*
At the heart of INI’s international network was INI Private Bank in Dublin, which, via complex operations and companies incorporated on Caribbean islands, offered safe havens for its rich clients: Russians, Chinese, Middle Easterners along with a pot-pourri of dictators and leaders of banana republics.
It could have seemed normal if the list ended there, but it didn’t. INI Private Bank offered its services to a serious number of Britons and Europeans who were actively hiding their money from tax authorities and prying eyes.
The unsuspecting public in London or Dublin would have never dreamt that the hidden fortunes of that mixed bag of dictators, gangsters and fraudsters were hidden offshore by the Irish bank, it offices visible to any passer-by, situated on a street like any other in Dublin’s financial district. Fortunes managed through a nebulous screen of companies, trusts, investment funds and accounts of every imaginable description, structures in constant metamorphosis, scattered across what was know in the offshore banking world as the Bermuda Triangle, situated between Panama, the Bahamas and the British Virgin Islands.
EU directives of 2001 and 2005, applying to interest paid to individuals resident in an EU Member State, other than the one where the interest is paid, implemented a system of cross border reporting so that all citizens paid taxes due on all their savings income.
Dublin Financial District
There was however a loophole, the directives were applied to individuals only, not companies, which was a boon to Ireland. To avoid taxes, all that was needed was the creation of a screen company and an account in its name, in a suitable offshore tax haven. A procedure that was child’s play to INI Private Bank Ltd., Dublin.
Banks such as INI possessed some of the most powerful data management systems on the planet, which left poorly equipped investigators, whose resources were to all intents non-existent, almost powerless.
INI with its private banking and wealth management units were, like other such institutions, answerable to none, with their business bases dispersed in a numerous and often conflicting jurisdictions. Giants like HSBC, which according to Forbes was the world’s fourteenth largest business enterprise, conducted its business in four sectors: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking, with more than six thousand agencies in seventy or more countries. A quarter of a million employees serving its fifty million customers, managing assets valued at two and a half trillion dollars; more than the entire national wealth of Russia or Brazil. HSBC’s shareholders numbered more than two hundred thousand and were scattered across more than one hundred and thirty countries and territories.
This went a long way to explaining how HSBC could menace, or blackmail, the British government, by threatening to quit the UK, moving its headquarters to Hong Kong, Shanghai, Paris or even the US. What was at stake was their freedom to do as they liked and with less regulation. The danger was, if HSBC quit the City of London, who would follow?
Banks protected themselves by the fragmentation of data on multiple and sometimes incompatible computer systems, some of which were based offshore, an opaque screen designed to prevent intruders and non-authorised personnel from accessing the movement of funds. What men like Fitzwilliams and his partners feared most were moles, insiders such as Hervé Falciani, who had delivered a mass of information to financial authorities concerning non-resident account holders with HSBC in its Swiss holding.
To complicate matters, whenever their interests were in danger, governments obstructed enquiries. Every contract signed, every commercial accord and every defence agreement involved payments, commissions and the transfer of funds, not forgetting the funding for delicate or covert missions, without which nothing would work.
John Francis, a respected academic, was far from being a conspirationalist, but it was evident that international finance had by definition certain goals. The first was its raison d’etre, profit; the second, optimisation of fiscal efficiency, that is to say, no tax; and the third, free movement of capital. All this implied operating in the most favourable environment, wherever conditions were propitious to profitability. Such conditions were assured by the complaisance of politicians who perpetuated the opacity of the system.
The average man’s knowledge as to how international finance functioned was extremely vague to say the least. The public saw the economic crisis as being the fault of banks, fat cats, traders and crooks in the City, all of whom were out to swindle them, and naturally the bonus system - and in a certain manner of speaking they were right. The international finance system was in fact a transnational institution, parallel to elected government, and beyond its control, a system with its own rules, dedicated to profit and by whatever means it took to make it.
Behind the vast machine that moved capital around the clock were men like Fitzwilliams, Tarasov and Kennedy, in other words bankers, financiers and powerful businessmen. They were aided and abetted by politicians who smoothed the way, bent the rules, starving the very services set up to fight corruption and fiscal evasion of the means necessary to carry out their mission.
A PROPERTY BOOM
London was booming. Suddenly, almost unannounced the good times were back, almost six years after the fatal bank run at Northern Rock, and the collapse of Mercian Finance, another important mortgage lender. Those events were since recognised as having been the precursors of the most severe economic crisis the world had experienced since the thirties, a crisis that economists were calling The Great Recession.
Spring had arrived, flowers bloomed in London’s parks and gardens, the trees took on their fresh green mantle as the leaves burst from their buds, and as Pat Kennedy set off for a Saturday morning jog he couldn’t help remarking the girls looked particularly pretty. The past week had not been simply good, but excellent. The Footsie had gained twelve percent since the beginning of year and seventeen percent over the previous twelve months.
He rubbed his hands with pleasure and breathed in the fresh morning air of Battersea Park. Things were definitely looking up as INI prepared to move into its new London headquarters in the Gould Tower. The bank had become bigger, better, and certainly more prosperous. At the same time Pat Kennedy had seen a spectacular rise in his own earning and investments, which was not the case for many other Britons, most of whom had seen their incomes fall in real terms.
The FTSE had been boosted by buoyant European markets and the belief the crisis that had racked the eurozone was finally over. It seemed that cash rich investors who had been watching from the sidelines, waiting for a sign, had finally taken the plunge and were investing heavily into European equities.
The INI Europa Fund, a private investment fund, specialised in real estate in the UK and for certain selected assets in France, Germany and the US, had raised raised over two billion pounds for investments in commercial and residential real estate. The Gould Tower counted amongst its major investments followed by new residential developments in the City, the West End and peripheral districts of London.
However, in spite of the general optimism of the promoters, Tom Barton, manager of the Europa Fund, had seen the BTL boom and crash in the period leading up to the 2008 crash, and had not forgotten the lessons learnt. Seriously concerned by the potential glut of prime residential property, with nearly a decade’s supply of homes in the pipeline, he started to discretely withdraw plans to invest in what he saw as speculative projects.
The starting prices of the fifty thousand homes planned or under construction, situated in an area between Earl’s Court and Tower Bridge and from Regents Park to the South Bank, stood at half a million pounds for a studio flat, whilst the average appartment price stood at around one million pounds or more.
Jonathan Plimpton had urged caution, informing Barton that a mere four thousand homes in that kind of price range had been sold in the same area during the whole of 2013.
The question remained as to who would buy those properties and what would happ
en to prices.
Promoters seemed to ignore the risk as they fought over development land, pushing prices up and margins down. Most had planned on attracting new foreign investors from China, Hong Kong and South East Asia, as well as Russians and buyers from the former republics of the former Soviet Union. They, along with the more traditional Middle Eastern investors, sought a haven far from the dangers that stalked their respective worlds, a last resort if things went badly wrong at home.
It was perhaps why promoters had opted for a majority of two-bedroom apartments in the skyscraper towers springing up across the capital. The newcomers would not be looking at their investment in the same way as the typical UK BTL buyer would, since it was improbably they would see the kind of returns promised by the promoters’ sales agents.
Jonathan Plimpton described them as buy-to-leave investors, interested in safe deposit boxes and not returns, in the same manner as wealthy middle-class Chinese left the appartments they bought in Beijing, Canton and Shanghai unoccupied.
Come what may, the Londoners forced out of the capital’s central districts were not the kind of buyers targeted by Gutherie Plimpton and their likes: the average Londoner could not even dream of acquiring such properties, not to speak of the top end of the range products: reserved for those who could pay millions for penthouse appartments overlooking Hyde Park, or large detached homes surrounded by landscaped gardens in the St Johns Wood kind of district.
The cost of being a global city was hard on London’s grass roots population which was being progressively priced out of the market.
Amongst the INI Europa Property Fund’s different portfolios were those that attracted the interest of sovereign wealth funds seeking long-term investments in prime property developments. These included investment possibilities in developments such as London’s Hyde Park Barracks, on offer by the Ministry of Defence at not far off one billion dollars, or the Royal Albert Dock or the Ram Brewery development in Wandsworth.
Even Boris Johnson, the Mayor of London, had become a salesman, heading a trade delegation to Malaysia, Singapore and Indonesia, to promote London residential property. He insisted the schemes were targeted at the regeneration of run-down London districts that offered an attractive investment for foreign buyers.
The idea that everything was up for sale was confirmed by the presence of Malaysia’s housing minister, Datuk Rahman Dahlan, who inaugurated a Battersea Power Station residential development set around a garden aptly named Malaysia Square.
The Thames skyline was being transformed by soulless Dubaiesque architecture, which in the long term would make London indistinguishable from any one of a growing number of glass and aluminium cities spring up across the face of the planet, each country vying with the other to build the highest symbol of national pride.
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