- Investigations, Litigation and Forensics
The Pandora Papers are the latest – and largest – in a series of leaks of confidential financial information over the last ten years. The 11.9m leaked documents come largely from 14 companies purportedly involved in offshore finance and cover nearly 50 years of transactions in some cases. The International Consortium of Investigative Journalists (ICIJ) on 3 October 2021 published the initial findings. According to the ICIJ, the data includes information on around 29,000 beneficial owners, which is twice as many as in the 2016 Panama Papers and more than the 2017 Paradise Papers, and over 330 politicians and senior officials, including 35 current and former national leaders.
Where was the leak from?
The data and information were leaked from 14 companies:
1. Trident Trust Co Ltd, BVI
2. Aleman, Cordero, Galindo & Lee (Alcogal), Panama
3. Asiaciti Trust, 1Singapore
4. Il Shin CPA and Il Shin Corporate Consulting, Hong Kong
5. Alpha Consulting Limited, Seychelles
6. Demetrios A Demetriades LLC, Cyprus
7. CIL Trust International, Belize
8. All About Offshore Ltd, Seychelles
9. Fidelity Corporate Services Ltd, BVI
10. SFM Corporate Services, Switzerland/UAE
11. Overseas Management Co Inc, Panama
12. Glenn D Godfrey and Co LLP, Belize
13. CCS Trust Limited, Belize
14. Commence Overseas Ltd, BVI
What do I do now?
The way that offshore leaks are managed means there are few options available to affected organisations. We suggest the practical step of identifying whether you have a relationship with any of the 14 affected companies. If you do then consider identifying the information and data you have shared with them to understand what might be available in the data leak, and assess the reputational – and possibly legal – risks associated with this information becoming public. You may need to then consider legal and public relations advice. Beyond this, organisations will be partly at the mercy of the news cycle, which will require patient monitoring of new stories and the responses to them.
What do we expect to happen next?
We expect the data to be uploaded to offshore leaks databases maintained by the ICIJ, but this is likely to take time. The teams of journalists working on the Pandora Papers worldwide will be working through the huge database of information and their priority will be stories with political impact. There is no timetable for when data or stories will be published, though affected organisations and individuals are likely to be approached by journalists.
These revelations will pose reputational – and potentially legal – risks to named individuals and entities, many of which will come under scrutiny from tax agencies, regulators, the media and political rivals. Given that they span several decades, the leaks could also add context or new evidence into existing investigations and legal proceedings.
There will likely be calls for increased financial transparency and a crackdown on transactions involving low-tax and low-disclosure jurisdictions. Among the more notable possibilities are in Australia, the UK and the US where there are ongoing reviews of anti-money laundering, counter terrorist financing and corporate disclosure regulations that could receive more political support in the coming months.
Can I see the data?
No, not yet. The ICIJ and its media partners have held closely any information and data associated with the Pandora Papers. The ICIJ holds the data in a data centre that is isolated from other networks. The ICIJ has drip fed the release of data into the public domain in previous leaks, with data and supporting documents published in association with specific stories by the ICIJ and its media partners. We expect a similar approach here. Between now and the data set becoming available, other organisations will build their own databases from the data points in the ICIJ’s stories. This will be an increasingly useful data set for organisations to use in the absence of the ICIJ’s original data.
Data from previous offshore leaks has been available in a format that allows organisations to analyse it. It can be a useful source of information in our proactive due diligence work and in research linked to mapping assets in dispute support cases. The ICIJ’s use of technology applications and tools in its presentation of findings demonstrates how the data can be used for relationship mapping and visualisation.
What has been the international response?
Since the global financial crisis in 2008-09, crackdowns on tax havens and low-tax jurisdictions have reduced some banking secrecy. As was the case with the Paradise and Panama Papers, two previous offshore leaks, the Pandora Papers are prompting further calls for more banking transparency and stronger anti-money-laundering legislation. Notably, however, of the countries where the offshore service companies that are thus far involved in the leaks are based, only Panama is currently on the Financial Action Task Force (FATF) “grey list” of “jurisdictions with strategic deficiencies”.
The disclosures will sustain pressure on the international community to tackle tax avoidance and evasion. The Group of 7 (G7) in June 2021 reached agreement on global taxation rules in an effort to reverse the decline of global corporate tax rates and rise of offshore tax optimisation. The US government has also proposed international tax reforms as part of stalled domestic budget legislation.
Government reactions and potential political implications
At the time of writing, eight countries have pledged investigations and other actions in response to the leak. Beyond these statements, tax authorities in many countries are likely to seek access to the leaks and related data for indications of tax evasion and undisclosed assets. Law enforcement and intelligence agencies are also likely to investigate potential breaches of anti-money laundering (AML) and combatting the financing of terrorism (CFT) laws. The data may also be used to justify sanctions against politicians and businesspeople associated with corruption.
Beyond the impact on specific individuals and entities, there will be longer-term consequences to the Pandora Papers. The extent and severity of these will depend on the significance and political impact of what is ultimately published, though we signpost two possibilities to monitor here:
- The impact on politicians in autoractic countries will be limited. Citizens know that autocratic leaders and people in their networks conceal their business interests. However, the publication of this data will provide additional and easily useable justifications for sanctions by democratic governments against people using these structures to hide their assets.
- The repercussions in more democratic countries are likely to be more politically and operationally significant. Politicians, such as those named thus far in Czechia and The Netherlands, may see their political careers limited. Brands and celebrities may be boycotted by business partners who take a stance on disclosure, transparency and taxation. However, the severity of this will be very specific to individual organisations and individuals.