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Trouble in paradise: ICIJ releases leaked financial documents

Eighteen months ago we had the Panama Papers; now we have the upgraded version for 2017, dubbed the Paradise Papers by the International Consortium of Investigative Journalists (ICIJ), the organisation that has analysed the contents of 13.4 million leaked documents (compared to 11.5 million leaked in the Panama Papers). 

The ICIJ broke the story yesterday of its global investigation into the offshore activities of some of the world’s most powerful people and companies.

The files, obtained by Süddeutsche Zeitung (as were the Panama Papers), related to offshore service providers and company registries in some of the world’s most secretive countries. In particular, the documents include nearly 7 million loan agreements, financial statements, emails, trust deeds and other paperwork spanning nearly 50 years from a leading offshore law firm called Appleby, with offices in Bermuda, and Singapore-based Asiaciti Trust.

The files are said to contain information on the financial dealings of celebrities, politicians and billionaires, as well as documents on corporate transactions and payment ledgers for corporate registries that don't publicly list names of company shareholders or directors. The ICIJ states: “As a whole, the Paradise Papers files expose offshore holdings of political leaders and their financiers as well as household-name companies that slash taxes through transactions conducted in secret.”

The investigation team of more than 380 journalists didn't just analyse the leaked files. It also involved obtaining court records, financial disclosures and freedom of information requests, as well as hundreds of interviews with tax experts, policymakers and industry insiders.

Key findings

The ICIJ says some of the key findings of its investigation so far include:

  • reveals offshore interests and activities of more than 120 politicians and world leaders, including Queen Elizabeth II, and 13 advisers, major donors and members of US President Donald Trump
  • exposes the tax engineering of more than 100 multinational corporations, including Apple, Nike and Botox-maker Allergan
  • reveals tax haven shopping sprees by multinational companies in Africa and Asia that use shell companies in Mauritius and Singapore to reduce taxes
  • shines a light on secretive deals and hidden companies connected to Glencore, the world’s largest commodity trader, and provides detailed accounts of the company’s negotiations in the Democratic Republic of the Congo for valuable mineral resources
  • provides details of how owners of jets and yachts, including royalty and sports stars, used Isle of Man tax-avoidance structures

How will the Paradise Papers affect companies?

The answer to this question will depend on whether the company is named in the files – and it's known that more than 100 multinational corporations have been named in relation to tax engineering and secretive deals. While the use of offshore tax havens isn't illegal, putting money in an account based in a haven can facilitate opacity and secrecy for financial transactions and in some cases offshore accounts can be used to avoid taxes, conceal transactions and launder money.

Apart from the fallout for those directly involved in these leaked files, the attention given to the use of offshore accounts to avoid tax payments could add momentum to the OECD's base-erosion and profit-shifting (BEPS) initiative and the EU's own proposed tax transparency measures, which would require companies to disclose where their profits are generated and where they pay their taxes. 

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Control & Compliance in Operations

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