the UK establishment. Lawyers and accountants from the offshore banking industry occupy senior political positions while politicians lobby on behalf of firms, draft policy, and pass legislation. Additionally, some sit on the boards of the corporations that keep the offshore banking fraud going.
Now we understand why some Western nations see it as being in their best interest to facilitate or support the imposition of a political class upon us that doesn’t necessarily have the interests of the Nigerian people as its priority. We may now understand better why some Western leaders were very quick to congratulate Bola Tinubu on his so-called “victory” in what has been deemed to be one of the most marred elections in our nation’s history.
Interestingly, despite Western media exposing a number of stories showing how our politicians and their friends hide ill-gotten money using secrecy laws designed to encourage corrupt leaders to move money into their economies with the promise of anonymity, it’s safe to say we should understand why the likes of Tony Blair visited Tinubu. Blair, who has also been associated with using off-shore banks to protect and hide his true net worth, could possibly be working on behalf of an establishment that wants to make it clear that the UK off-shore facilities look forward to doing more business with you (Tinubu).
Boris Johnson another politician known for his degrading perspectives on Africa in his article written in 2002 where he claimed “Africa should never have been decolonised” and referred to the reactions of Africans to Tony Blair’s state visit to Congo as “No doubt the AK47s will fall silent, and the militias will stop their hacking of human flesh, and the tribal warriors will all break out in watermelon smiles to see the big white chief touch down in his big white British taxpayer-funded bird” or the equally racist claim that the Queen loved visiting Africa because of the “watermelon smile paninis waving flags” (in reference to crowds that came out to wave at the Royals during the state visits under colonialism).
Now he is suddenly a friend of Africa, visiting Lagos, no doubt smelling the pending corruption in the air with the change of government and hoping to lure some of that dirty cash back to the UK off-shore repositories.
When some of our leaders told us not to look abroad for the support of foreign nations and that Nigeria’s problems need to be solved by Nigerians, maybe it’s much clearer now that it’s not in the best interests of some nations that masquerade as champions of democracy to actually see Nigeria have politicians in power who will drastically reduce, if not eliminate, the illegal outflow of plundered capital from our economy. Delegations and visiting former prime ministers with shifty smiles should not fool us, especially now that we know why our stolen riches are so welcome abroad.