Friday, 22 October 2021

Pandora Papers: How banks and law firms work with offshore service providers to design complex corporate structures to hide the riches of world leaders and billionaires, reported by ICIJ

Millions of leaked documents and the biggest journalism partnership in history have uncovered financial secrets of 35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, and a global lineup of fugitives, con artists and murderers.

The secret documents expose offshore dealings of the King of Jordan, the presidents of Ukraine, Kenya and Ecuador, the prime minister of the Czech Republic and former British Prime Minister Tony Blair. The files also detail  financial activities of Russian President Vladimir Putin’s “unofficial minister of propaganda” and more than 130 billionaires from Russia, the United States, Turkey and other nations.

The leaked records reveal that many of the power players who could help  bring an end to the offshore system instead benefit from it  stashing assets in covert companies and trusts while their governments do little to slow a global stream of illicit money that enriches criminals and impoverishes nations.

Among the hidden treasures revealed in the documents:

  • A $22 million chateau in the French Riviera – replete with a cinema and two swimming pools – purchased through offshore companies by the Czech Republic’s populist prime minister, a billionaire who has railed against the corruption of economic and political elites.
  • More than $13 million tucked in a secrecy-shaded trust in the Great Plains of the United States by a scion of one of Guatemala’s most powerful families, a dynasty that controls a soap and lipsticks conglomerate that’s been accused of harming workers and the earth.
  • Three beachfront mansions in Malibu purchased through three offshore companies for $68 million by the King of Jordan in the years after Jordanians filled the streets during Arab Spring to protest joblessness and corruption.

The secret records are known as the Pandora Papers.

The International Consortium of Investigative Journalists obtained the trove of more than 11.9 million confidential files and led a team of more than 600 journalists from 150 news outlets that spent two years sifting through them, tracking down hard-to-find sources and digging into court records and other public documents from dozens of countries.

The leaked records come from 14 offshore services firms from around the world that set up shell companies and other offshore nooks for clients often seeking to keep their financial activities in the shadows. The records include information about the dealings of nearly three times as many current and former country leaders as any previous leak of documents from offshore havens.

In an era of widening authoritarianism and inequality, the Pandora Papers investigation provides an unequaled 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 U.S. 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 organizations have made little headway in ending offshore financial abuses.

An ICIJ analysis of the secret documents identified 956 companies in offshore havens tied to 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others. More than two-thirds of those companies were set up in the British Virgin Islands, a jurisdiction long known as a key cog in the offshore system.

At least $11.3 trillion is held “offshore,” according to a 2020 study by the Paris-based Organization for Economic Cooperation and Development. 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 and how much of it involves funds that come from legitimate sources and have been reported to proper authorities.

Tens of millions of dollars were moved from offshore havens in the Caribbean and Europe into South Dakota, a sparsely populated American state that has become a major destination for foreign assets.

A document in the Pandora Papers shows that banks around the world helped their customers set up at least 3,926 offshore companies with the assistance of Alemán, Cordero, Galindo & Lee, a Panamanian law firm led by a former ambassador to the US. The document shows that the firm – also known as Alcogal – set up at least 312 companies in the British Virgin Islands for clients of the American financial services giant Morgan Stanley.

The US is one of the biggest players in the offshore world. It is also the country best situated to bring an end to offshore financial abuses, owing to the outsize role it plays in the international banking system. 

Another case revealed in the investigation involved Philippine political figure, Juan Andres Donato Bautista. He served from 2010 to 2015 as the chairman of the Presidential Commission on Good Government – the panel established to track down Marcos’ billions. A month after he was appointed to lead the commission, Bautista created a shell company in the British Virgin Island that held a bank account in Singapore, secret records show. In a phone call and emails to ICIJ, Bautista said he created his BVI company on the advice of bankers. 

ICIJ’s report stressed that many obstacles remain. Big banks, law firms and other powerful groups often oppose stronger transparency rules and tougher enforcement against offshore abuses.  And in the Philippines and many other countries, anti-corruption activists endure legal threats, arrests and violence. Read more.

Re-disseminated by The Asian Banker from ICIJ.

Diary of Activities
Transaction Finance and Risk Dialogue and Awards Ceremony
23 November 2021