Offshore havens and hidden riches of world leaders and billionaires exposed in unprecedented leak
ICIJ journalists
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The Pandora Papers reveal the inner workings of a shadow economy that benefits the wealthy and well-connected at the expense of everyone else.
Photo: Tayma Ben Ahmed, Inkyfada/ICIJ
In popular imagination, the offshore system is often seen as a far-flung cluster of palm-shaded islands. The Pandora Papers show that the offshore money machine operates in every corner of the planet, including the world’s largest democracies. The key players in the system include elite institutions – multinational banks, law firms and accounting practices – headquartered in the U.S. and Europe.
Millions of leaked documents and the biggest journalism partnership in history have uncovered financial secrets of 35 current and former world leaders, more than 330 politicians and public officials in 91 countries and territories, and a global lineup of fugitives, con artists and murderers. The leaked records reveal that many of the power players who could help bring an end to the offshore system instead benefit from it – stashing assets in covert companies and trusts while their governments do little to slow a global stream of illicit money that enriches criminals and impoverishes nations.
The secret records, known as the Pandora Papers, come from 14 offshore services firms from around the world that set up shell companies and other offshore nooks for clients often seeking to keep their financial activities in the shadows. Pandora Papers include more than 11.9 million confidential files include information about the dealings of nearly three times as many current and former country leaders as any previous leak of documents from offshore havens.
An ICIJ analysis of the secret documents identified 956 companies in offshore havens tied to 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others. More than two-thirds of those companies were set up in the British Virgin Islands, a jurisdiction long known as a key cog in the offshore system.
‘You know who’
At least $11.3 trillion is held “offshore,” according to a 2020 study by the Paris-based Organization for Economic Cooperation and Development. Because of the complexity and secrecy of the offshore system, it’s not possible to know how much of that wealth is tied to tax evasion and other crimes and how much of it involves funds that come from legitimate sources and have been reported to proper authorities.
In most countries, it’s not illegal to have assets offshore or to use shell companies to do business across national borders. But these affairs often amount to shifting profits from high-tax countries, where they are earned, to companies that exist only on paper in low-tax jurisdictions. Using offshore shelters is especially controversial for political figures, because they can be used to keep politically unpopular or even illicit activities from public view.
For a few hundred or a few thousand dollars, offshore providers can help clients set up a company whose real owners remain hidden. Or, for perhaps $2,000 to $25,000, they can set up a trust that, in some instances, allows its beneficiaries to control their money while embracing the legal fiction that they don’t control it – a bit of paper-shuffling creativity that helps shield assets from creditors, law enforcement and ex-spouses.
Offshore operatives don’t work in isolation. They partner with other secrecy providers around the globe to create interlocking layers of companies and trusts. The more complex the arrangements, the higher the fees – and the more secrecy and protection clients can expect.
The Pandora Papers show that an English accountant in Switzerland worked with lawyers in the British Virgin Islands to help Jordan’s monarch, King Abdullah II, secretly purchase 14 luxury homes, worth more than $106 million, in the U.S. and the U.K. The advisers helped him set up at least 36 shell companies from 1995 to 2017. In emails, offshore advisers used a code name for the king: “You know who.”
U.K. attorneys for the king said that he is not required to pay taxes under Jordanian law and that he has security and privacy reasons to hold property through offshore companies. They said the king has never misused public funds.
In neighboring Lebanon, where similar questions about wealth and poverty have been playing out, the Pandora Papers show top political and financial figures have also embraced offshore havens. They include the current prime minister, Najib Mikati, and his predecessor, Hassan Diab, as well as Riad Salameh, the governor of Lebanon’s central bank, who is under investigation in France for alleged money laundering.
In 2019 Lebanon’s former minister of state and the chairman of Al Mawarid Bank Marwan Kheireddine scolded former parliamentary colleagues for inaction amid a dire economic crisis. Half the population was living in poverty, struggling to find food as grocers and bakeries closed. “There is tax evasion and the government needs to address that,” Kheireddine said. That same year, the Pandora Papers reveal, Kheireddine signed documents as owner of a BVI company that owns a $2 million yacht.
Al Mawarid Bank was one of many in the country that restricted customers’ U.S. dollar withdrawals to stem economic panic.
Wafaa Abou Hamdan, a 57-year-old widow, is among the regular Lebanese who remain angry at their country’s elites. Because of runaway inflation, her life savings plummeted from the equivalent of $60,000 to less than $5,000, she told Daraj, an ICIJ media partner. “We are still struggling on a daily basis to maintain our living” while “the politicians and the bankers” have “all transferred and invested their money abroad,” she said.
Kheireddine did not respond to requests for comment.
‘Coalition of the corrupt’
Imran Khan was elated when ICIJ’s Panama Papers investigation came out in April 2016. “The leaks are God-sent,” the Pakistani politician and former cricket superstar said. The Panama Papers revealed that the children of Pakistan’s prime minister at the time, Nawaz Sharif, had ties to offshore companies. This gave Khan an opening to hammer Sharif, his political rival, on what Khan described as the “coalition of the corrupt” ravaging Pakistan.
“It is disgusting the way money is plundered in the developing world from people who are already deprived of basic amenities: health, education, justice and employment,” Khan told ICIJ’s partner, The Guardian, in 2016. “This money is put into offshore accounts, or even western countries, western banks. The poor get poorer. Poor countries get poorer, and rich countries get richer. Offshore accounts protect these crooks.
Ultimately, Pakistan’s top court removed Sharif from office as a result of an inquiry sparked by the Panama Papers. Khan swept in to replace him in the next national election.
ICIJ’s latest investigation, the Pandora Papers, brings renewed attention to the use of offshore companies by Pakistani political players. This time, the offshore holdings of people close to Khan are being disclosed, including his finance minister and a top financial backer.
The documents also show that Khan’s water resources minister, Chaudhry Moonis Elahi, contacted Asiaciti, an Singapore-based offshore services provider, in 2016 about setting up a trust to invest the profits from a family land deal that had been financed by what the lender later claimed was an illegal loan. The bank told Pakistani authorities that the loan had been approved due to the influence of Elahi’s father, a former deputy prime minister.
Asiaciti records say that Elahi backed off from putting money into a trust in Singapore after the provider told him it would report the details to Pakistani tax authorities. Elahi did not respond to ICIJ’s requests for comment.
Other political figures have also spoken out against the offshore system while surrounded by appointees and other supporters who have assets stowed offshore. Some who have spoken out have used the system themselves.
Czech Prime Minister Andrej Babis, one of his country’s richest men, rose to power promising to crack down on tax evasion and corruption. In 2011, as he became more involved in politics, Babis told voters that he wanted to create a country “where entrepreneurs will do business and will be happy to pay taxes.”
The leaked records show that, in 2009, Babis injected $22 million into a string of shell companies to buy a sprawling property, known as Chateau Bigaud, in a hilltop village in Mougins, France, near Cannes. Babis has not disclosed the shell companies and the chateau in the asset declarations he’s required to file as a public official, according to documents obtained by ICIJ’s Czech partner, Investigace.cz. In 2018, a real estate conglomerate indirectly owned by Babis quietly bought the Monaco company that owned the chateau.
Babis didn’t respond to requests for comment.
‘Pandora’s box’
In 2016, after Panama Papers came out, street protesters helped topple top leaders in Iceland and Pakistan. The Philippines has joined dozens of countries that now require companies to disclose their real owners. Philippine authorities have recovered roughly $4 billion stolen by Marcos and his circle, using it to buy land for landless farmers and to compensate families of people targeted for murder or “enforced disappearance” by the Marcos regime.
In December 2018, the Bahamas enacted legislation requiring companies and certain trusts to declare their real owners to a government registry. The island nation was under pressure from larger countries, including the U.S., to do more to block tax dodgers and criminals from the financial system. Some Bahamian politicians opposed the move. They complained the register would discourage Latin American clients from doing business in the Caribbean. “The winners of these new double standards are the U.S. states of Delaware, Alaska and South Dakota,” one local attorney said.
Months later, a confidential document indicated that the family of the Dominican Republic’s former Vice President Carlos Morales Troncoso had abandoned the Bahamas as a go-to sanctuary for their wealth. For their new refuge, they chose a place 1,600 miles away: Sioux Falls, South Dakota, where they set up trusts, leaked records show.
Over the past decade, South Dakota, Nevada and more than a dozen other U.S. states have transformed themselves into leaders in the business of peddling financial secrecy. By 2020, 17 of the world’s 20 least-restrictive jurisdictions for trusts were American states, according to a study by Israeli academic Adam Hofri-Winogradow.
Meanwhile, most of the policy and law enforcement efforts of the world’s most powerful nations have stayed focused on “traditional” offshore havens such as the Bahamas, the Caymans and other island paradises. “As a citizen, I’m so sad that my state was the state that opened Pandora’s box,” Susan Wismer, a former lawmaker, told ICIJ.
