The "Pandora Papers" project — a remarkable report from the International Consortium of Investigative Journalists — offers rare transparency into the shadowy way some global elites shade their wealth — including, at times, public money.
The exposé, reported by a group of 600 journalists from 150 media outlets in 117 countries tasked with analyzing 11.9 million financial records, describes offshore accounts designed to avoid detection from creditors, criminals, tax authorities and others.
The revelations should galvanize government action, including in the U.S. Some of the "offshore" havens are in Alaska, Delaware, New Hampshire and South Dakota.
In fact, according to an account in the Washington Post, which was a partner with the ICIJ, "the files provide substantial new evidence, for example, that South Dakota now rivals notoriously opaque jurisdictions in Europe and the Caribbean in financial secrecy. Tens of millions of dollars from outside the U.S. are now sheltered by trust companies in Sioux Falls, some of it tied to people and companies accused of human rights abuses and other wrongdoing."
The trust companies commenting on the Pandora Papers all said they were working within the law. If so, these laws need to be reconsidered, especially since the U.S. government often criticizes other countries for having similar regulatory environments. American credibility, a currency that even these hidden riches can't buy, is at stake.
The Pandora Papers' headline names are assorted foreign leaders — 35 from five continents in just this one report of leaked documents — including allies like Jordan's King Abdullah II, who spent more than $106 million on U.S. luxury homes while his struggling country receives considerable foreign aid from U.S. taxpayers, and adversaries like Russian President Vladimir Putin, who reportedly acquired a luxury waterfront apartment in Monaco to support a Russian woman who allegedly had his child.
And then there are the leaders of Kenya and the Czech Republic, who rose to power in part on anticorruption platforms. Such duplicity may not shock their constituents, but it could deepen their cynicism and provide fertile ground for a rise in reckless populism or another form of illiberal governance.
The Pandora Papers, according to the Post, "allow for the most comprehensive accounting to date of a parallel financial universe whose corrosive effects can span generations — draining significant sums from government treasuries, worsening wealth disparities, and shielding the riches of those who cheat and steal while impeding authorities and victims in their efforts to find or recover hidden assets."
The U.S. government should be leading the effort to end this scourge, not allowing it to happen in selected states. "It really should be a wakeup call to all of our policymakers to fix," Gary Kalman, the U.S. executive director for Transparency International, told an editorial writer. "Because of the secrecy that we afford in this country, because of our lack of laws, we allow illegal and illicit money to flow through our borders without penalty or awareness on our part.
"And so if we are really serious about tackling global corruption, we have to recognize our role in facilitating that corruption. We have to make sure that our laws sufficiently address it."
Some laws, of course, already exist, including the Corporate Transparency Act. Enforcement, as always, is key. And if new laws are needed, Congress should consider significantly strengthening the legal framework.
"The world cannot sustain two separate financial systems — one for hardworking people who follow the law and pay taxes, the other for the global rich and political elites who use offshore financial secrecy to evade taxes and accountability for crimes," Ian Gary, the executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, said in a statement on the report.
More revelations are expected this week. Indeed, like the name of the project suggests, the Pandora Papers box is open now and must be met with government scrutiny and reform.