According to Greek mythology Pandora was sent to the earth by Zeus in possession of a closed jar that, unbeknown to her, contained a host of miseries and evil. Overcome with curiosity, she opened the jar, releasing badness across the earth.
This name for the latest revelation from the International Consortium of Investigative Journalists (ICIJ) was carefully chosen, reflecting the destructive nature of the facilities provided by 14 corporate service providers (CSPs) that have an impact across the globe. This follows similar disclosures by the ICIJ in 2016 (the Panama Papers) and 2017 (the Paradise Papers). The same theme was picked up in a leak of data from the US FIU, styled as the FINCEN Files.
2.9 tera bytes of data within 11.9 million documents contain sensitive financial and legal information from 14 corporate service providers (CSPs). Over the last 12 months, 600 journalists have investigated the material, uncovering details of how wealthy corporations and individuals have used offshore arrangements to exploit tax loopholes and protect $ trillions from tax exposure. The same arrangements are also attractive to organised crime and corrupt politicians as they launder the proceeds of their crimes. The papers have shone a light on many fascinating cases including:
Setting up or benefitting from offshore entities is easier and more accessible than it ever has been. The practice is not itself illegal and, in some cases, people will have legitimate reasons such as to create security for themselves or their family. But the apparent secrecy offered by jurisdictions known as offshore tax havens has at times proven attractive to tax evaders and professional criminals, some of whom are exposed in the files.
The leaked documents provide a window into this world and further our understanding of how and why these companies might be used. The structures provide a shelter for the ultimate beneficial owners and undoubtedly make it harder for citizens to hold power to account. They can also be used to launder dirty money. Complex webs of opaque business structures, usually with the intention of secrecy, can offer opportunities to channel money, which may be the proceeds of crime and corruption, through offshore companies that are part of the structures. The files contain emails, memos, incorporation records, share certificates, compliance reports and complex diagrams, showing vast, complex, corporate structures, which has enabled investigators to finally identify the true owners of opaque shell companies for the first time.
Recent years have seen an intensification of efforts to close the loopholes created by offshore corporate and financial arrangements.
These developments reflect increased commitment to tackle the problem, but many argue that they don’t go far enough. Transparency International have longed campaigned on this issue and in August 2021 published five recommendations to fix the problem.
The legal and practical issues concerning transparency and beneficial ownership continue to evolve. They are complex and connect to wider AML and anti-corruption requirements. It is vital that individuals working in regulated business understand them to ensure they are compliant with the law, and take all appropriate steps to prevent misuse. ICA designs and delivers training in these key areas in the context of the Advanced Certificate in CDD, Advanced Certificate in AML and Diploma in AML courses.
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