Hedge fund managers will inevitably be keeping a close eye on developments as Barack Obama's administration pledges support for legislation introduced on Monday in the US Congress to crack down on tax havens - the revival of a bill that Obama himself co-sponsored while a senator. The bill includes a provisional blacklist of 34 countries, including Switzerland, Jersey and Liechtenstein.
The putative Stop Tax Haven Abuse Act was introduced in the Senate this time by Republican Carl Levin, and in the House of Representatives by Democrat Lloyd Doggett. Treasury Secretary Timothy Geithner welcomed the measure, saying: 'We fully support the legislation on offshore tax centres, and we look forward to working with you as part of the broader effort to address international tax evasion and close the tax gap.'
EU Commission president José Manuel Barroso also said yesterday that the European Union could penalise any nation that refused to share information on tax evasion and money laundering as part of a wider push to tighten financial supervision.
French finance minister Christine Lagarde and her German counterpart Peer Steinbrück have already promised action against any financial centre that does not co-operate in the fight against tax fraud and money laundering, and UK prime minister Gordon Brown has also made noises about clamping down on tax haven abuse.
Of course, there's a huge amount of wilful ignorance - and hypocrisy - involved in the planned clampdown on the offshore financial industry. All the major financial centre, from the Channel Islands to the Caribbean, have implemented the anti-money laundering recommendations of the Financial Action Task Force, and many of them have signed tax information exchange agreements with the US and European countries. The Isle of Man has just concluded one with Germany.
Jurisdictions such as the Cayman Islands note that they have enforced measures such as retrospective due diligence on all banking customers that the US and UK rejected as too difficult and costly. And offshore professionals say that if more transparency is required, a good place to start would be among the vast number of opaque financial structures in Delaware, one of a number of US states that attract global business by in effect operating their own 'offshore' regimes.
However, hedge fund managers will be watching out for any possible impact the campaign might have upon Cayman, the British Virgin Islands, Bermuda, Jersey and Guernsey, the principal domiciles for offshore funds.
And although some of its European neighbours are targeting its own banking secrecy regime, Luxembourg is already rolling out the red carpet to any fund managers that might prefer the reassurance of an onshore jurisdiction within the EU. Time will tell whether the latest media-whipped storm will this time do serious damage to the offshore financial industry, or whether it will blow itself out like so many campaigns in the past.