Connor Carlin
Staff Writer
At the conclusion of an investigation involving more than 600 reporters across the globe, the world has become aware of the “Pandora Papers,” a collection of about 11.9 million files detailing hundreds of offshore financial trusts owned by some of the wealthiest, most powerful and influential individuals and families. 35 current and former world leaders have been implicated, along with more than 300 other public officials from 91 different countries. The full picture of the findings are still being parsed by journalists and the public, but already the Pandora Papers represent the largest leak of tax haven files since the Panama Papers and Paradise Papers from 2016 and 2017 respectively.
The information within the files is wide-reaching and has led to many revelations about the secret finances of numerous global power players. One that has received particular coverage is the case of King Abdullah II of Jordan. Abdullah II was named in the files as owning 36 offshore shell companies, meaning legally fictitious companies used simply to store taxable wealth overseas, based in the British Virgin Islands and Panama, and reportedly used these shell companies to disguise the purchase of 14 properties in the US and UK totaling $106 million, which includes three Malibu, California mega mansions valued together at $68 million. For context, Jordan is one of the poorest and most foreign aid-dependent nations in the Middle East, and Abdullah II rules it as an aggressive police state, suppressing dissent and journalists ruthlessly. The revelations of the king’s lavish spending can only add to the existing tension between himself and his people.
King Abdullah II is perhaps the most widely covered figure named in the Pandora Papers, but he is far from alone. In the United Kingdom, a top donor to the British Conservative Party, Mohamed Amersi, was found to have helped negotiate a Swedish telecommunications deal which turned out to simply be a $220 million (£162 million) bribe to the daughter of the then President of Uzbekistan. The Legion of Christ, a conservative Catholic order infamous for allegations of child sexual abuse by its founder and clergy, was revealed to have stored almost $300 million in two New Zealand-based trusts, money that was invested in US holding companies which evicted tenants during the Covid-19 pandemic.
Many of the current world leaders named in the papers have either defended their financial transactions or refused to address them, such as Cypriot President Nicos Anastasiades, who has rejected reporters’ questions over allegations he set up a law firm to hide assets of a Russian exile behind fake company owners. For some, the revelations could look particularly bad on their records, including Ukrainian President Volodymyr Zelensky, Czech Prime Minister Andrej Babiš and Kenyan President Uhuru Kenyatta, all of whom were elected on anti-corruption platforms and were named as owning offshore trusts. For others, they would only add to already diminished reputations, such as Chilean President Sebastián Piñera, who was named in the files, but whose authority has already been greatly wounded by ongoing protests against his government’s policies.
Perhaps the biggest surprise to come from the Pandora Papers, however, is the jurisdictions of many of the secret trusts. Historically, locations such as Switzerland, the Bahamas and the Cayman Islands have served as the most prevalent tax havens, but according to the files, they are facing growing competition in a number of US states, and leading the charge is South Dakota. Almost 30 trusts have been identified in the midwestern state as being tied to individuals involved in misconduct overseas, making South Dakota a $367 billion tax haven for the international rich and their families. For an example of this, the former Vice President of the Dominican Republic, Carlos Morales Troncoso, transferred his sheltered wealth from the Bahamas to several South Dakota trusts after the island nation passed legislation requiring companies and certain trusts to enter their real owners into a government registry. Troncoso’s assets included shares in a Dominican sugar company, Central Romana, accused of forcing workers off their property at gunpoint and destroying their homes.
Over the years, South Dakota has deregulated itself to create some of the strongest legal protections for financial trusts, making it one of the least restrictive jurisdictions in the world for such activity. 17 of the 20 least-restrictive jurisdictions for trusts in the world are now located in US states, many following the path laid by South Dakota. This revelation in particular raises questions about the US’s role in the global offshoring scheme.
The US has extraordinary influence over the international banking system. With the dollar being the de facto world currency, almost all international transactions have to go through the New York financial system, which has allowed the US to push banks in other countries to reveal offshore accounts of Americans. However, the US has been fairly resistant when it comes to turning over information about the offshore activities within the United States, only making it easier for wealthy individuals to use its shores to hide away their assets, even if they are ill-gotten.
In response to the Pandora Papers, the Biden Administration has publicly stated their commitment to cracking down on offshoring and corruption. Meanwhile, Representatives Tom Malinowski (D-NJ) and John Curtis (R-UT) have introduced rare bipartisan legislation to combat the practices detailed in the files. Called the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act, the legislation would create new due diligence rules for American middlemen who facilitate the flow of foreign assets into the US. It would effectively close a loop-hole in the 51-year-old Bank Secrecy Act which does not require banks to investigate trust companies, lawyers, investment advisors, accountants, art dealers or public relations firms. If passed, it could serve as a strong signal of the US’s commitment to legitimately crack down on the system of offshoring which has allowed the world’s wealthy and elite to stash their money tax free for so long.
