The ‘Pandora Papers’ reveal some of the world’s most influential politicians, business identities and celebrities have been evading tax in their countries via offshore bank accounts. It’s a huge story – so we’re going to spend two days breaking it down. Today, we’re going to set the scene and help you understand what offshore banking is, and why we care about it. Tomorrow, we’ll explain the key findings from this latest leak.
Who broke this story?
It was a team effort. More than 600 journalists from 150 global news outlets have worked together to analyse over 11.9 million confidential files, leaked from 14 offshore financial services firms. The International Consortium of Investigative Journalists call it “the biggest journalism partnership in history”.
35 current and former world leaders, 330 current politicians, 100 billionaires and a long list of celebrities – including Elton John, Shakira, Claudia Schiffer and Sachin Tendulkar – are all implicated.
What’s offshore banking, and why is it a secret?
Offshore banking is simply holding cash, property or assets in bank accounts in another country. You will often hear the Cayman Islands, Panama, British Virgin Islands and Switzerland mentioned as popular destinations to set up personal or company accounts. There tends to be three core reasons why someone would set up an offshore account – tax minimisation, confidentiality or to escape tough regulation.
Tax: Offshore accounts are attractive because they tend to have no income or corporation taxes, which makes them attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries.
Confidentiality: Offshore accounts might not require as much proof of identity as more regulated accounts, and typically publish very little information publicly about the account holders.
Regulation: It’s hard to seize or freeze accounts in these offshore locations – so many organised crime syndicates or corrupt politicians use the accounts as a way to protect their assets from regulators.
This isn’t the first time documents have leaked from offshore bank systems – you might remember the Panama Papers (2016) and the Paradise Papers (2017).
Is it illegal?
While offshore holdings are not illegal and can even have legitimate security-related purposes, their secretive nature has at times been used to enable criminal activity and money laundering. Ultimately, discovering offshore accounts typically leads authorities to take a closer look at the individual’s finances in case they have something to hide.
