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Welcome to Tra i Leoni, Andrew Crossley!

Pandora Papers – The new ‘Offshore’

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Reading time: 5 minutes

“The Pandora Papers revealed plenty of dirt on politicians, celebrities and billionaires, and yet the role of governments remains much undiscussed. While learning about the Pandora Papers more generally, what can be said about the often-overlooked role large western governments play? Should so much focus be on the individual villains if they are irrelevant to the search for solutions?”  

For the last couple weeks, every kiosk in Milan has been plastered with images of Roberto Mancini and ex-camorra boss Raffaele Amato. Both men who recently had their offshore banking schemes exposed by major publications. Yet many readers overlook the more subtle villains of the scandal; the large western countries profiting from their own lack of action.  

‘Offshore banking’ enables people to circulate money in a way that is untraceable to government organizations. Frequently this anonymity is used to hide assets obtained illegally, obtain tax breaks that cheat governments out of tax revenue and render proof of corruption and cronyism undetectable.  

Over the years, it has been the goal of many investigators to uncover the hidden workings of these offshore money markets. Past successes of these efforts include the Offshore Leaks in 2013, Panama Papers in 2016, and Paradise Papers in 2017. The Pandora Papers are the most recent and largest leak of private financial information evidencing malpractice since the Offshore Leaks in 2013. They have laid bare the shadowy dealings of many of the world’s richest and most powerful figures. 

The Pandora Papers contain 11.9 million confidential files were combed through by a group of journalists from the International Consortium of Investigative Journalists (ICIJ) and allies such as “The Guardian”, “BBC Panorama”, “Le Monde” and the “Washington Post”. The files included 6.4M documents such as trust contracts and risk assessment results, 1.2M private emails, 2.9M images of information such as passport scans or diagrams of trust schemes and 1.4M other files including audio, video, and spreadsheet files. These documents reveal a vast network of underground financial dealings from 35 past and present world leaders, 300 public officials and 130 billionaires. Many of these men and women use shell companies and incognito bank accounts to hide their luxury assets, which range from opulent properties and yachts to Picasso paintings and Cambodian antiquities. 

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Some of the most controversial figures who have been revealed to have hidden large sums include: the Czech Prime Minister Andrej Babis, the King of Jordan Abdullah II and Najib Mikati, the current Lebanese Prime Minister. Andrej Babis reportedly used a long and convoluted chain of banks to purchase a €15M house in the south of France, which he claims was a figment of his rivals’ imagination. The King of Jordan has not denied an uncovered property portfolio worth over €86M, with properties in Malibu and Belgravia. Najib Mikati was revealed to be the owner of a Panama based firm worth €7M, and his son, Maher Mikati, was listed as director of two firms in the British Virgin Islands. This seems to directly contrast with his grandstanding as the savior of Lebanese democracy and a politician willing to combat rampant corruption.  

‘Offshore banking’ originated at a time when colonial islands and foreign, financially underdeveloped shores were the best places to hide bags of cash. Many of these locations are still home to banks offering similar financial freedom and privacy today. Two thirds of the shell companies mentioned in the Pandora Papers were from the British Virgin Isles (BVI); a country that the EU still refuses to blacklist as a tax haven. However, contrary to public perception and many journalistic hit-pieces, the most concerning participants in the lack of financial transparency are the large nations. The United Kingdom and the United States, who so far outright refuse any and all proposals for financial policy change, are by far the most frightening. The active participation of these countries in the pursuit of financial transparency and effective anti-corruption legislation are the best chance for the success of the operations. Instead by allowing the practices the hope of ever controlling it becomes significantly less attainable. 

The UK was shown to be a huge enabler of the tax evasion practices due to its willingness to sell to foreign investors without any thorough investigation of the investor’s identity. In fact, the UK even lacks a Public Register for foreign investors. The Pandora Papers proved Azerbaijan’s ruling family to be the owners of London property that was sold to the Queens Crown Estate through a BVI firm for over €78M. As long as the UK remains ambivalent to the extent to which it is used by foreigners for tax evasion and financial dishonesty, it will be hard for foreign countries and governments to enforce financial transparency. 

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The US also had a worryingly large presence within the Pandora Papers, though not in the way most expected. Many of the world’s largest billionaires have American based companies, and yet names like Bill Gates, Warren Buffet and Jeff Bezos were omitted from any reports. American politicians were also mostly exempt, as not even Donald J. Trump, who was featured heavily in the previously leaked Panama Papers, had any more dirt come to the surface. The lack of US individuals present on a list and the heavy focus on members of Putin’s tight circle, was even reason enough for Putin to decry the Papers as the product of US intelligence agencies, a claim which admittedly struggles to hold water due to the frequent mentions of American states and allies throughout the Pandora Papers. In fact, one of the places most frequently utilized as a tax haven is South Dakota.  

South Dakota, the 5th least populated State in the US, has over €260M stashed in various bank accounts. A strange figure for a state heavily reliant on its agricultural sector. In fact, a large majority of the money has been deposited by individuals that live out of state, and often, outside of US territory. Despite these issues at home, the US is still significantly more preoccupied with forcing foreign countries to divulge financial information on overseas Americans than domestic financial reform. Getting the United States to actively participate in the divulgence of financial information regarding the movement of money through their own trusts, companies, and bank accounts has so far proved near impossible. America’s role in the global market is huge, and their lack of willingness and cooperation in supporting financial transparency is a massive blow to international efforts. Efforts that would be essential to effectively curtail global corruption. 

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Recent discussions of levying a minimum 15% tax on multinational corporations in every country are already a pace in the right direction. A minimum tax would keep multinational corporations from being able to pit countries against each other and profit dishonestly from foreign tax rates. Tax havens such as Bermuda, the Cayman Islands and the aforementioned British Virgin Isles have all signed. If the remaining holdout nations – including but not limited to Kenya, Nigeria, Ireland, Hungary as well as Peru, Barbados, and Saint Vincent – all agree on terms, it will be a powerful step in the right direction.  

As Bocconi students, many of us will have futures as either regulators or members of the private sector, fields greatly affected by decisions the governments of tomorrow will come to regarding financial transparency and legislation. Many of our futures will play a direct hand in the field, ergo determining the long-term stability of democracies and the promotion of financial honesty. Discoveries like the Pandora Papers are essential to our individual diagnoses of the political world surrounding us; diagnoses that could be vital in shaping a healthier future. Our job today is to listen to the people trying to warn us of the grave faults in the current systems, and meditate on our future goals and decisions in accordance with that knowledge. 

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