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Written by Jackie Whiting
on October 14, 2021

By now everyone has heard (and is talking) about the latest bombshell revealed by the International Consortium of Investigative Journalists, known as the “Pandora Papers”. But with so many around the world reporting and reacting to this massive information leak, it’s easy for the essential takeaways to get lost in the mix. Get caught up on this breaking news story and learn how it compares to past leaks, what offshore actually means and how jurisdictions are responding by reading our latest story

What are the Pandora Papers?

The Pandora Papers describe the leak of nearly 12 million documents and files that expose the secret bank accounts, property (including real estate, artwork and even airplanes) and income streams of the world’s wealthy elite.

Who is responsible for the release of the Pandora Papers?

The files and documents that make up the Pandora Papers were obtained, interpreted, and disseminated by the International Consortium of investigative Journalists (ICIJ). They have been working with more than 140 media organisations in what has become their biggest ever global investigation. In total, this release brought together more than 600 journalists across 117 countries who combed over the documents for several months before beginning to publish their stories.

Why is it called the Pandora Papers?

Somewhat differently from previous leaks of this kind, the Pandora Papers are aptly named after the Greek mythological artifact, Pandora’s box. Legend says that the first woman on Earth, Pandora, was given a mysterious box by Mercury, messenger of the gods, and asked to take care of it and never open it. Her curiosity eventually compelled her to open the box, resulting in various evils like death and disease being released into the world.

Nowadays the term is used as a metaphor for starting something that causes additional and unforeseen complications, and fittingly describes what’s been and what will continue to be unearthed by the publication of the Pandora Papers.

Who is named in the Pandora Papers?

Many well-known people around the world are featured in the Pandora Papers, including prominent politicians, corporate executives, celebrities, and professional athletes. Some particularly notable individuals include performers such as Elton John, Ringo Starr, and Shakira as well as former UK prime minister Tony Blair and Brazilian Economy Minister Paulo Guedes.

What noteworthy individuals are not named in the Pandora Papers?

Although more leaks should be anticipated in the coming weeks, at the time of publishing, notable American billionaires such as entrepreneur Jeff Bezos and Facebook CEO Mark Zuckerberg do not appear in the Pandora Papers.

The Washington Post speculated that the absence of many of America's wealthiest may be owed to the generous tax breaks they already receive domestically.

How do the Pandora Papers compare to past leaks?

The size of this leak supersedes its predecessors, including the FinCEN Files, Panama and Paradise Papers. While previous leaks focused on pulling back the curtain on criminal activities, the Pandora Papers goes further and exposes the vast divide between the world’s wealthiest and its poorest.  

This leak can also be considered a study on how powerful individuals (who are disproportionately male) use tax havens and offshore companies to avoid - but in many cases, legally - paying taxes and disclosing the true depth of their wealth. The relationship to money laundering is clear. After all, if such notable public figures can successfully and easily shroud assets in secrecy, what stops career criminals looking to hide illicit funds?

What is an offshore company and are they legal?

An offshore company can be simply described as a company that is incorporated in a jurisdiction different from the one where the beneficial owner resides. However, the implications of offshore operations can be considered anything but simple.

In respect to the Pandora Papers, what’s “offshore” includes entities that are not only corporations/companies but also trusts and deposits. Both companies and natural persons can operate offshore.

And while the definition of offshore can mean any place different from the beneficial owner’s official residence, the term has become universally aligned with specific locations like Cayman Islands, the British Virgin Islands and the Bahamas. Natural persons and companies choose specific offshore destinations for their favourable tax laws (in some cases income is not taxed at all), looser regulations and perhaps most valuably, their confidentiality (if creditors can’t find your assets, they are nearly impossible to seize).

Setting up offshore companies, investments and deposits are legal; hiding offshore assets is not. Supporters of this system claim that using offshore companies improves the flow of capital and enables international business. Critics say that going offshore helps the world’s wealthy avoid paying taxes and helps them hide illegal activity from authorities. Both things can lead to money laundering, fraud, tax evasion, human trafficking and other illegal activity.

Why is what’s revealed in the Pandora Papers a problem?

At first glance, it may be tempting for the average person to respond apathetically to the information revealed by the Pandora Papers. But when high net worth individuals successfully and routinely conceal their profits and assets, they disproportionately leave the tax burden to those less equipped to manage the load and those unable to take advantage of the same benefits due to lack of funds.

The Pandora Papers also reveal the ways in which the uber rich, including those on sanction lists can conduct business, such as buying real estate, in countries where housing crises are at all-time highs. This is made possible by natural persons or corporations setting up series or layers of shell companies to hide true ownership information that might otherwise make such purchases difficult, more expensive, or even impossible.

Simply put, the leak is not just about the rich exploiting tax havens in order to not pay their fair share - it’s also about the enablement of brazen criminal activity which damages our society at a fundamental level. For example, there are criminal organisations throughout Europe that are dedicated to drug trafficking and human trafficking. It has been revealed through the Pandora Papers, that one organisation in particular used a shell company in the UK to buy land and real estate in Spain. Thanks to the lack of transparency enabled by using offshore companies, this purchase and its subsequent profits was made possible - empowering criminals to continue hurting local communities through their illegal drug trafficking and prostitution operations.

Put another way, the anonymity that offshore companies in “tax haven” jurisdictions allow is contributing to countless crimes while also artificially inflating the price of real estate in major cities around the world - both of which result in a wider wealth divide that hurts our global economy.

What is the world doing about it?

There is a growing acknowledgement that the lack of attention to the role that trusted professionals provide in the movement of illicit funds (within the boundaries of the law) is to blame for a lot of the activity unearthed in the Pandora Papers. Everyone from investment advisors to art dealers are not being scrutinised enough.

But as these concerns are not new ones, legislation has already been passed (and is in some stage of enactment) in many jurisdictions around the world, to provide some insight into beneficial ownership. With greater transparency, the effectiveness of shell companies in helping individuals and companies hide their true motives can be limited or perhaps eliminated altogether.

Noteworthy legislation already in place includes the European Union’s 4th, 5th and 6th Anti-Money Laundering Directives, the UK's People with Significant Control (PSC) register, the Corporate Transparency Act in the US, and the ongoing work to do away with money laundering (referred to as snow-washing) in Canada with amendments to the 2021 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

What is kompany doing to help?

Since 2012, kompany has upheld its mission to serve as the first line of defense for anti-money laundering programs by providing our clients with the highest standard of data possible. As a global register network, our clients have access to commercial registers, financial authorities, tax offices and beneficial ownership registers around the world, helping them to quickly and efficiently validate and identify cross-border relationships.

We expect the regulatory landscape to enter a period of accelerated evolution because of the Pandora Papers. And as new beneficial ownership registers are created and added to, we will continue to support our clients around the world by providing primary sourced, time-stamped data and documents for even their most complex anti-money laundering and Know-Your-Customer needs.

Read our story on the creation of UBO registers in the European Union

Final Thoughts

Access to efficient and effective business verification services is an essential tool for private companies and international regulators alike to uncover those entities looking to circumvent the rules that keep our societies healthy and functional. We are proud to be a global leader in business verification and entity identity services and look forward to continuing our work with governments and registers around the world to increase our clients’ access to the data they need to do sustainable business better.

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