From Panama to Paradise to Pandora: Another ICIJ Leak Published

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GUEST BLOGGER

Mason Wilder, CFE
ACFE Senior Research Specialist

The International Consortium of Investigative Journalists (ICIJ) published another investigative report — the Pandora Papers — based on leaked documents that illustrate the complex international financial dealings of politicians, celebrities and other wealthy people who use various means to avoid taxes.

The revelations of the Pandora Papers are not substantially different than those of other alliterative ICIJ leak investigations such as the Panama Papers, Paradise Papers, Luanda Leaks or Luxembourg Leaks. The Pandora Papers show how extraordinarily wealthy people move money through complex international networks of holding companies, special accounts and secrecy jurisdictions to minimize their tax obligations and disguise their ownership of assets as well as large sums of money.

How are the Pandora Papers different?

There are a few distinguishing characteristics of the Pandora Papers compared to prior investigations. First, the size of the leak is larger than any of those the ICIJ previously reported on, at 2.94 terabytes of information in the form of documents, images, emails, spreadsheets and more. Second, the Pandora Papers leak involved information from 14 firms that facilitate complex financial arrangements, instead of a single firm in the case of the Panama Papers leaks or the two firms from which the Paradise Papers originated. And third, the number of current and former country leaders featured is substantially higher in the Pandora Papers; nearly three times more than any previous document leak. Finally, while prior leaks focused on well-known secrecy jurisdictions and tax havens such as the Bahamas, the Cayman Islands and the British Virgin Islands, the Pandora Papers show an increase in foreign assets pouring into U.S. states that offer the ability to easily hide beneficial ownership of corporations or flexible terms for trust accounts that shield wealth from creditors and investigators.

Highlights from the report

Among the current and former country leaders whose financial dealings were included in the leak are King Abdullah II of Jordan, billionaire prime minister Andrej Babis of the Czech Republic, Lebanon’s current prime minister, Najib Mikati, and his predecessor Hassan Diab, former U.K. prime minister Tony Blair, Kenyan President Uhuru Kenyatta and almost 30 more.

Abdullah II and Mikati in particular will likely face international criticism for spending lavishly while the countries over which they preside receive foreign financial aid to avoid humanitarian crises or destabilization. According to the ICIJ’s reporting, Abdullah II bought three beachfront mansions overlooking the Pacific Ocean in Malibu, California, worth $68 million. He also bought 11 other homes worth more than $38 million in the U.S. and U.K. with the help of an English accountant in Switzerland and lawyers in the British Virgin Islands, who set up at least 36 shell companies for the monarch.

Babis, who rose to power on a platform of cracking down on corruption and tax evasion, funneled $22 million through shell companies to buy a chateau in southern France while not disclosing the shell companies or the chateau in asset disclosures related to his role as a public official.

Blair and his wife reportedly avoided more than $400,000 in tax obligations related to the acquisition of a Victorian building worth just under $9 million by purchasing the British Virgin Islands company that held the property from the family of Bahrain’s industry and tourism minister, although Cherie Blair claimed her husband was not involved in the transaction.

Fallout just beginning

Within a day of the initial Pandora Papers stories’ publication, authorities in Pakistan, Mexico, Spain, Brazil, Sri Lanka, Australia and Panama promised to investigate the reports. As the revelations from the massive amount of documents continue trickling out, other countries will likely follow suit, and face calls to reform regulatory landscapes that allow the tax avoidance and financial secrecy illustrated in the report.

Without any meaningful response or significant changes to these exploitable loopholes we’ll probably be reading about the Pandemonium Papers or Delaware Docs in a few years.

SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners