Pandora Papers

What are the Pandora Papers?

The release of the Pandora Papers is creating a shock wave across the world. An anonymous source shared a plethora of confidential financial files with the International Consortium of Investigative Journalists (ICIJ) nearly 2 years ago. The ICIJ led an investigation whereby 600 journalists in 117 countries worked together to unlock the secrets hidden in these files. The Pandora Papers consist of nearly 12 million leaked documents showing how a group of people, including the world’s richest and most powerful people, concealed their wealth, evaded taxes, and in some cases, how they laundered money. The investigation revealed how it has helped people and companies tied to corruption, fraud and authoritarian regimes to hide wealth or avoid taxes.
 

It is titled the “Pandora” papers because it is thought to be the equivalent of opening Pandora’s Box: once opened, it creates many complicated problems. These files contain 6.4 million documents, more than 3 million images and 1.5 million e-mails, and almost half a million excel spreadsheets. Documents show that people, including 330 politicians from 90 countries, hid their wealth through offshore companies. 

What has been uncovered?

The Pandora Papers have highlighted the huge problem of financial crimes being committed globally through offshore companies. There are fourteen “secrecy brokers” at the heart of this investigation. Read more about them here. The files contain information that has exposed the secret wealth and dealings of some of the world’s richest and most powerful politicians, world leaders and celebrities. It has uncovered how have hidden their wealth, evaded taxes and laundered money. The release of these files has unmasked the covert owners of offshore companies, incognito bank accounts, private jets, yachts, mansions, even artworks by Picasso and Banksy. 

The underlying significance of this investigation has concluded that the individuals who could help to put a stop to financial crimes and money laundering are some of the ones who are benefitting from it. They are concealing their wealth in covert companies and trusts while their governments do little to reduce the risk of illicit money that enriches criminals and impoverishes nations. The people who have the power to stop money laundering appear to have little incentive to end it.

As well as highlighting the role of law firms and offshore companies, the leak also re-emphasised how certain jurisdictions, especially the U.K. and U.S., are favourable end destinations for illicit wealth, prompting renewed calls for reform in both countries.

Politically Exposed Persons

The FATF defines a PEP as “an individual entrusted with a prominent public function”. This group of people are vulnerable to abuse for the purpose of corruption, financial terrorism and money laundering. The FATF published recommendations of additional regulation that PEPs and their family members should meet.

As seen in the Pandora Papers leak, these files unveiled that over 300 politicians and world leaders have hidden their wealth, evaded taxes and laundered money. It is evident that additional rigor for transaction monitoring and sanction screening is necessary to mitigate the risk of these crimes, particularly with the use of offshore havens.

It is not just political figures who have been under scrutiny since the revelations were made. The leak also highlighted the role that law firms play in forming shell companies and complex structures, which enable these elites to avoid taxes and operate in secrecy.

What do we mean by offshore?

Offshore companies are not illegal, but as seen through the Pandora Papers, they can be used to hide wealth from tax collectors and other regulators. There are several legitimate reasons as to why people hold money in different countries. However, loopholes in the law allow people to avoid paying full taxes by holding their money internationally. The Pandora Papers reveal complex networks of companies that are set up across borders, often resulting in hidden ownership of money and assets.  

These offshore territories are where: 

• it’s easy to set up companies 
• there are laws that make it difficult to identify owners of companies 
• there is low or no corporation tax 

How can DX help?

The existence of the Pandora Papers and their reveal has highlighted the global problem of financial crimes. The findings by the ICIJ emphasise how deeply secretive finance has infiltrated into global politics. Now, more than ever, we need to tighten the regulations globally to mitigate the threat of money laundering and financial crimes. Firms all over the world could find it difficult to keep up with regulatory demands.

Anti-money laundering software programmes, such as DX Compliance solutions, use the most effective technology to reduce the risk of financial crimes. Effective transaction monitoring, customer due diligence and other regulations can help to mitigate the kind of financial crime like the ones highlighted by the Pandora Papers.

Read more about the revelations of the Pandora Papers in this BBC article.

Find out more about the leading investigations carried out by the ICIJ here.