Pandora Papers: Exposing Corruption and Shadow Economy

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This week was very busy in the world of investigative journalism, the Pandora Papers data leak caused furore amongst the whole world, and the news outlets reported in a frenzy. The 12 million files that were leaked to the International Consortium of Investigative Journalists (ICIJ) reveals how the rich and famous are hiding their wealth in offshore accounts in tax haven paradises all around the world. They use clever accountants and various techniques to hide their identities, evade paying taxes to their own countries, and not report (sometimes criminally) acquired funds. 


WHO: The Pandora Papers target a broad spectrum of people including, politically exposed people, celebrities, criminals, CEOs and owners of some of the largest companies, and some of the wealthiest people in the world. The Pandora Papers has revealed information on over 27,000 companies, and about 29,000 beneficial owners. There was information from over 330 politicians and people working in the public sector, spanning over 90 countries. This includes 35 currently presiding, and previous, world leaders.

WHAT: It shows information on how these individuals and companies used so called ''secrecy jurisdictions'' to buy properties and real estate, hide money in offshore accounts, and tax evade by using shell companies, and other entities to keep their identities a secret, and hide how much money they actually have. 

For example, Asiaciti Trust was setting up Superfund trusts for people in Samoa, and providing them with loans based on these trusts. If an individual or entity has a loan, they don't pay any tax on it. This is because it is not seen as revenue or income, they don't gain anything from it, but rather just owe money to someone. 

WHERE: The data leak came from 14 different providers that supply offshore services and give advice to rich entities and individuals who are looking to basically hide their wealth in offshore accounts using shell companies, trusts, foundations and other entities to create a shadow economy. Often this money is hidden in ''tax havens'' , these are countries that require little to no tax to be paid. 

WHEN: The exact date of the leakage has not been confirmed. However, this is not the first time that this kind of financial information has been revealed. 

In 2016 there was the Panama Papers leak, that had 2.6 terabytes of data from law firm Mossack Fonseca. Then in 2017, came the Paradise Papers, with 1.4 terabytes of data, mostly from a company called Appleby, that is an offshore provider from Bermuda. Now in 2021, Pandora Papers is the largest of the three leaks. 

WHY:  The data leak came from individuals working for some of these offshore providers who wanted to expose to the governments what kind of shadow economy and money laundering activities are going on right under the tax authorities, and other governments, legal authorities noses. They wanted to show how much tax evasion is going on using clever tricks and hiding ownership and income details. 

By not paying taxes, and not being clear about how much money is made or who is making this money, the general society and governments are being affected by losing out on revenue that can be used to better society, provide services and pay back in the community. 

Also, by hiding criminally acquired funds, we wouldn't have the capability to trace the activity and thereby gather evidence and prosecute the relevant parties for wrongdoings.

HOW: About 2.94 terabytes of data, or about 11.9 million documents, was leaked to the ICIJ in documents of various formats. There was 6.4 million PDF documents, some of them with up to 10,000 pages. There was passports, tax documents, bank statements, company income statements, company incorporated certificates, real estate documents, and due diligence questionnaires. 

There was also over 4 million images and email included in the leak. 4 % of the data was spreadsheets, and there were also included audio and video files. 

The data had to be carefully sifted by the ICIJ because the information was fairly random and unstructured. The various organisations where this data came from had different filing systems. Some kept paper records and these were scanned, some had digital records. Some of the information was mixed and some contained information spanning over several years. Also, the information came in all sorts of languages including English, Spanish, Arabic, Russian, French and Korean. 

THE LIST OF SHAME 

Some of the most prominent names that came from this list and their secret assets:

- King Abdullah II, from Jordan, bought $106 million USD worth of homes in USA and England under front companies registered in these tax haven countries. The homes are located in central London and Washington D.C. He had accountants and lawyers from Switzerland and British Virgin Islands to form shell companies for him and protect his name from the public. 

King Abdullah II of Jordan

It can be speculated that as Jordan is one of the poorest countries in the world, having a public display of wealth could affect them getting foreign aid and money from Western donors. The King's representatives said that it is not concealed to hide assets but rather for security reasons. It's known that the royal Jordanian family owns properties in the US and England, and they are used for private and official visits by the King and his family and relatives. The information in the Pandora Papers are exaggerated and false, according to Jordan's Royal Hashemite Court. 

There is also information of properties owned by the King of Jordan in Malibu, worth $68 millions USD. And papers shown that these were bought around the time of the Arab Spring, when the people of Jordan were protesting in the street of corruption and unemployment. 

 - Svetlana Krivonogikh, a woman alleged to have been in a relationship with the Russian President, Mr Vladimir Putin, around 2003. The Pandora Papers revealed that she has bought a luxurious apartment in Monaco, worth $4.1 million USD, shortly after she gave birth to her little girl. Of course, we need to mention that her daughter Luiza Rozova, also known as Elizaveta Krivonogikh, is claimed to be Mr Putin's secret youngest daughter. 

Elizaveta Krivonogikh

There are no records of where this $4 million came from to buy this apartment, but the time coincides with the time she is alleged to have been in the relationship with Putin, as well as when she is know to have acquired a generous portfolio of assets in Russia. As Ms Krivonogikh comes from a humble background, that includes her working as a shop cleaner, it is questionable how she came to be so wealthy. 

Her alleged relationship with the Russian leader was speculated by Projekt, a Russian investigative outlet that had been shamed in the Russian media and by the Kremlin. 

Svetlana Krivonogikh

In 2010, Bank Rossiya disclosed that Svetlana Krivonogikh was one of the main stakeholders, under her company OOO Relax. This bank was latter subjected to US sanctions and described as a ''personal bank for senior officials of the Russian Federation.''

- The President of Kenya, Uhuru Kenyatta, is shown to own more than $30 million USD in assets in offshore businesses registered in British Virgin Islands and Panama. These assets were mostly accumulated before he was elected, and a few of the businesses still remain active today. The Pandora Papers actually revealed that there is no evidence that the Kenyatta family tried to steal or hide the assets in these offshore entities. 

President Uhuru Kenyatta

Mr Kenyatta, who vowed to fight corruption in Kenya when he took office, said that in his opinion these Pandora Papers are a good thing and the financial transparency and openness is something that they need in Kenya and the world. According to him, ''the movement of illicit funds, proceeds from crime and corruption thrive in secrecy.'' 

- Mr Tony Blair, the ex-Prime Minister of England, and his wife, Cherie Blair, is show to have avoided paying $423,000 USD, or £312 000, in stamp duty when they purchased a town house in London. Stamp duty is the tax you pay when you buy property in England. 

Tony and Cherie Blair

They bought the townhouse by acquiring the offshore firm that owned the home. The previous owners were a family from Bahrain. They set up a UK firm to buy the offshore entity, and avoided stamp duty because buying a company that owns property means to tax is required to be paid. 

There are many, many more people that were included on the list. There was also celebrities like Shakira and Claudia Schiffer. There were hundreds of Russian billionaires, known mobsters, people tied to crime, and of course an array of politicians and people tied to public office.   

WHY WE SHOULD CARE ABOUT THIS ''SHADOW ECONOMY''?

Owning offshore companies, or moving funds through these tax havens is not illegal and there are certain loopholes that people can use to avoid paying for tax. Although allowed, it is usually seen as unethical. And, using a network of shell companies and secret identities is the perfect way to hide proceeds from a crime.  

There is more and more demands that lawmakers make these loopholes in the law harder, and that there is more financial transparency about wealthy holders and how much assets they have and where the fund are actually coming from. Especially this is important of people holding a public office, such as Prime Ministers or Presidents. 

The reality is that when taxes are not paid, there is less money to use in a social context. Tax money are used to fund public schools, public health systems, repair roads, and provide social assistance and pension to the general public. Less taxes for a country means less money to do these things. So this is why we should care! 

The people exposed in the Pandora Papers have an immense amount of wealth, more than they could spend in a life time. There is certainly enough funds in their bank accounts to be able to pay the right amount of taxes that they are required by law. 

The more that there is this kind of shadow economy, and a way to hide funds in the offshore entities and tax haven countries, the more the wealthy become wealthier and the poor become poorer. This is because the average person does not have access or the knowledge of how to also circumvent the system, so the less wealthy pay more tax in comparison to their income than the so called rich people. 

CONCLUSION

I think that this data leak was a impressive effort on the part of the whistleblowers, and the 600 odd journalists  that had to sift through  all the data and arrange it in a comprehensive way. Financial transparency is needed to make sure we can fight corruption and prevent illicit gains from crime. 

More of this is needed, but more demanded from a legal perspective than from whistleblowing. Laws need to be put in place so that the governments of the world demand that wealthy tax payers actually pay the tax in proportion to income, and that the funds acquired are clear and easily traceable. 

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