Much has been written about the role sleepy alpine countries and palm tree-laden Caribbean islands play in the secretive world of tax evasion and money laundering.  Those countries bristle when their names appear on lists of one sort or another or in media stories when the issue of shell corporations or illicit financial flows is discussed.  So it is no surprise that those secrecy jurisdiction oppose any effort to remove the veil of opacity on their financial systems.

But it is surprising when opposition to increased transparency comes from other quarters.  Take South Korea for example.  According to a story in today’s Korea Herald only three of the 30 countries the OECD lists as being tax havens are recognized as such by the Korean government.   Only Andorra, Liechtenstein and Monaco are given that designation.  Liberia and the Marshall Islands were removed from the Korean list in 2006.  The tremendous gains those countries made in transparency that year were perceived only by the Seoul government.

According to Rep. Cha Myung-jin of the ruling Grand National Party,

“The government is going against the trend of increasing international cooperation concerning tax havens to prevent tax evasion and laundering of illegal political funds.”

The motives for such a stance, in the face of a global shift in the other direction, can only be surmised.  As the world’s 13th largest economy the number of high net worth individuals there is large – even with the economic downturn – and hiding assets might play a role.  Political corruption could also be a driving factor in the Korean policy.  Former President Roh Moo-hyun apologised to the country last month as he was led to questioning by prosecutors.  “I apologize for disappointing the people,” he was quoted as saying.   The New York Times reported that he was the third former president to be questioned about corruption charges.

Whatever the reasons, Korea’s policy on tax havens puts them squarely on the list of the “Quiet Facilitators” – those nations that fight transparency, fight fairness, fight the tide of common sense  by refusing to promote even the current, albeit weak, OECD standards.  Those policies aren’t discussed in public fora or argued in newspaper op-eds but by their mere existence they prevent progress toward a level playing field in the global financial system.

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