More than two thirds of the companies named in a massive new offshore data leak analysed by the International Consortium of Investigative Journalists were incorporated through the Virgin Islands, the ICIJ stated when rolling out its extensive coverage of the leak over the weekend.
The “Pandora Papers” — consisting of 11.9 million confidential files that name hundreds of high-level politicians, business leaders and other famous figures — hit the media on Sunday afternoon, resulting in headlines across the globe.
For the Virgin Islands, the leak is the latest and largest in a series of similar leaks involving the jurisdiction in recent years, and it is expected to amplify global calls for more transparency and speedier implementation of the public company register the VI government has promised to establish in 2023.
“It seems clear here that one of the aims of some of the ICIJ journalists right now is heavily aligned with the aims of transparency campaigners generally, like Oxfam, Global Witness and The Guardian newspaper,” VI asset-recovery lawyer Martin Kenney told the
Beacon. “And that aim is to encourage regulators and policymakers in places like the UK to compel smaller territories like ours to have, as soon as possible, open [beneficial ownership] registers.”
Media coverage
The news coverage resulting from the leak — which was a collaboration among more than 600 journalists around the world — ranged widely, but VI companies were often front and centre.
In one of the more prominent stories, the ICIJ alleged that the King of Jordan used VI structures to secretly buy millions of dollars’ worth of properties in central London. Another story alleged that the president of Azerbaijan and his associates used VI companies in a way that shielded his property transactions from public view, at one point registering a building in the United Kingdom to his then-11-year-old son.
Other UK property transactions also loomed large in the reporting as well, with the BBC alleging that more than 1,500 UK properties were bought by clients using offshore firms.
Some of the buyers, according to the BBC, have been accused of corruption.
The leak also exposed information about companies linked to other famous people, most of whom are not accused of any wrongdoing, including former UK Prime Minister Tony Blair, German supermodel Claudia Schiffer, and Colombian pop singer Shakira.
The files name several jurisdictions across the globe, including Switzerland, the Cayman Islands, the Bahamas, and South Dakota in the United States. But out of the 14 financial services firms whose files formed the basis of the leaks, the two most prominent — Trident Trust
Group and Alemán, Cordero, Galindo & Lee — have offices in the VI.
The source of the leak has not been identified, and the legal implications for the firms whose data was compromised is not yet clear. The VI passed a Data Protection Act this year, but has yet to name a regulator.
The VI government, meanwhile, has remained mum on the leak, and the Financial Services Commission and the Premier’s Office did not immediately respond to requests for comment. BVI Finance CEO Elise Donovan, however, told the Beacon, “We remain confident not only of the high-quality services that BVI firms provide, but also of the strength and efficacy of the BVI’s regulations. Together, these play a vital role in helping organisations to operate efficiently, generating growth and jobs around the world.”
For the VI, the leak is the latest in a string of blows to the territory’s financial services industry, which brings in more than half of government revenue each year. The ICIJ’s 2016 Panama Papers leak, for instance, included millions of documents about offshore companies set up by Panamanian law firm Mossack Fonseca, which was later forced to close its offices here and abroad.
However, this week’s investigation involved more than three times as many public figures as the Panama Papers, according to the ICIJ. The
organisation said its analysis identified 956 companies linked to 336 politicians, as well many other companies linked to hundreds of other
public figures.
“The findings by ICIJ and its media partners spotlight how deeply secretive finance has infiltrated global politics — and offer insights into why governments and global organisations have made little headway in ending offshore financial abuses,” the organisation wrote on its website.
However, the ICIJ also said it’s not possible to know how much of the world’s $1.3 trillion in wealth it says is held offshore is linked to tax evasion or other crimes. Owning an offshore company is not a
crime, the organisation noted, and those named in the leak who responded to the ICIJ’s requests for comment denied any wrongdoing.
Though the ICIJ did not hint at the source of the leak, Mr. Kenney said the Pandora Papers differ from previous leaks in the number of firms affected. In the previous leaks, data typically came from just one firm at a time. This time, the leak includes data linked to 14 firms.
“We’re being told it happened concurrently,” he said. “There were a lot of resources poured into this by someone. Now, the only person[s] with
those resources to infiltrate into 14 systems are large, wellfunded government intelligence agencies like the [US National Security Agency]. Or other foreign governments agencies, or one or more high-net-worth individuals with a lot of resources have a political
agenda.”
The ICIJ said a “significant proportion” of the beneficial ownership information in the Pandora Papers is in the form of “reports generated by providers” for the VI’s Beneficial Ownership Secure Search System, which was established after the Panama Papers investigation in 2016.
But Ryan Geluk, managing director of BDO Ltd — the company government paid at least $745,000 to establish BOSSs — told the Beacon the “system has not been compromised and has not been a source of the Pandora Papers leak.”
BOSS System
The VI requires registered agents to collect and verify accurate information on the owners of companies they incorporate, and provide it to the BOSSs, which in turn must transmit it to law enforcement
abroad on request.
This information is not available to the public, however, and the new leak could add fuel to transparency advocates’ past arguments that the BOSSs doesn’t go far enough.
The UK has also adopted the same position: In recent years, it has pressured overseas territories to establish public registers no later than 2023.
The VI government, after long refusing to enact such a register before they become a global standard, appeared to soften its stance last year in a statement from Premier Andrew Fahie.
However, Mr. Kenney emphasised that despite this week’s revelations, BOSSs is still better verified than the information collected by many other countries’ corporate registries.
“The [anti-corruption] campaigners and the journalists at the ICIJ seem to be aligned,” he said. “They appreciate that BOSSs is being used by the BVI government, and BVI Finance and others, to show that we are serious about compliance and fighting money laundering. So anytime there’s an opportunity to attack the end result performance of BOSSs,
campaigners and the journalists they are aligned with are happy
to do so. So some of the leaked material that we have seen indicates, of course, that a system like BOSSs is not perfect, because some human beings, a minority, will lie or mislead.”
Dr. Dominic Thomas-James, a financial services expert at Fitzwilliam College, Cambridge, said he too expects the leak to intensify calls for a public register.
“While it is too early to ascertain the full impact and extent to which BVI’s financial centre is implicated, what is certain is that this latest data breach will intensify international calls for the implementation of public beneficial ownership registers — something BVI has already committed to,” he said.
Mr. Kenney added that despite the VI’s agreement, he also expects “calls to blacklist places like the BVI” in the near future.
“Some politicians, with pious outrage, like [UK Parliamentarian Dame] Margaret Hodge, will call … to force [the VI] to actually have an open register tomorrow,” he added.
According to the ICIJ, most of the leaked documents were associated with the firms Alemán, Cordero, Galindo & Lee and Trident Trust Group, which both have offices in the VI. Alcogal VI, a branch of the Panamanian law firm, was connected to some 2.19 million files and served 161 of the politicians identified in the papers — more than half, according to ICIJ.
The ICIJ also claimed that more than half of the companies identified in the Pandora Papers were linked to Alcogal.
The firm had the largest proportion of Latin American clients named in the papers, and a large segment of Russian clients, the ICIJ said.
However, the largest number of files — 3.76 million — were
associated with Trident Trust branches worldwide. The company also served 97 of the identified politicians, the ICIJ stated. Trident (BVI) Limited describes itself on its website as one of the “oldest and largest” trust companies in the VI, and says it employs more than 90 staff.
Some of the reporting on the leaks takes a close look at the ways in which financial services firms have worked to conceal their clients’ identities. For instance, several news stories allege that Jordan’s King
Abdullah II used VI-registered companies to secretly buy three adjacent properties in London for $68 million in 2014, 2015 and 2017 in order to develop them. Alcogal and a Swiss adviser for the king allegedly “worked to conceal the monarch’s identity from the public,” referring to the monarch by pseudonyms like the “final beneficiary” and “you know
who,” according to an ICIJ-affiliated consortium called the Organised Crime and Corruption Reporting Project.
Correspondence included in the Pandora Papers showed that in 2017, Alcogal and the Swiss adviser also discussed the possibility of working around the VI’s BOSSs Act by disclosing a holding company rather than the king as true owner to local authorities, the OCCRP reported. The OCCRP, however, said it was unclear whether the company ultimately went through with the potential plan.
The king’s attorneys reportedly told the ICIJ that their client’s companies comply with “all relevant legal and financial obligations.”
Additionally, Alcogal reportedly told ICIJ that Panamanian law does not require it to report “politically-exposed people,” and that it conducts
enhanced background checks on all such “PEPs.”
The OCCRP also claimed that some of the 14 firms involved in the leak have continued to do business with clients who had been accused of
wrongdoing.
It also alleged that Trident helped the family and business associates of Azerbaijani President Ilham Aliyev set up 84 VI companies, including some that allegedly received money from the “Russian and Troika Laundromats,” two “multi-billion-dollar money laundering schemes”
first revealed by OCCRP, the organisation reported.
“The companies were also used to secretly invest in businesses back home in Azerbaijan,” according to the OCCRP.
Their ownerships and directorships were shuffled among the same small group of people, often on the same days, according to the organisation, which added that the network controlled properties worth $694 million in some of London’s most exclusive neighbourhoods.
It also reported that a portion of real estate in Mayfair belonged to Mallnick Holdings S.A, which in 2009 was registered in the name of Mr.
Aliyev’s then-11-year-old son.
The OCCRP said it contacted Mr. Aliyev and four of his children, who did not respond.
Trident reportedly declined to discuss specific cases with OCCRP reporters, but told reporters that each of Trident’s corporate and trust services businesses is “regulated in the jurisdiction in which it operates and is fully committed to compliance with all applicable regulations.”
The company added, “Trident routinely cooperates with any competent authority which requests information.” The international and VI
branches of Trident and Alcogal did not immediately respond to the Beacon.