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A massive leak revealing the secret assets of some of the world’s most powerful figures adds new pressure on world leaders to crack down on obscure finances.
The said Pandora Papers consist of millions of leaked financial documents that have been reviewed and analyzed for two years by more than 100 media outlets, including the Washington Post and the BBC, which are part of the International Consortium of Investigative Journalists (ICIJ).
The treasure illustrates the secret practices that world leaders and wealthy people have used to keep their assets hidden in dozens of countries, including the United States.
Here are four takeaways from the Pandora Papers.
South Dakota becomes a tax haven
South Dakota was highlighted in the survey as a leading offshore tax haven that has been used by current and former world leaders over the years.
There were 81 trusts discovered in South Dakota in the full-scale investigation, as well as 37 in Florida, 35 in Delaware, 24 in Texas, and 14 in Nevada.
“The Pandora Papers provide details of tens of millions of dollars being moved from offshore havens in the Caribbean and Europe to South Dakota,” the ICIJ said.
The investigation found that the family of Carlos Morales Troncoso, the former vice president of the Dominican Republic, began to put their assets in trusts in the Midwestern state in 2019.
The family of newly elected Ecuadorian President Guillermo Lasso also transferred two offshore companies from Panama to trusts in South Dakota in 2017 after lawmakers in Ecuador passed a law banning public officials from using public servants. tax havens to protect their assets. Lasso told the ICIJ that his previous offshore financial activity was “legal and legitimate”.
The ICIJ reported that South Dakota state law over the years has allowed for more secretive investments.
Lauren Kohr, senior director of anti-money laundering in the Americas for the Association of Certified Anti-Money Laundering Specialists, said South Dakota, Nevada, Delaware, Arkansas and Wyoming have the reputation of being “onshore-offshore states”.
“South Dakota is a trust-friendly state with minor restrictions that make it nationally and globally attractive for legitimate and unlawful use,” she said.
Lawmakers seek to crack down on financial ‘enablers’
A bipartisan group of lawmakers introduced legislation in the wake of the Pandora Papers seeking to crack down on financial “enablers” who help foreign clients hide their wealth in the United States using shell companies, trusts, and other means .
“If we force banks to report dirty money but allow legal, real estate and accounting firms to look away, it creates a loophole through which crooks and kleptocrats can navigate a yacht,” the representative said. Tom malinowski
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The legislation would require the Treasury Department to impose stricter laws on due diligence rules by the end of 2023 for “middlemen,” including attorneys who help set up limited liability companies for abusing clients. of the law.
Ian Gary, executive director of the Financial Accountability and Corporate Transparency Coalition, called the bill a step in the right direction.
“Unlike the banking industry, which is highly regulated and has to file suspicious activity reports and do ‘Know Your Client’ due diligence, these lawyers, investment advisers, accountants… real estate agents, they are not subject to this kind of basic homework. due diligence requirements, ”he said.
“This is why the Enablers Act, I think, is so important,” he said. “Again, the United States is behind some other countries and doesn’t have requirements for those industries either.”
The King of Jordan has extensive assets abroad, including the United States
The investigation revealed that King Abdullah II of Jordan owned 14 properties in the United States and the United Kingdom with purchases totaling more than $ 106 million.
One of the properties in California was purchased for $ 23 million in 2017 using an offshore company. Although the company is said to be based in the British Virgin Islands, the King also had a second company which served as the appointed director for the original company.
“In the offshore world, appointed directors are people or companies paid to advocate for whoever is really behind a company,” said ICIJ.
The king’s legal team said the purchases were made in part for security purposes.
There were a total of three beachfront properties in Malibu that the investigation revealed to the King, whose lawyers also said he was not legally obligated to pay taxes in Jordan, purchased through corporations. offshore.
The King has come under scrutiny in light of the investigation as his country continues to depend on help from other countries.
The ICIJ linked the king to nearly 40 shell companies created between 1995 and 2017.
“If the Jordanian monarch were to display his wealth more publicly, it would not only upset his people, it would upset Western donors who gave him money,” Annelle Sheline, non-resident member of the Baker Institute Center for the Middle East, told the ICIJ.
There are also world leaders on the list who are used to speaking out against bribery and similar offshore transactions used by the wealthy who use the same practices or have people around them doing so.
Kenyan President Uhuru Kenyatta, who previously said officials must publicly disclose their assets for transparency, has siblings who owned offshore companies that amounted to tens of millions of dollars, ICIJ said. .
Leaked files also showed Kenyatta was named the beneficiary of a “secret foundation in Panama,” the group said.
“The Panama Papers were not just a unique event”
The Pandora Papers were published by the same group behind the 2016 Panama Papers investigation, which was based on a leak of offshore financial documents from a Panama law firm that illustrated how thousands of clients, including world executives and celebrities, were using practices such as tax havens and shell companies to hide their wealth.
The Pandora Papers, however, centered on an even more solid investigation, seeking documents from 14 offshore service companies around the world that experts say provide a much broader insight into a complex underground system.
The ICIJ said its investigation uncovered “the financial secrets of 35 current and former world leaders, more than 330 politicians and officials in 91 countries and territories,” in addition to fugitives, crooks and murderers.
Key leaders named in the inquiry include King Abdullah II of Jordan, former British Prime Minister Tony Blair and the presidents of Ukraine, Kenya and Ecuador. The probe also detailed some in the inner circle of the Russian president Vladimir Poutine
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Although the group noted in its investigation that holding assets abroad or using shell companies for security purposes is legal in many countries, some advocates have called for more regulation around the practices, which , they argue, can also be misused for tax evasion or corruption.
Gary, of the Financial Accountability and Corporate Transparency Coalition, said the investigation showed that there is a “massive system of financial secrecy operating around the world.”
“It’s really a validation that the Panama Papers was not just a one-off situation,” he said, adding that the investigation indicates that there are “two separate financial systems that work in the world.”
“One is for people like us who obey the law and pay taxes, and another is for some of the wealthy and global political elites identified in Pandora Papers who are able to use financial secrecy to hide their assets abroad in order to avoid paying taxes. “
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