Capital on the run

Capital flight has been in the news a lot lately. This has focused attention on those aspects of private international banking, especially secrecy and anonymity, that make it so appealing to banks and customers alike. Two things have accelerated the introduction of regulation in this field. The first is the increasingly public involvement of banks, accountants and lawyers, without whose connivance capital flight from emerging markets could not take place. The second is the realization that it can affect developed countries: for example, German citizens place deposits in Luxembourg to avoid taxes, a practice often encouraged by their domestic bankers.

At first sight, international attempts to impose regulation seem long in gestation. The only comprehensive ban is in money laundering, initiated by the US with the Bank Secrecy Act of 1970 and the Money Laundering Act of 1986, which was followed up by the UN and the Basle Committee two...