"All of this goes a little way to explaining why Britain has, for some time now, been considered the global capital for criminal money laundering among those in the know. Perhaps, with the release of the Panama Papers, the last sheen of respectability will finally be stripped away."

The “Panama Papers” show that the sun never sets on the United Kingdom’s tax havens.

[Republished without foreignpolicy permission]

There is a temptation, when looking at the astonishing “Panama Papers,” to start by searching for politicians from your own country who are implicated. If you are British and approach the documents in this way, you’ll find slim pickings in the information released so far.

Among the many thousands of names listed in the leak as possibly implicated in dodgy tax deals, there can’t be any appearance less surprising than that of Baroness Pamela Sharples, the widow of the former governor of Bermuda. That is, until you get to Lord Michael Ashcroft — billionaire, Belizean national, and former deputy chair of the Conservative Party — who would have been more remarkable if he had been absent. Then there’s Michael Mates, a former Tory MP, who stood down in 2010 amid another business scandal. And David Cameron’s late father, but again — hardly a surprise.

To engage in this exercise, however, is to largely miss the point: not just the point of this astonishing leak, but the point of the whole United Kingdom. Because it’s hard not to look at the whole affair and see Britain right at the core of it. Or, at least, the British state, which one might argue is a very different entity.

There are, you see, a few important facts we are rarely told about the British state. Like, for instance, the fact that it governs more land in the Southern Hemisphere than the Northern; more penguins than any other; that there are 18 legislatures under Westminster’s auspices; and that these include the governments that oversee by far the most important network of tax havens in the world.

With the City of London at its center, Britain’s network of refuges from taxes, regulations, and other pesky laws stretches first to the crown dependencies — the Isle of Man, Guernsey, and Jersey — and then into the 14 British overseas territories: places like the British Virgin Islands, Bermuda, and the Cayman Islands. From there, this web extends to places like Hong Kong, not under British rule since 1997 but, according to author Nicholas Shaxson, still feeding “billions in business to the City.”

The overseas territories — the last vestiges of the old empire — each have slightly different political structures, but all of them have a governor figure, appointed by the British government. All of them hand control of their foreign policy over to Westminster, and all of them depend on the motherland for military protection: The Falklands War is an obvious example, but let’s not forget that when Tony Blair famously claimed Saddam Hussein had weapons of mass destruction capable of reaching British military targets within 45 minutes, he was referring not to London, but to Akrotiri and Dhekelia, Britain’s military bases and overseas territory on Cyprus. Akrotiri and Dhekelia still serve a strategic purpose, which make them the exception; most of the overseas territories have evolved into, essentially, parking lots for the wealth of the .01 percent. It’s worth pointing out that more than half of the companies listed in the leaked Mossack Fonseca documents are registered in the U.K. or its overseas territories — and they’re not based in Birmingham.

It’s easy to focus on the idea that this is another story about possible corruption in the governments of countries in the “global south” — those developing nations of Africa, Asia, and Latin America — or the former Soviet Union. And, of course, it is that too. But it’s important to recognize that this is also a story about Britain’s changing role in the world.

Of course, the overseas territories are far from new — some date back to the earliest days of the British (or, English, as it was then) Empire and were vital parts of the English tradition of piracy. Bermuda, for example, was managed by a series of English companies before becoming an official royal colony in 1684. But the evolving role of these small corners of British influence tells a story of how, over the last 100 years, Britain switched from a land empire to a financial empire: from conquering the world to laundering its money, through treasure islands distributed across the planet, hiding pots of gold for corrupt leaders, tax dodgers, drug dealers, and embargo breachers.

Want to understand how things on the edges got so bad? Look to the center: The City of London itself is even older than the empire. The 1.12 square miles that make up London’s financial center have had their own constitutional arrangements for a millennium. (As Shaxson notes, it’s said that William the Conqueror allowed the City to keep its “ancient rights” in 1067, as he trashed the rest of the country.) Today, those square miles are governed by the City of London Corporation, whose representatives are elected by the businesses that operate there, and they have an unelected representative who sits in Parliament, as well as their own police force, which has been remarkably unsuccessful in policing British banks.

Because having its own built-in constitutional protections wasn’t sufficient, in 2010, the City paid for more than half of the Conservative Party’s election campaign, ensuring Cameron’s narrow victory (along with the aforementioned Lord Ashcroft) and that any significant new regulations on finance after the 2008 crisis would be politically impossible. To be sure, however, the Labour Party didn’t do anything to regulate the city in the previous 13 years when it was in power — winning it over with a famous “prawn cocktail offensive” that was a key part of its strategy to get into No. 10 Downing St. in the first place. All of this goes a little way to explaining why Britain has, for some time now, been considered the global capital for criminal money laundering among those in the know. Perhaps, with the release of the Panama Papers, the last sheen of respectability will finally be stripped away.

If we want to understand modern Britain, we first need to realize that our primary economic function in the world today is probably our network of tax havens. After all, around $21 trillionis estimated to sit in offshore accounts, of which Britain’s territories are said to make up by far the biggest part. Our own GDP is only around $3 trillion.

Second, we need to come to grips with the serious claims about our role as the global money-laundering capital. This isn’t just something we should be ashamed of — it also causes the country significant economic problems: It pushes up the price of the pound so far as to make our other exports unaffordable (bye-bye, steel industry); it drives up the cost of housing in London and the South East, fueling a vast speculative bubble, which sucks investment out of the rest of the economy. It’s no wonder net investment in the British economy is, according to the economist John Mills, effectively zero.

And third, we need to think about how this gradually dawning economic reality interacts with our politics: not through the obvious corruption of direct bribery, but through revolving doorsbetween government and civil service, through old boys’ networks and friendship groups, through perfectly legal election donations and media dominance, which all combine and operate to cement the role of finance as Britain’s most important industry.

It was not so long ago — within my grandparents’ lifetime — that Britain was at the center of the biggest empire in human history. Many observers have considered the present day, understandably, as the post-imperial era, placing the end date of empire somewhere around the time Britain withdrew from South Asia. But perhaps we got ahead of ourselves — perhaps we’re only just now seeing the final stages, the physical empire replaced with a hidden financial one. And perhaps the Panama Papers will be seen as the moment when this empire, too, finally began to come unstuck.