The massive 'Paradise Papers' leak reveals how the world's wealthiest individuals and companies move their money
- The Paradise Papers are the largest collection of leaked documents in history, with over 13.4 million documents released.
- The leak follows 2015's Panama Papers, which revealed prominent politicians, billionaires and celebrities allegedly using offshore bank accounts.
- Queen Elizabeth II, Canadian Prime Minister Justin Trudeau, and billion-dollar companies like Apple and Nike were named in the trove of documents.
The Paradise Papers document leak revealed more than 13.4 million internal documents on Sunday showing how major world players take advantage of offshore tax havens.
The leaked documents were obtained by the German newspaper Suddeutsche Zeitung and were shared with the International Consortium of Investigative Journalists (ICIJ), which also spearheaded the release of the Panama Papers in last year.
The massive trove of material reveals the inner workings of global companies, including offshore law-firm Appleby and Singapore-based Asiaciti Trust, which administer offshore accounts for wealthy investors. There are also details from 19 corporate entities maintained by governments in tax-haven countries.
What is a tax haven?
Although there is no generally agreed definition, tax havens offer foreign individuals and businesses a means by which to enjoy minimal tax liability in a location that is consider politically and economically stable. The world's ultrawealthy have 10% of global GDP tucked away in tax havens, Business Insider's Pedro Nicolasi da Costa wrote in September.
The Tax Justice Network's financial secrecy index, released every two years, ranks jurisdictions according to their levels of secrecy. According to the report from 2015, an estimated $21 to $32 trillion of tax-free or lightly taxed private finances are located in tax havens.
Is it legal?
Placing finances into an offshore account is legal, however critics of the system, like the Tax Justice Network, say it facilitates illegal activity by providing an extra layer of secrecy to financial transactions.
Information obtained from the leaked Panama Papers showed offshore accounts were used by Mexican drug traffickers, world leaders, celebrities, and billionares. In some cases, offshore accounts were used to avoid taxes, conceal transactions, and launder money.
Who's in the report?
The collection of documents in the Paradise Papers include major revelations on politicians and public figures from around the world.
US Department of Commerce Secretary Wilbur Ross, President Donald Trump's main man for trade and manufacturing policy, has a stake in a company that does business with a gas producer partly-owned by Vladimir Putin's son-in-law. A number of the company's major stakeholders have been individually sanctioned by the US. This information further complicates the investigation into potential financial ties between Trump's inner circle and Russia.
The estate of Queen Elizabeth II was outed by the Paradise Papers as having invested £10 million of the Queen's private money into offshore accounts. The Duchy of Lancaster, which manages the Queen's investments and provides her with an income, held funds in the Cayman Islands and Bermuda. The funds had not been previously disclosed in official Palace accounts, however there are no immediate signs that the investments were illegal.
Associates of Canadian Prime Minister Justin Trudeau, including his chief fundraiser and senior adviser, were involved in moving millions of dollars to offshore accounts. Stephen Bronfman, heir to the Seagram fortune and senior adviser to Trudeau, was revealed to have orchestrated a complex web of entities in the US, Israel and the Cayman Islands.
Multinational corporations, like Nike and Apple, were also revealed to have actively invested money into offshore accounts in countries which guaranteed very low tax rates. The European Commission ordered Apple to pay $14.5 billion to Ireland last year, on accusations the company paid virtually no taxes in the country.
What happens next?
The ICIJ approached Appleby with allegations of wrongdoing, which they deny. Appleby said in a statement it did not tolerate "illegal behaviour," and said the ICIJ's allegations were "unfounded and based on a lack of understanding of the legitimate and lawful structures used in the offshore sector."
The firm said it had investigated the allegations "thoroughly and vigorously," and was satisfied there was no evidence of wrongdoing "either on the part of ourselves or our clients."
The Panama Papers led to a series of high-profile scandals, including the resignation of the Prime Minister of Iceland after it was alleged he had hidden millions of dollars-worth of investments in an offshore company. Pakistan's former Prime Minister Nawaz Sharif was indicted on corruption charges in October, stemming from the leaked documents. Investigators said that the papers showed the family had unreported assets overseas.
Camilla Hodgson contributed to this report.