February 19, 2010 1:00PM # Tax Havens Are Not Money Laundering Centers By [Daniel J. Mitchell](https://www.cato.org/people/daniel-mitchell) --- SHARE Demagogues such as Sen. Carl Levin (D‑MI), as well as many other politicians and journalists, often assert that low-tax jurisdictions are havens for dirty money and terrorist financing. From a theoretical perspective, this does not make sense. So-called tax havens have a big incentive to avoid scandal since they are much more vulnerable to reputational risk. Just imagine what would have happened, after all, if the 9–11 terrorists had used a bank in the Bahamas instead of a bank in Florida. Critics of low-tax jurisdictions automatically would have assumed that the bank was complicit and the entire financial services industry in the Bahamas would have been crippled — or even destroyed. But because the terrorists used American banks (as well as banks in high-tax European nations and the Middle East), there was no knee-jerk reaction. People understood that the bank tellers and managers had no way of knowing that the flight school students were actually lunatics. But this does not stop the anti-tax haven smear campaign. Low-tax jurisdictions are viewed as a threat by politicians since it is much harder to impose bad tax policy in a world where [tax competition](http://www.youtube.com/watch?v=nJWLemN29Wc) is allowed to flourish. This is why tax havens are attacked whenever something bad happens. If there is a terrorist attack, blame tax havens. If there is a financial crisis, blame tax havens. With this in mind, a new report from the University of Basel’s [Institute of Governance](http://www.baselgovernance.org/big/) did some real research and came up with a list of nations where there actually is a high risk of money laundering and terrorist financing. As the [map ](http://baselgovernance.org/fileadmin/docs/LISTE.jpg)below indicates, only one so-called tax haven is among the 28 countries listed, and that nation was in the lowest-risk category. ![Media Name: money-laundering-jurisdictions.jpg](/sites/cato.org/files/styles/pubs_2x/public/download-remote-images/danieljmitchell.files.wordpress.com/22587835464/money-laundering-jurisdictions.jpg?itok=n6JrCzL0) ##### Related Tags [Tax and Budget Policy](https://www.cato.org/tax-budget-policy) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).