Did you notice, at almost regular intervals new documents uncovering people who hide considerable wealth are brought to public attention?
According to the findings politicians, oligarchs and other members of the global wealth park large amounts of money in off-shore companies or trusts while never having to disclose their identity.
Then, tabloids quickly point to tax avoidance or money laundering and the general public duly reacts with outrage and disgust. Then, politicians dutifully promise to stop this illicit practice. Needless to mention, nothing much happens.
I was curious about what is being uncovered and why all this is so scandalous? 2021 was the year of the Pandora Papers, let´s go down the rabbit hole, together.
What are the Pandora Papers?
Almost 12 million documents, on hidden wealth, tax avoidance and money laundering. These documents bring to light the covert, at times unethical dealings of some members of the global wealthy.
Apart from business owners and members of show-business, over 300 politicians, leaders, and rulers were exposed.
A murky and corrupt system, with a complex web of tax havens, shell corporations, and offshore accounts makes this possible. The true ownership of billions of dollars in assets stays hidden.
| Offshore Leaks | |||
|---|---|---|---|
| Leak | Year | Data Size | # of Documents |
| WikiLeaks | 2013 | 260 GB | 2.5 million |
| Panama Papers | 2016 | 2.6 TB | 11.5 million |
| Paradise Papers | 2017 | 1.40 TB | 13.4 million |
| Pandora Papers | 2021 | 2.94 TB | 11.9 million |
Many of the facilitators involved are registered in tax havens like Bermuda, the British Virgin Islands, Panama, and the Bahamas. Other entities were uncovered in Russia, the United Kingdom, the US, France, the British Virgin Islands, Belize, Cyprus and Switzerland.
Pandora Paper´s sources
Members of the International Consortium of Investigative Journalists (ICIJ), probed 14 offshore financial service providers and law firms. They obtained a plethora of agreements, financial statements, emails, and trust deeds.
More than 600 journalists from 150 news outlets spent two years sifting through 11.9 million confidential files. They tracked down sources, exposed hidden bank accounts and works of art, investigated court records, probed P.O boxes and studied public documents.
It is the largest such data release to date. Larger than the Panama Papers or the Paradise Papers leaks.
Who is Who
The documents expose more than 330 politicians and public officials in 91 countries and territories. Including 35 current or former world leaders.
The Middle-East
The Qatari ruling family purchased two of England’s priciest mansions. Both properties were bought by offshore SPVs, thus avoiding £18.5m in tax.
The Anti-corruption advocates
The prime minister of the Czech Republic Andrej Babis, failed to disclose an offshore investment company used to purchase two French villas for $16.3 million.
Ukraine ranks number one with 38 politicians accused of corruption, including President Volodymyr Zelensky. His $41 Million dollar fortune seems to be in an opaque network of of-shore companies located in Belize, the Virgin Islands and Cyprus. Curtesy of a dubious kleptocrat by the name of Kolomojskyi.
Several people of Pakistan’s Prime Minister Imran Khan’s inner circle, a minister and a top donor of his party, own offshore companies.
The poor countries
Jordan’s King Abdullah II owns 14 luxury homes in the United Kingdom and the United States worth more than $106 million total. The properties are owned by a network of off-shore companies.
Mr Sassou-Nguesso, Congo-Brazzaville’s president, concealed his ownership of diamond mines in an offshore company.
Members of President Uhuru Kenyatta´s family, have been linked to at least seven offshore companies and foundations.
No tax, please
Sir Philip and Lady Green went on a property spree in London. He was the owner of British Home Stores. The company filed for bankruptcy in 2016 with debts amounting to £1.3 billion and £571 million in pension liabilities. The properties were bought by offshore companies.
Shakira did it, so did Ringo Starr, Claudia Schiffer, Julio Iglesias and cricket legend Sachin Tendulkar.
All have “offshore ”companies in places like the British Virgin Islands (BVI). Their tax rates are low or zero and businesses and identities are can be hidden from the public.
The owners of 1500 UK properties used offshore firms to buy them. Amongst them John and Cherie Blair.
Shady business Owners
The family of Azerbaijani President Ilham Aliyev, repeatedly accused of corruption, is involved in property deals in the UK worth more than £400m. Grace to a network of offshore firms.
Lubov Chernukhin, a prominent Tory donor, is linked to a network of 32 offshore companies and trusts with more than £100m in assets.
Tory donor Mohamed Amersi, involved in one of Europe’s biggest corruption scandals is the owner of several offshore companies.
Speed Read
Are the Pandora Papers important?
Twice as many politicians and public officials were connected to offshore activity as in the Panama Papers. It seems that more than ever before offshore finances and secretive wealth has infiltrated global politics.
The documents identified 956 companies in offshore havens tied to 336 high-level politicians and public officials. The list includes country leaders, cabinet ministers, ambassadors.
Some of the people named in the papers are major political leaders in developing or impoverished countries. Countries, that receive substantial international aid.
If wrongdoing is found and exposed, these high-profile people could be forced from office and stripped of their powers.
The billions attracted by tax havens do harm to sending and receiving nations alike
NICHOLAS SHAXSON, F&D Article IMF
Banks, law firms and countries
The investigation reveals how banks and law firms work closely with offshore service providers to design complex corporate structures. The report also found that many financial providers don’t know their customers, despite their legal obligation.
The offshore system is often seen as a far-flung cluster of palm-shaded islands. The Pandora Papers show that the offshore money machine operates in every corner of the planet, including the world’s largest democracies.
The key players in the system include institutions like multinational banks, law firms and accounting practices. Many are headquartered in the U.S. and Europe.
More than two-thirds of the offshore companies were set up in the British Virgin Islands, long known as a key player in the offshore system.
The Trident Trust (British Virgin Islands)for example is amongst the most frequented by politicians. Algocal in Panama is another favourite.
Cyprus is a favourite amongst Eastern Europe´s rich and powerful. With Russians being the largest contingency. Russians account for the largest group by nationality, to use offshore companies or SPACs to hide their money.
Kleptrocracy
Ukrainian President Volodymyr Zelensky ran for office on a commitment to anti-corruption and transparency. It is unclear whether his ties to a kleptocrat and an opaque network of offshore companies will affect Zelensky should he choose to run in Ukraine’s 2024 presidential election. Probably, due to the abundance of kleptocrats, nobody can be bothered.
Foreign aid
Jordan is amongst the top recipients of foreign aid. Whether the tucked away funds are the king´s private wealth or not, is irrelevant. The disclosure of his involvement in offshore dealings will leave a bitter feeling with Jordania´s. A largely impoverished, population. Governments like the U.S., the UK or the European Union could be forced to rethink their generous flow of donations and as a result, poverty could get worse.
Londongrad
Lubov Chernukhin, a former banker, has given more than £2 Million to the Tory party since 2012. The Russian-born Chernukhins have been granted British citizenship. Ms Chernukhin´s personal wealth comes from her husband Vladimir´s tight net of offshore companies. Their UK properties are owned by offshore companies. This might raise doubts about the Tory party´s integrity.
A Vow
The Kenyatta family owned at least seven entities based in the British Virgin Islands and Panama with assets worth more than $30 million. Kenyatta had vowed to fight corruption in his country.
The Abolitionist
The former Czech Primeminister, Andrej Babis a businessman, with a net worth of $4.04 billion, has rallied against the elite, tax avoidance and corruption since he became prime minister in 2017. Yet, he is accused of tax evasion, and his asset declaration forms fail to show a chateau property or the offshore companies in his ownership. He paid his price already his party lost the recent elections in October.
A Russian businessman
Victor Fedotov, a businessman and generous donor to Conservative MPs is alleged to have made millions from one of Russia’s largest fraud scandals. The former oil executive not only owns the company behind a shady infrastructure project in the English Channel but also several offshore companies.
A pledge
Hundreds of Pakistanis, including members of Mr Khan’s cabinet, are said to have secretly moved wealth through offshore companies. To remain credible, the Prime Minister, who pledged to eradicate poverty and corruption, needs to ask questions now and bring wrong-doing to light.
Is it illegal?
There are legitimate uses for offshore companies and trusts. The Pandora Papers do not intend to suggest or imply that any individuals, companies or other entities have broken the law or acted improperly.
Offshore accounts or ownership in foreign corporations is not illegal or unethical, as such. However, not declaring those holdings and using them to avoid taxes or hide business dealings are.
Setting up companies and trusts offshore is easy, and relatively cheap. In addition to easy tax systems, many offshore jurisdictions have laws that shield the owners’ identities.
An offshore entity makes it difficult to determine whether they are used to hide assets from tax collectors, creditors or law enforcement agencies.
Lost revenue
According to a 2020 study by the Paris-based Organization for Economic Cooperation and Development, at least $11.3 trillion are estimated to be in “offshore” accounts.
Because of the complexity and secrecy of the offshore system, it’s not possible to know how much of that wealth is tied to tax evasion and other crimes. It can not be established how much of this wealth comes from legitimate sources and has been reported to proper authorities.
The IMF estimates, about 10 per cent of the global economic output is parked in offshore financial centres, held by shell companies that exist only on paper. The cost to governments, in lost revenue, is estimated to exceed $800 billion a year.
The revelations are an embarrassment for leaders who may have campaigned publicly against tax avoidance and corruption, advocated austerity measures or where economies are kept alive with generous donations from other countries.
A lot of noise
Uncovering the financial dealing of hundreds of world leaders and celebrities puts the spotlight on the offshore system itself. In the past, there was plenty of public outrage, and politicians vowed to close the gaps and combat money laundering and tax evasion.
Whether the reports will have any long-term effect on passing legislation for more financial transparency around the globe, is questionable. Sofar governments can not agree on common global standards, and still do little to slow the global stream of illicit money.
