Financial Secrets and Lies

LONDON – In early April, a major exposé of financial secrecy sent shock waves around the world. After devoting more than a year to examining 2.5 million leaked files, the International Consortium of Investigative Journalists (ICIJ), in partnership with several global news outlets, behind more than 120,000 anonymous offshore companies and trusts.

Among the luminaries hiding their identities behind shell companies registered in the British Virgin Islands (BVI), the Cook Islands, and other offshore jurisdictions were Georgia’s billionaire prime minister, Bidzina Ivanishvili; the late Gunter Sachs, a well-known German billionaire and one of Brigitte Bardot’s former husbands; Jean-Jacques Augier, the treasurer of French President François Hollande’s election campaign; and Imee Marcos, a Filipino politician and daughter of the country’s former dictator, Ferdinand Marcos. A Venezuelan general, international arms dealers, and several Russian corporate executives also made the list.

The ICIJ investigation – which details cash transfers, incorporation dates, and links between companies and well-known individuals – demonstrates the massive scale of the offshore industry. It not only highlights the prevalence of financial secrecy worldwide, but also shows how hidden company ownership facilitates tax evasion, money laundering, corruption, and other crime.

Over many years spent investigating these issues, Global Witness has discovered that the ability to hide money offshore depends on two factors: banks that accept dirty money, and companies that help the wealthy, well-connected, and corrupt to conceal their identities. The ICIJ report proves definitively that neither is difficult to find.

In of 200 cases of grand corruption, the World Bank found that more than 70% involved shell companies. Anonymously owned BVI-registered companies contributed to the introduction of horsemeat into Europe’s food chain earlier this year. And the Cypriot service provider linked to the food scandal provided nominee services for the convicted arms trafficker Viktor Bout, who profited from some of Africa’s bloodiest wars, prior to his arrest in 2008.

Furthermore, Global Witness has exposed secret transactions in the Democratic Republic of the Congo, in which lucrative mining assets were sold off to shell companies linked to a friend of President Joseph Kabila at prices well below market value. The companies then sold the assets to major international investors for huge profits, depriving the DRC’s citizens of many hundreds of millions of dollars in revenue.

Similarly, during Global Witness’s investigation in Sarawak, Malaysia, members of the ruling family and their lawyers described the mechanisms they use to evade taxes; for example, Singapore’s secrecy laws enable them to conceal their identities when selling off vast chunks of disputed land. Here, again, financial secrecy directly impedes development and equitable growth.

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