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What You Need to Know About The Pandora Papers and the Countries Involved

The release of the Pandora Papers has resurfaced an opportunity to take a closer look at the offshore industry. The Pandora Papers is among the most extensive global financial investigations. It brought together more than 600 journalists from 140 media organizations across 117 nations to pore over nearly 12 million leaked documents from 14 offshore services companies.

cleversoft group
October 18, 2021

The October 3rd release of the Pandora Papers has resurfaced an opportunity to take a closer look at the offshore industry. The Pandora Papers is among the most extensive global financial investigations. It brought together more than 600 journalists from 140 media organizations across 117 nations to pore over nearly 12 million leaked documents from 14 offshore services companies. This was in a bid to assess the tax avoidance and wealth concealment strategies employed by high-level government officials, oligarchs, and some of the world's wealthiest people.

The ICIJ (International Consortium of Investigative Journalists) and the Organized Crime and Corruption Reporting Project orchestrated the Papers. The probe follows the release of FinCen files in 2020, the Paradise Papers in 2017, and LuxLeaks in 2014. And once again sees various nations and the super-rich under scrutiny over their promotion of offshore tax havens in places such as the British Virgin Islands and the Cayman Islands.

On a global scale, the Pandora Papers have triggered a new initiative to stop decades of long-abused corporate secrecy, and drive hesitant decision-makers into taking corrective measures. These investigations have come at a time when the world is teetering closer to a new global standard of corporate transparency. Additionally, the Financial Action Task Force (FATF) needs to use this chance to gather public, central registers of company owners in all nations across the globe. At the same time, national governments are more inclined than ever to get their offshoring affairs cleaned up.

Here is a list of the countries that are most caught up in the offshore industry saga.

The Power Players in the Pandora Papers

The Pandora Papers have cast a light on over 300 politicians from 91 countries. This includes current and former government leaders, who have allegedly dodged scrutiny by sheltering themselves with anonymity. Entities tasked with taking decisive measures to tackle the flow of dirty money have, themselves, been caught abusing the system's transparency. In the coming months, they will need to have a plan to further remove themselves from involvement in the offshore industry.

Czech Republic

A politician's private finances can be a significant political factor in Central Europe. The Czech Republic's current Prime Minister knows this well.

In a 2018 Transparency International Czech Republic investigation, there were trust funds linked to a Czech Conglomerate that lead back to a top political official. The funds were poised to receive significant EU subsidies. This information was made available through Slovakia's free and public platform, that records ownership information of companies that receive public contracts and licenses.

Additionally, a top official had been named the sole beneficial owner of offshore companies in the United States and BVI, Monaco — neither France nor the USA have information on the real owners of offshore companies and trusts.

Following these discoveries, the Czech Senate Commission for public procurement held a debate where its chairman called for investigations of the source of wealth of the top official in question.  

Brazil

The Pandora Papers also revealed 14 current and former heads of states, and other high-level government officials, of this Latin nation were involved in the offshore practice. This involvement worked its way up to the Brazilian Economy Minister. The Papers revealed this public official kept a company in the British Virgin Islands with nearly US$10 million invested in a Credit Suisse account in New York.

There have also been conflicts of interest regarding national legislation.

The lower chamber of Brazil has already called on these officials to shed light on the allegations made by the Pandora Papers.

However, the government should institute stricter policies regarding the disclosure of the real beneficiaries of offshore companies, plus a reform of the country's asset declaration regime, so the public can also participate in the scrutiny of potential conflicts of interest.

Nigeria

An investigation conducted by Finance Uncovered and Premium Times discovered that over 100 influential Nigerians used unnamed companies to purchase properties worth £350 million in the UK since 1990. The perpetrators include former and current high-level government officials such as state governors and ministers.  

The secretive dealings by Nigerian power holders have been in previous investigations, namely the FinCEN files investigations and the Panama reports. However, there has been inaction towards curbing this vice.

The Nigerian government needs to rise to the challenge and investigate all individuals mentioned in the Pandora Papers. This is regardless of their political affiliations. The government should also furnish the Code of Bureau with adequate resources. It will help aid in scrutinizing official asset declarations.

Lebanon

The Pandora Papers revealed some of Lebanon's most high-profile business executives and politicians are also offshoring their wealth. On of Lebanon's top officials reportedly purchased property worth $10 million USD in Monaco, via an offshore account registered in Panama. This official acquired the property before joining politics and also stated the assets were previously disclosed to the Lebanese Constitutional Council.

Following the allegations made by the Pandora Papers, the Lebanese Transparency Association has emphasized the need for tasking authorities to thoroughly investigate the assets of individuals and companies named in the report. They also echoed the need to confiscate and recover funds obtained through corruption and the imposition of taxes on persons named in the Pandora Papers if they failed to declare their assets in Lebanon.

Jordan

Top leadership in Jordan accumulated approximately $100 million USD worth of property in the United Kingdom and the United States, through secret companies, according to the Pandora Papers. The properties were acquired between 2003 and 2017 through tax-haven registered firms.

The Enablers

The Pandora Papers revealed evidence that the offshore industry is thriving. Private sector providers, corporate service providers, and other intermediaries continue to function with minimum scrutiny and obligations in many countries around the world. Lax regulations and loopholes have further made the financial sector vulnerable.

New Zealand

The Pandora Papers discovered that politicians and business people from Brazil, Russia, Romania, and China used trusts. And amongst these individuals were people who faced serious money laundering and corruption charges in their home countries.

Before 2017, New Zealand was also guilty of attracting foreign entities for the purpose of avoid taxes and hiding their identities. However, currently, a law that requires foreign-owned trusts to disclose the basic information of their assets and the identity of beneficiaries has been instituted. This law resulted in a reduction of foreign-owned trusts. However, there are still challenges with both domestic and foreign-owned trusts. As such, the New Zealand government should make more reforms to further reduce foreign-owned trusts.

Panama

Panama is one of the most known enablers in the practice of offshoring. Of the 14 corporate service providers mentioned in the Pandora Papers, two are Panama-based.

Libertad Ciudadana reported that the new revelations emphasize the essentiality of implementing the beneficial ownership register. They are currently at an 18-month delay for implementation.

Earlier this month, the EU announced that Panama would continue as a non-cooperative tax haven, thus, still blacklisted.

Australia

Australia's weak anti-money laundering policies mean that it is not a requisite for the gatekeepers—accountants, real estate agents, and lawyers—to question the source of finances and report dubious transactions. As such, huge sums of money can be hidden and integrated into the economy via the real estate industry. According to Transparency International Australia, this is one of the reasons why Australia's real estate industry attracts suspicious cash.

For the last 15 years, FATF (Financial Action Task Force) has urged the Australian government to institute stricter policies to strengthen its money-laundering laws. Despite there being a few amendments, lack of coverage of the enablers and a lack of transparency in beneficial ownership still leave vulnerabilities.

United States

The Pandora Papers revealed that the USA is one of the leading secrecy jurisdictions. States such as Delaware, South Dakota, New Hampshire, Florida, and Nevada emerged as hotspots for people to hide their wealth.

According to the Pandora Papers, 206 trusts, spread across 15 states,  held assets in excess of US$1 billion. Some of the trusts held assets of companies or individuals perceived to be corrupt or fraudulent.

Following the release of the Pandora Papers, the Transparency International US office has called on the US Treasury Department to spearhead efforts to close the secrecy loopholes for trusts by instituting the implementation of the Landmark Corporate Transparency Act. This mandates that all trusts not expressly law-exempted report true ownership.  

United Kingdom

The UK property market has also been an attractive destination for investors looking to hide their wealth. The Pandora Papers revealed the names of individuals accused of corruption, high-profile foreign officials, and UK political donors believed to anonymously own over $7 billion USD worth of UK real estate.

For example, even Azerbaijan reportedly purchased property worth $700 million USD using a British Virgin Island registered company within the past 15 years.

Similarly, The Papers revealed that a former UK Prime Minister acquired a building worth $8.8 million USD in 2017. This was through a British Virgin Island Company that held the property.

The UK government should expedite legislation to close the loopholes that enable individuals to purchase and sell properties anonymously through the use of shell companies.

Conclusion

The Pandora Papers have brought to light, previously unknown financial activity of some of the most influential people. It showed how their actions can impact their country — and, the global economy.

We look forward to the governments of the involved countries implementing more policies and strategies to help curb money laundering, tax evasion, and the use of shell companies to hide stolen assets.

BusinessForensics, a cleversoft group company, is a leading provider of fraud, KYC, AML, and fraud prevention solutions for banks and insurance companies. Talk to sales to learn more.