Introductory Breakdown to the Pandora Papers

What are the Pandora Papers? The Pandora Papers is the largest investigation in journalism history, led by the International Consortium of Investigative Journalists (ICIJ), with the leak of around 12 million files that reveal the abuse of the global financial system by individuals, businesses and Politically Exposed Persons (PEPs). Released on Sunday 3rd October 2021 the Pandora Papers expose issues with: –

  • Tax avoidance;
  • Hiding wealth, and
  • Money Laundering.

The papers are a leak of previously privately held data that exposes tax haven secrecy, shining a light on the hidden world of offshore finance bringing it to the fore, which will allow an informed discussion by global citizens and Non-Governmental Organisations (NGO’s) concerned by the leaks contents. The ICIJ has exposed this type of financial information previously with the Panama Papers in 2016 and the Paradise Papers in 2017. It may not be a surprise of abuse, but the information provides evidence of those who are playing the system to their financial benefit.

Breaking down the Pandora Papers: What’s the Issue?

The use of offshore finance loopholes by some wealthy individuals is the major issue highlighted within the Pandora Papers. Offshore finance is a process of setting up companies within nations with a more favourable regulatory regime, whilst conducting the business within a different country. An example of this would be setting up a business within the British Virgin Islands but then conducting all the business from London. This allows the business to benefit from the tax benefits of being in the British Virgin Islands (a low tax jurisdiction), without needing to physically move to the country.

The offshore finance loophole exposed by the Pandora Papers has provided information on the many individuals and companies setting up businesses within these favourable countries, mainly for the purpose of tax. Whether it is for tax minimisation (legal), or tax evasion (illegal) is central to the discussion.  The offshore loophole is compounded by the fact that the identities of the beneficiaries of these companies or complex financial structures are protected, providing anonymity, and allowing for the creation of shell companies to protect individuals’ wealth from home nation taxation that they would otherwise be required to pay. Also, criminals are able to use the same lack of transparency to pass their ‘dirty’ money through offshore entities and funnel it back into the financial system as ‘legitimate’ money.

Pandora Papers – Key Statistics

Examples of Cases Mentioned

Individual(s) Involved Alleged Act
Tony and Cherie Blair Tony Blair became owner of a London Office building worth nearly £6.5 million in 2017 through buying a British Virgin Islands company that already held the property. Buying the ‘company’ as opposed to the property, the Blairs saved an estimated £312,000 in stamp duty.
King Abdullah II of Jordan Between 1995 and 2017 around 3 dozen shell companies were set up by King Abdullah, allowing the purchase of 14 homes worth $106 million in the USA and UK. These shell companies were set up in locations like the British Virgin Islands which are tax havens. This all occurred in a period of time in which Jordan was struggling financially and the report coincides with Jordan’s cry for international aid due to an ongoing recession.
Andrej Babis-Czech Prime Minister Babis put $22 million into a shell company in 2009 which was used to buy a Chateau property in Mougins, France. This was not disclosed in Babis’ required asset declaration according to Investigace.cz. A real estate group owned indirectly by Babis bought the shell company owning the chateau in 2018.

The Reaction to the Pandora Papers

The report has been hot news since its release on 4th October 2021. Many individuals named within the report have publicly denied wrongdoing or stated that it was simply a misunderstanding.

Governments globally have publicly committed to investigate the data shown within the Pandora Papers. There have also been calls from the wider public and NGOs to shut the loopholes exposed by the investigation and strengthen money laundering regulation to prevent loopholes from being used in the future.

Professional bodies such as Transparency International have called for the need for better transparency around ownership of companies with calls for legislation to be put in place before Christmas, this would remove ‘the mask’ of property owners using offshore companies to get around tax laws, closing the loophole whilst strengthening Anti-Money Laundering protection. There are also calls for tax reforms to bring the current people exploiting the broken system back into line, closing as many loopholes as possible in the process. ActionAid International, an NGO who aim to work against poverty and injustice worldwide, have also called for the establishment of public registers of beneficial ownership, in all jurisdictions, accounts and entities to stop individuals setting up shell companies to hide wealth or integrate dirty monies into the financial system.