Shadow financial world



November 14, 2021

Shadow financial world


The Pandora Papers have revealed the vast shadow financial world that exists on a global level enriching hundreds of individuals on the expense of the large majority of people who are left to eke out their living. This disclosure has shocked people globally and it is expected that this is not the end of disclosing the shenanigans of the functionaries involved in this despicable act of earning fortunes by dubious means. Side by side it is also expected that the shadow world will do its utmost to waive-off the possible fall-out of such disclosures and would venture to justify its actions through a maze of quasi-legal justifications but the potential public anger will put tremendous pressure on it to mend its ways.

The Pandora Papers have revealed the secret deals and hidden assets of some of the world’s richest and most powerful people in the biggest trove of leaked offshore data in history. The investigated leaks comprise of the cache includes 11.9m files from companies hired by wealthy clients to create offshore structures and trusts in tax havens such as Panama, Dubai, Monaco, Switzerland and the Cayman Islands. They expose the secret offshore affairs of 35 world leaders, including current and former presidents, prime ministers and heads of state. They also throw ample light on the secret financial dealings of more than 300 other public officials such as government ministers, judges, mayors and military generals in more than 90 countries.

The Pandora Papers reveal the inner workings of what is a shadow financial world providing a rare glimpse into the hidden operations of a global offshore economy that enables some of the world’s richest people to hide their wealth and in some cases pay little or no tax. More than 100 billionaires feature in the leaked data, as well as celebrities, rock stars and business leaders. Many use shell companies to hold luxury items such as property and yachts, as well as incognito bank accounts. There is even art ranging from looted Cambodian antiquities to paintings by Picasso and murals by Banksy. The files include disclosures about major donors to the Conservative party, raising difficult questions for Boris Johnson as his party meets for its annual conference.

The Pandora Papers are the title given to the cumulative record of hidden dealings obtained through emails, memos, incorporation records, share certificates, compliance reports and complex diagrams showing labyrinthine corporate structures. These details were leaked to the International Consortium of Investigative Journalists (ICIJ) in Washington sharing access to the leaked data with select media partners that made them to task more 600 journalists to sift through the files as part of a massive global investigation. The Pandora Papers represent the latest – and largest in terms of data volume – in a series of major leaks of financial data that have convulsed the offshore world since 2013.

With the advent of the Panama Papers it is, however, repeatedly asserted that setting up or benefiting from offshore entities is not itself illegal and in some cases people may have legitimate reasons, such as security, for doing so but it is also an established fact that the secrecy offered by tax havens has at times proven attractive to tax evaders, fraudsters and money launderers, some of whom are exposed in the files. These dubious practices have given rise to international arrangements such as FATF mandated to inquire into the financial activities hidden from the eyes of taxation authorities and monitoring institutions globally.

The Panama Papers are the outcome of more than 18 months of analysing the data and now some details are printed exposing hidden financial dealings of some of the most powerful political leaders in the world including King Abdullah II of Jordan amassing a secret $100 million property empire spanning Malibu, Washington and London. Azerbaijan’s ruling Aliyev family has traded close to $600 million of UK property in recent years. One of their properties was sold to the Queen’s crown estate, which is now looking into how it came to pay $80 million to a company that operated as a front for the family that runs a country routinely accused of corruption.

The Pandora Papers also threaten to cause political upsets for two European Union leaders. The prime minister of the Czech republic, Andrej Babis, who is up for election this week, is facing questions over why he used an offshore investment company to acquire a $22 million chateau in the south of France. He too declined to comment. And in Cyprus, itself a controversial offshore centre, the president, Nicos Anastasiades, may be asked to explain why a law firm he founded was accused of hiding the assets of a controversial Russian billionaire behind fake company owners.

Ukraine’s president, Volodymyr Zelenskiy, who was elected in 2019 on a pledge to clean up his country’s notoriously corrupt and oligarch-influenced economy, is also named in the leak. During the campaign, Zelenskiy transferred his 25% stake in an offshore company to a close friend who now works as the president’s top adviser, the files suggest. The Russian president, Vladimir Putin, does not appear in the files by name but numerous close associates do, including his best friend from childhood – the late Petr Kolbin – whom critics have called a wallet for Putin’s own wealth. In Kenya, the president, Uhuru Kenyatta, has portrayed himself as an enemy of corruption. He will come under pressure to explain why he and his close relatives amassed more than $30 million of offshore wealth, including property in London.

The Pandora papers also place a revealing spotlight on the offshore system itself. In a development likely to prove embarrassing for the US president Biden, who has pledged tolead efforts internationally to bring transparency to the global financial system, the US emerges from the leak as a leading tax haven. The files suggest the state of South Dakota, in particular, is sheltering billions of dollars in wealth linked to individuals previously accused of serious financial crimes. The leaked records vividly illustrate the central coordinating role London plays in the murky offshore world. The UK capital is home to wealth managers, law firms, company formation agents and accountants. All exist to serve their ultra-rich clients. Many are foreign-born tycoons who enjoy non-domicile status, which means they pay no tax on their overseas assets.

The Pandora papers also reveal some of the unseen repercussions of previous offshore leaks, which spurred modest reforms in some parts of the world, such as the BVI, which now keeps a record of the real owners of companies registered there. However, the newly leaked data shows money shifting around offshore destinations, as wealthy clients and their advisers adjust to new realities. Some leaked files appear to show some in the industry seeking to circumvent new privacy regulations.

ICIJ expects the Pandora Papers to have a greater impact than previous leaks, not least because they were arriving in the middle of a pandemic that had exacerbated inequalities and forced governments to borrow unprecedented amounts to be shouldered by ordinary taxpayers.  It is estimated that at least $11.3 trillion in wealth is held offshore that practically is being lost to treasuries around the world and that could be used to recover from Covid. The common man is the loser because some people are gaining while others don’t get a single thing!TW

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