The world’s second largest data leak brings out the worst in offshore finances. This time its individuals and companies much closer to daily life…

The Paradise Papers are a huge leak of financial documents that shed light on the top end of world’s offshore finance culture. These papers refer to a leak of 13.4m files. About 6.8m relate to a law firm and corporate services provider called ‘Appleby’, that operated in over 10 jurisdictions. The “fiduciary” arm of the business was the subject of a management buyout last year and it is now called Estera.

Paradise papers cover the period from 1950 to 2016.

Further, there are also details from 19 corporate registries maintained by governments in secrecy jurisdictions – Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the Cayman Islands, the Cook Islands, Dominica, Grenada, Labuan, Lebanon, Malta, the Marshall Islands, St Kitts and Nevis, St Lucia, St Vincent, Samoa, Trinidad and Tobago, and Vanuatu.

The papers were acquired by  German newspaper Süddeutsche Zeitung, who also acquired the Panama Papers last year. Süddeutsche Zeitung, then shared the material with the International Consortium of Investigative Journalists (ICIJ), a US-based organisation that coordinated the global collaboration of 96 media partners in the project- 381 journalists from 67 countries have been analysing the data. ICIJ has a project each for Panama Papers and Paradise Papers. Süddeutsche Zeitung has not, and commented that it will not, discuss issues around sourcing.

Voice of London has reached out to Süddeutsche Zeitung and ICIJ both for a comment, at the time of publication.

World’s largest data leaks

Who really are the customers?

Money flows into the world of offshore finances from everywhere. It’s practically very hard to track the people and companies behind it. Among the documents leaked is a database of Appleby customers from the period of 1993 to 2014. It contains names of more than 120,000 people and companies from around the world. However, not all are connected to a company registered offshore. It has been an impossible task, even for 381 journalists, to check whether the customer is just a contact or if they have used Appleby services on a regular basis. But the papers give a good indication of where the demand for Appleby’s services originated- many clients are from the UK, China and Hong-Kong, but the largest number, over 30,000, are from the US.

Companies registered offshore can be used to hold many assets such as property, aircraft, yachts and investments in stocks and shares. The Appleby data records about 25,000 offshore companies, which shows that the most popular jurisdictions for Appleby clients were the British-ruled tax havens of Bermuda and the Cayman Islands, The British Virgin Islands and the Isle of Man

The papers focus on both individuals and companies, united by one common trait- unaccounted money. World’s biggest names feature in the leak- tech companies, politicians, celebrities and lifestyle brands.

What do the documents show?

The data shows that the offshore world is a much bigger and more complicated than most people envisioned, even after Panama Papers. The files have revealed a multitude ways of tax avoidance through Appleby, which could be legal, but in operation have failed checks by regulators.

Some key revelations are:

• The Queen’s royal goof-up

Millions from the Queen’s private estate has been invested in Cayman Islands as a part of undisclosed offshore portfolio. Files show the Queen, through the Duchy of Lancaster, still continues to hold investments into numerous businesses, including the off-licence chain Threshers, and the retailer BrightHouse, criticised for exploiting thousands of poor families and vulnerable people. Although the estate said it has not received any tax advantages from investing offshore, the revelations about the finances are likely to revive campaign groups and MPs who will push for greater scrutiny of royal spending in the UK.

• Apple moved to Jersey to avoid tax

As governments shut down tax loopholes in 2014, Apple found new ways to keep tax rates ultra-low. Those rates allowed it to accumulate a $252 billion mountain of cash offshore. The Paradise Papers show two of Apple’s Irish subsidiaries, AOI and ASI, in the process of changing tax residency to Jersey, a crown dependency of the UK.

• Trump’s commerce secretary Wilbur Ross was in business with Putin family

The papers show Ross holds a stake in a Russian shipping company, Navigator, through a chain of offshore investments. The company is in a lucrative partnership with Sibur, a Russian gas company part-owned by Kirill Shamalov, the husband of Putin’s daughter.

Ross retained the relations in spite of going into a senior government position. These revelations will intensify inquiries into Russian interference with the 2016 US election.

• Twitter and Facebook substantially funded by Russia

Two Russian state institutions with close ties to Vladimir Putin funded substantial investments in Twitter and Facebook. This was done through a Russian technology magnate, Yuri Milner, a business associate of Jared Kushner, son-in-law of Donald Trump and a senior White House advisor. This discovery will likely stir concerns over Russian influence in US politics and the role played by social media in last year’s presidential election.

• Justin Trudeau’s front man moved huge sums offshore

Stephen Bronfman, the chief fundraiser and senior adviser to the Canadian prime minister, Justin Trudeau, is involved in multimillion-dollar cash-flows between US Israel and Cayman Islands to avoid taxes in Canada, Israel and US.

• How Nike is one step ahead of legal taxes

Money paid for trainers in Nike shops moves in and out of Europe, to Caribbean, Bermuda and even to entities not officially based anywhere. Nike makes its products in Vietnam and Indonesia, ships them for sale across the world. If you buy a pair in UK, your cash should technically go to the company’s main British subsidiary, Nike UK Ltd. But, it doesn’t! It goes to Netherlands, then Bermuda and to further non-registered entities.

• Glencore digs the offshore finance culture to secure DRC mining rights

World’s largest mining company, London based Glencore, secretly loaned tens of millions of dollars to an Israeli billionaire after it enlisted him to secure a controversial mining agreement in the Democratic Republic of the Congo. Files from Appleby reveal deals, emails and multimillion-dollar loans to bankroll ventures in Russia, Latin America, Africa and Australia. Glencore was such an important client, that it once had its own room with Appleby’s Bermuda offices.

• Lewis Hamilton, Formula One champion, has avoided taxes on £16.5m jet using Isle of Man scheme by setting up an offshore structure open to legal challenge.
• $450m offshore trust in Bermuda, shelters of Lord Ashcroft, Brexiter and one of the Conservative party’s biggest donors, putting Theresa May in an awkward position.
• The complex offshore webs used by two Russian billionaires -Alisher Usmanov and Farhad Moshiri- to buy stakes in Arsenal and Everton football clubs, respectively. After the Panama Papers revelation, campaigners are calling for changes to the rules intended to safeguard the independent ownership of Premier League teams as opposed to ‘dual ownership’ rules.
• Stars of BBC hit sitcom Mrs Brown’s Boys used a complicated web of offshore companies to avoid tax, but claim that they weren’t aware of dealings of the scheme

Difference between Panama Papers and Paradise papers

The two set of documents differ in both source and content. In contrast to the Panama Papers, the Paradise papers contain more than just information pertaining to politicians, athletes and the super-rich, but also to several multinational corporations that use the offshore finances. Among Appleby’s clients are companies like Nike, Apple, Facebook, Walmart, Allianz, Siemens, McDonald’s and Yahoo.

Who is Appleby?

According to ICIJ, Appleby is a member of the “Offshore Magic Circle,” an informal clique of the planet’s leading offshore law practices. The firm was founded in Bermuda and has offices in Hong Kong, Shanghai, the British Virgin Islands, the Cayman Islands and other offshore centres. Appleby has had a well-guarded 100-year reputation and has often avoided public scrapes through a mixture of discretion and expensive client monitoring.

Panama Papers reveal one big reality- the deepening inequality

The fundamental question posed by the Paradise Papers is that has tax avoidance in all guises gone too far? Tax havens’ secrecy laws entice those who wish to place their wealth and dealings beyond the reach of regulators, investigators and the tax collectors, often untraced. Paradise Papers highlight that documents come from high- and low-profile bastions of financial secrecy such as Marshall Islands, Lebanon and St. Kitts and Nevis. Over the past decade, the European Union and other international organisations have pressured offshore havens to reform their laws and require that offshore go-betweens aggressively screen clients, to avoid illegal dealings, however, the progress has been slow.

While a global web of powerful people and large companies benefit from the offshore system- they do so at the expense of many. The burden of taxation then shifts to middle-income taxpayers and giving MNCs an unfair advantage over smaller competitors. The worst brunt of this is faced by nations struggling to provide the basics for their populations.

This is why we ordinary citizens should care about the offshore empire. Panama papers and Paradise papers, alike, highlight a question, not of legality but that of morality and fairness. Sadly, the papers reaffirm a deepening division that scars the world – the rich are getting richer and the poor are getting poorer.

Words: Rituja Rao | Subbing: Yasmin Dahnoun