How does a forgotten spot in the Caribbean, birthplace of the man who laid America’s fiscal foundations, become one of the dodgiest financial havens in the world?
According to a fictionalised singing version of fourth US President James Madison, Alexander Hamilton “took our country from bankruptcy to prosperity. I hate to admit it but he doesn’t get enough credit for all the credit he gave us”.
This founding father’s legacy was largely forgotten until Lin-Manuel Miranda’s musical made rapping about pamphlet-writing and economic policy box-office gold.
Hamilton was born in 1755 or 1757 (the exact dates have been lost to history) in Nevis, a volcanic island in the eastern Caribbean with an area of just 36 sq miles. As any disciple of the musical knows, by the second minute of the show Hamilton was orphaned and left to fend for himself, subsequently travelling to New York to become a new man.
But growing up surrounded by the sugar and rum trades, both powered by slavery, then being seen as an immigrant and outsider had a lasting impact on Hamilton’s ideology and politics, which would shape the policies of the newly born United States.
Nevis is gorgeous but its financial and legislative affairs are pretty sordid
Today, Nevis has a population of around 12,000. Monkeys outnumber people three to one (there is also one resident Python – John Cleese moved there last year). But also outnumbering monkeys at least three to one is a suspiciously high number of registered companies. In 2017, some 70,000 Nevis-based businesses were part of the Paradise (or Panama) Papers leaks, which exposed the dirty dealings of fishy financiers.
“Nevis is gorgeous, a lovely place, but its financial and legislative affairs are pretty sordid,” says Oliver Bullough, author of Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back, an acerbic exposé of how money is moved around the globe and hidden from authorities by criminals and kleptocrats.
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“In the offshore world, there’s lots of specialist operators who fill different niches,” he explains. “At the top of the tree are London and New York, and to a certain extent Switzerland. They provide all the services you could want: lawyers, bankers, accountants. They’re wealth havens with lots of luxury property you can buy. But before the money gets there it needs to be cleansed so there are other havens who might provide banking services or trusts, which is something like Jersey does. But the real bottom feeders provide anonymity, like Nevis.”
The new Netflix film The Laundromat explores the Panama Papers scandal – and features dodgy dealings in Nevis
With a British company, anyone can look up the owners online via Companies House. This stops people hiding assets from the law, tax collectors or ex-spouses. In Nevis, even the official registry doesn’t know who owns a company. Digging into the files would only reveal the law firm that represents whoever they are, but to find out more you’d have to go to court. To make matters more complex, bringing legal proceedings on Nevis requires a bond of $100,000 and a legal challenge against a suspect trust, for example, has to be lodged within a year of its creation. Of course, it’s unlikely anyone would know about its existence in the first place.
Look around the island’s mini-capital of Charlestown and there is little to suggest it’s a hub of commercial activity. There are no flash cars, luxury offices or apartments – only a couple of small supermarkets, craft shops and a static queue of taxis waiting at the pier for ferry passengers. But on every other building is a plaque showing that it’s home to a lawyer or insurance agent.
“The money isn’t from there and it doesn’t end up there,” says Bullough. In fact, Nevis makes relatively little cash given the amount of money involved. The island’s premier, Mark Brantley, who is also an offshore lawyer, told Bullough that revenues of £3.8m-4.2m per year come from company renewal fees. That small amount still accounts for around 16 per cent of government income.
Bullough continues: “Nevis’s only asset apart from its delightful weather and environment is its sovereignty so it’s selling it. They’re just offering a service. The money goes through there – or through a bank account owned by a company there – and that strips the identifying details from it.
“It was created as a tax haven by American lawyers to frustrate the American legal system; the idea being that you could put a little bit of Nevis into your holding company and then any American legal proceeding comes to a bit of a juddering halt when it hits it, like a road-block.
“It will help you dodge tax but that’s not really what people use it for. It’s more about dodging scrutiny. If you own your property via Nevis then it means nobody knows who you are.”
Nevis-registered companies were implicated in Britain’s biggest ever tax fraud, where more than £100m was siphoned from what was sold to investors as a green investment scheme funding reforestation projects in Brazil and China. Disgraced ex-Ukrainian president Viktor Yanukovych also filtered his stolen assets through Nevis.
Since the economic crash in 2008 and the Paradise Papers leaks there has been a concerted global crackdown in offshore finance.
“It’s difficult making a living as a tax haven compared to what it used to be,” Bullough says, “but in a way that slightly benefits places like Nevis.”
Just this month the Cayman Islands bowed to pressure and announced it would publish its corporate ownership documents. The islands are a British Overseas Territory so are ultimately under British jurisdiction. Nevis, on the other hand, is part of a federation with the neighbouring island of St Kitts, granted independence from Britain in 1983. The unique constitutional set-up means Nevis is autonomous from its island neighbour but not an independent country.
“Nevis also has a legal system that is very similar to the British and US ones, but with no oversight from Washington and London,” Bullough adds.
The island’s assembly, where local representatives decide whether or not to keep being a financial laundromat for mysterious moneymen and women sits in the upstairs section of what is also the Museum of Nevis History. It has a special section celebrating its most famous fiscally responsible son, Alexander Hamilton, who just so happened to be born on the same very spot.
“Hamilton was this guy who created institutions to make America autonomous, democratic and prosperous,” says Bullough. “American lawyers have essentially partnered with the government of Nevis to do the opposite, to undermine American laws and undermine American courts to get fair judgments. It is fairly ironic.”
Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back by Oliver Bullough is out now. For more, read this in-depth piecefrom last year
How Alexander Hamilton made America great in the first place
• As the first treasury secretary inGeorge Washington’s government in1789, Hamilton solved the nation’sdebt problem and established amodern system of credit.
• He established a national bankin 1791 and authorised the federalgovernment to assume the debts thatindividual states had incurred duringthe revolution, financially unitingthe states.
• In the first years of independence,Americans used a vast array ofcurrencies, with states minting theirown coins. Hamilton establisheda single currency that has come todominate global financial affairs– the dollar.
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