From Britain’s perspective, the most significant element of the recent Panama Papers scandal was David Cameron’s involvement. Amid the 11.5m documents leaked from Mossack Fonseca, the Panamanian law firm, were revelations that forced him to admit he profited from an offshore trust set up by his late father. Though the reported profits of £19,000 were modest, his involvement with the scheme chimed with a deep unease about the role of elites in Britain and other western societies. The campaign for Britain to leave the European Union is being harnessed to this anti-establishment sentiment.
The other big story for Britons was that Mossack Fonseca’s favourite jurisdiction for incorporating secret shell companies for its clients was not Panama, but the British Virgin Islands. The BVI, alongside other tax havens such as the Cayman Islands, Bermuda and Gibraltar, is a British Overseas Territory. These places—along with Jersey, Guernsey and the Isle of Man, the Crown dependencies closer to home—sport the Queen’s head on their stamps and bank notes. The Queen also appoints their governors or the equivalents, and their laws are approved in London, where their final court of appeal sits.
In the early 1970s the Bahamas, then a British colony, was the dirty-money haven for North and South America—it was a favourite of the mob in the United States. When Bahamian Premier Lynden Pindling led the island nation to full independence in 1973, the offshore money fled almost overnight. “It wasn’t that Pindling said or did anything to damage the banks,” explained Milton Grundy, a lawyer and tax expert. “It was just that he was black.” Most of the hot money went to the nearby Cayman Islands, with its reassuring British-run system.