The world of offshore wealth has been rocked yet again by another huge document leak, writes Christian Angeloni for FSA‘s sister publication, International Adviser.
The investigation by the International Consortium of Investigative Journalists (ICIJ) in Washington DC, alongside 140 media organisations around the globe, lifted the lid on how politicians and the super-rich hide their wealth.
Dubbed the ‘Pandora Papers’, the 6.4 million documents, three million images and more than a million emails, have shed a light on how the uber wealthy have used offshore shell companies to buy properties around the world and conceal their money.
Some of the cases include:
- The king or Jordan going on a £70m ($95m, €81m) spending spree on properties in the UK and US through secretly owned companies;
- Azerbaijan’s leading family hiding its involvement in property deals in the UK totalling more than £400m;
- Czech prime minister Andrej Babis’ failure to declare an offshore investment firm used to buy two villas in France for £12m; and,
- The family of Kenyan president Uhuru Kenyatta’s secret ownership of a network of offshore companies for decades.
According to the ICIJ, the files are linked to about 35 current and former national leaders, and more than 330 politicians and public officials, across 91 countries.
‘Financial abuses’
The Pandora Papers revealed complex networks of companies that were set up across borders, or offshore, in order to conceal ownership of money and assets.
Such jurisdictions are chosen because it is easy to set up a business there, they have laws making it difficult to identify their owners, and there is very low or no corporation tax.
The use of ‘tax havens’ is not illegal per se, but previous investigations such as the Panama Papers, have shed a light on how the rich and powerful have used this mechanism to avoid paying tax, conceal their wealth and, at times, even launder money, the BBC reported.
It is not known how much money is currently hidden offshore, but the ICIJ’s estimates have ranged between $5.6trn to $32trn (£23trn, €27trn).
According to the International Monetary Fund, the use of cross-border companies to hide money costs governments worldwide around $600bn in lost taxes.
The ICIJ said: “In an era of widening authoritarianism and inequality, the Pandora Papers investigation provides an unequalled perspective on how money and power operate in the 21st century – and how the rule of law has been bent and broken around the world by a system of financial secrecy enabled by the US and other wealthy nations.
“The findings by ICIJ and its media partners spotlight how deeply secretive finance has infiltrated global politics – and offer insights into why governments and global organisations have made little headway in ending offshore financial abuses.”
Panama law firm
The ICIJ discovered that banks around the world helped their clients set up nearly 4,000 offshore companies with the assistance of Panamanian law firm Alemán, Cordero, Galindo & Lee, which was reportedly established by a former ambassador to the US.
The consortium found that the firm – also known as Alcogal – served figures involved in some of the most notorious corruption scandals in Latin America, including the global bribery operation of Brazilian construction giant Odebrecht, the international football corruption scandal known as ‘Fifagate’, and the alleged looting of Venezuelan public assets.
“The Pandora Papers investigation is based on more than 11.9 million confidential records from law firms and offshore services providers,” the ICIJ said.
“More than two million files came from Alcogal.”
‘Global phenomenon’
UK chancellor Rishi Sunak told Sky News that, in light of the latest leak, “HM Revenue & Customs will look through those [documents] to see if there is anything we can learn”.
“But as the papers showed, this is a global phenomenon. We can do our bit, but we require other countries to cooperate with us as well and you will continue to expect us to press on that.”
When questioned about Russian money laundering in the UK, Sunak told BBC Radio 4’s Today programme that independent global body Financial Action Task Force “said that we are one of the best in the world at [tackling money laundering].
“But as you’ve seen from the papers, it is a global problem. But we are determined to do that and our track record on this is very strong.”
The Pandora Papers investigation follows three giant data leaks in the past decade, namely the Offshore Leaks in 2013; the Panama Papers in 2016 and the Paradise Papers in 2017.
