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Investigators worldwide continue to open ‘Pandora’s Box’ to pursue criminals identified in Pandora Papers two years after ICIJ’s landmark investigation

The Pandora Papers exposed the financial secrets of powerful people in more than 100 countries, leading to a worldwide crackdown on tax dodgers, money launderers and the white-collar professionals who enable them.

By Scilla Alecci

Image: Nelson Almeida/AFP via Getty Images

October 3, 2023

From India to Germany, Peru, the U.K. and beyond, two years after the International Consortium of Investigative Journalists published the Pandora Papers, authorities worldwide continue to investigate, prosecute and legislate against tax evaders, money launderers and the white-collar professionals who service them.

The 2021 Pandora Papers investigation was the largest investigation in journalism history. Led by ICIJ, a cross-border team of more than 600 reporters trawled through a leak of 11.9  million documents from 14 offshore service providers that specialized in setting up shell companies in tax havens and secrecy jurisdictions. The files detailed the financial deals and hidden assets of politicians, celebrities, business people and criminals in more than 100 countries.

Earlier this year, authorities in the German state of Hesse said they had acquired the data from an undisclosed source for a “six figure” amount. A dedicated task force is currently reviewing the documents and coordinating with law enforcement in “several” European countries to identify suspects of tax fraud and other crimes, a finance ministry spokesperson told ICIJ in an email. The spokesperson did not provide further details, citing privacy concerns and “tactical reasons.”

“Investigators [analyzing the leaked data] will come across a lot of evil — like that associated with the mythical Pandora’s Box,” Hessian Finance Minister Michael Boddenberg said in a statement in July, inviting authorities from around the world to join Hessian investigators to probe the data and “stop the tax criminals who harm the public.”

Other agencies, too, have been acting upon Pandora Papers findings by ICIJ and its media partners in 117 countries.

  • In France, the financial prosecutor’s office told Le Monde that the agency had requested international assistance to continue the investigation into the Czech Republic’s former prime minister Andrej Babis and his acquisition of a $22 million luxury villa in Mougins, near Cannes. ICIJ and its partners found that Babis, a billionaire, had used a web of shell companies in offshore jurisdictions to secretly buy the 9.4-acre property and failed to declare ownership of the property as legally required for politicians. Babis, who lost national elections following the revelations, denied any wrongdoing.
  • Peruvian authorities launched an investigation into three members of the Catholic religious group Sodalicio de Vida Cristiana who are suspected of using offshore entities to launder money and hide profits from the authorities, according to local media. Documents in the Pandora Papers trove showed how the trio secretly created shell companies in the British Virgin Islands and Panama to invest in a mining business, ICIJ’s partner Convoca reported. They did not respond to Convoca’s comment requests.
  • Indian financial authorities have seized high-end property and other multimillion-dollar assets belonging to at least five businessmen with offshore shell companies identified in the leaked data, according to information reported on India’s Enforcement Directorate website. One of them is accused of bribing a judge, laundering the proceeds of financial crimes and using an offshore trust and British Virgin Islands companies to hide assets worth more than $77 million.

In the U.K., tax authorities have begun reviewing potential tax evasion cases uncovered by the international team of reporters. In June, HM Revenue and Customs announced it was sending letters to hundreds of U.K. residents named in the leaked data, warning them to “come clean” with details of their overseas holdings, or risk harsh penalties.

“The work of investigative journalists or media coverage in general of potential financial crimes is sometimes decisive for the initiation of preliminary proceedings,” said Anna Pingen, a European criminal law expert and researcher at the Max Planck Institute for the Study of Crime, Security and Law in Freiburg, Germany.

“This has been the case in a number of cases such as the Offshore Leaks, Paradise Papers, Panama Papers, Pandora Papers,” Pingen said, referring to previous ICIJ investigations.

Targeting the enablers

Babis, the Czech politician and businessman, was one of more than 330 public officials whose offshore financial deals were uncovered in the 2.94 terabytes of leaked data. Others included 130 billionaires from 45 countries, art collectors, pop stars, criminals, and Russian businessmen and politicians close to Russia’s President Vladimir Putin.

Behind each client was a financial services provider who administered the paperwork, kept company records up to date, and, in some cases, executed share transfers and other deals on behalf of their clients without asking too many questions.

Last month, an officer with the U.S. Internal Revenue Service told a South Dakota radio station that the agency had identified sanctioned Russian oligarchs who were holding assets in trusts incorporated in the state — an issue flagged in the Pandora Papers. ICIJ revealed how the American state has become a new global hub of financial secrecy, attracting international clients who want to shield their wealth from authorities. The revelations led U.S. legislators to introduce an amendment to the Bank Secrecy Act that would force attorneys, art dealers and trust companies to investigate clients from abroad seeking to move money through the American financial system. The Senate later blocked the bill.

In New York, the state legislature recently passed the so-called LLC Transparency Act that, if signed into law by the governor, would require limited liability companies incorporated to do business in New York to disclose their owners. In an op-ed in the Albany Times Union, Emily Gallagher, an assembly member behind the proposed law, described it as “a blow against slumlords, human traffickers, fentanyl importers, tax cheats, terrorists, political corruption, kleptocrats and Russian oligarchs.”

Even in Switzerland, where a powerful legal and consulting industry has long resisted reforms, the Federal Council is currently discussing the introduction of a new anti-money laundering bill. If approved, the new law would impose due diligence requirements on lawyers, accountants and consultants who set up and administer trusts and shell companies for their clients.

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Pandora Papers documents analyzed by ICIJ showed how prominent Swiss consultancy firms, as well as solo advisers, counted among their clients people who were later convicted or suspected of financial crimes, including an Italian national accused of tax fraud, several people involved in Brazil’s largest corruption scandal, and two brothers convicted in a money laundering case. The proposed law would make white-collar professionals accountable for reporting risks and stepping up oversight of legal entities.

So-called enablers are also under scrutiny by European Union regulators.

In a June resolution titled the “lessons learnt from the Pandora Papers and other revelations,” EU parliamentarians called on member states to scrutinize the role of intermediaries in facilitating tax dodging and sanction evasion. Lawmakers cited ICIJ reporting that showed how “PwC, along with other major accountancy firms, had a central role in assisting Russian oligarchs with their investments in the West through their networks of offshore shell companies.”

Confidential emails and corporate documents included in the Pandora Papers and analyzed by ICIJ showed how PwC worked for Russian steel tycoon Alexei Mordashov for nearly two decades, helping him administer dozens of offshore entities. Some of those companies, the documents revealed, were used to carry out deals with entities linked to Sergei Roldugin, a man believed to be a proxy for Russia’s President Vladimir Putin. Mordashov, who did not respond to ICIJ’s comment request, is currently sanctioned in the EU, the U.S. and other jurisdictions.

A PwC spokesman did not answer ICIJ’s specific questions at the time but said that the work the firm performs for its clients is “in line with all applicable laws, regulations and PwC’s own internal standards.”

The accounting firm is also one of the industry players that expressed veiled criticism of the EU’s proposed new “SAFE” directive, which would prevent accountants from creating complex and non-transparent structures that can be used for tax evasion and aggressive tax planning purposes. After the European Commission launched a public consultation on the proposed directive in July, PwC published a brief claiming that the measures may negatively affect the “businesses and individuals that use entities to cater for a specific personal, societal, investment or business need.”

“Whether proposed legislation that addresses the role of enablers, such as the SAFE Act, will be a game changer in the fight against financial crime will depend on its implementation and Enforcement,” said the European criminal law expert Pingen.

The directive “is only one piece of the puzzle,” Pingen told ICIJ.

In addition to creating new laws that target the enablers, she said, governments should take other measures to prevent financial crimes, including “strengthening international cooperation to share information and coordinate law enforcement efforts.”

Adding to the enforcement challenge, a new report by Europol found that, in Europe, more than 80% of the active criminal networks exploit entirely legal business structures to support and finance their illicit activities.

“Infiltration into the legal system is what makes crime pervasive and destructive,” the report said.

As a result, each year law enforcement manages to recover just a tiny fraction, or about 2%, of the criminal proceeds, according to Europol’s executive director Catherine De Bolle — “a drop in the ocean of the immense illicit — and untaxed — revenues gained by criminal networks,” she said in the report.

The report identified “layers of corporate structures spread across multiple jurisdictions,” including offshore tax havens, as one of the key factors that help criminals hide their illegal funds.

Stunted reforms

In recent years, several secrecy jurisdictions have begun a slow shift towards transparency, following political pressure triggered by the Pandora Papers and other ICIJ investigations into the offshore financial system. Yet, in many cases, reforms remain partial.

The Cayman Islands is one of the latest territories to consider rolling out a transparency bill that would make corporate ownership information available to law enforcement. Last month, Financial Services Minister André Ebanks said in a statement that the bill, if passed by Parliament, will improve Cayman’s reputation as the territory seeks to comply with global rules against money laundering and terrorism financing.

“By enhancing transparency and ensuring access to accurate information, the Cayman Islands solidifies its position as a trusted global financial centre of excellence dedicated to combating financial crimes,” Ebanks said.

However, the proposed legislation, known as the Beneficial Ownership Transparency Bill, does not currently allow the public to access the information. According to the statement, such conditions may change in the future after the Caymans government concludes its discussion with the U.K. over the registry’s potential implications for privacy and data-protection rights.

The concerns are based on a 2022 judgment by the European Court of Justice that struck down a 2018 requirement that EU member states establish and publish databases of company owners — a decision criticized by anti-corruption advocates as a way to roll back corporate transparency.

The Pandora Papers provided further evidence that shell companies incorporated in the territory can be used to transfer millions of dollars of unclear origin without much accountability.

We need rules that tackle all factors which allow people to commit such white-collar crimes, such as weak regulations, low corporate tax compliance and ethics as well as the impunity of shady white-collar professionals.

— Chiara Putaturo, a tax and inequality expert with Oxfam International

The files show that, between 2010 and 2015, Cayman Islands companies were part of a vast offshore empire linked to Suleiman Kerimov, a Russian billionaire associated with a covert group of powerful Russians believed to hold Putin’s vast wealth. A Swiss financier accused by French authorities of acting as Kerimov’s frontman used the entities for multimillion-dollar transfers later flagged by BNY Mellon bank as “suspicious,” ICIJ found. They denied wrongdoing.

After ICIJ’s exposé, in 2022, the U.S. government sanctioned Kerimov and the financier.

It “cannot be the norm” that wealthy individuals and corporations can continue to use the offshore financial system to hide their profits and wealth, said Chiara Putaturo, a tax and inequality expert with Oxfam International.

Regulators need to target both the end users as well as the service providers if any crackdown on offshore finance is to be effective, Putaturo told ICIJ.

“We need rules that tackle all factors which allow people to commit such white-collar crimes, such as weak regulations, low corporate tax compliance and ethics as well as the impunity of shady white-collar professionals,” she said.

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