Pandora papers – behind the headlines

20 November 2021

It has been a few weeks since the publication of the latest set of leaked documents detailing assets owned via offshore companies by the rich and famous. The Pandora papers follow the previously published Panama and Paradise papers, and the news stories surrounding them cover many of the same themes. Now that the dust has begun to settle, it is worth thinking about what the revelations really tell us about the world of offshore companies and secret bank accounts.

Hidden assets?

The starting point for any analysis of the papers is rather disappointing for those of us who love spy stories involving numbered Swiss bank accounts. Sadly for fiction, but happily for tax authorities, there are now very few places in the world where you can transfer money without your home country’s tax authority knowing about it.

Rather more promisingly for thriller-lovers is the large amount of information published about the use of offshore companies to buy real estate anonymously. There is no question that in the past this has allowed the source of funds to be disguised, assisting money-laundering and fraud, with offshore privacy rules making it very difficult to work out where money really comes from.

Dirty money?

The Pandora papers highlight some ongoing valid concerns in this area, but if we focus on the use of foreign companies to buy UK property the reality is again less dramatic. For some years now the UK has applied strict rules on money-laundering which can impose heavy jail sentences on lawyers, bankers and the like who help their clients use ‘dirty’ money to buy UK assets. As a result, UK advisers routinely dig deeply into the source of funds before agreeing to be engaged: the fact that the owner of a company is not public knowledge does not mean that the source of their funds is hidden and, in the UK at least, anyone trying to outwit the system should expect to suffer serious legal sanctions.

There is a real debate to be had about the appropriate level of transparency that should attach to the ownership of assets, but it is more finely balanced than is often acknowledged. On the one hand, transparency is a good thing and, if you have done nothing wrong, why should you object to public scrutiny? On the other hand, what right does any other individual have to poke into your private affairs, especially if this could place your safety at risk? There is currently no consensus about where lines should be drawn here, and much comes down to personal philosophy rather than there being a single right answer.

Right and wrong?

This leads to a final observation about the way in which the Pandora papers have been reported. In many of the stories published, if you read all the way to the end you will see a statement to the effect that the people involved have done nothing illegal. When the Panama papers were published in 2016 they contained many examples of transactions that appeared to involve tax evasion or fraud. By contrast, the Pandora papers relating to the UK show no real sign of this. There are transactions that appear designed to minimise UK tax, but from the details published these appear to operate within the law, making any objection a moral rather than a legal one. This makes the tone of the publication of the Pandora papers more of a moral crusade than an exposure of criminality. This does not mean that journalists were wrong to run the stories they did, but it has created a lack of balance. Cayman Islands companies owning London penthouses make for great headlines, but we now need a serious debate about what the boundaries between private and public information should be, and that has yet to begin.

For more information, please get in touch with Andrew Robins, or your usual RSM contact.