On October 3, the British newspaper The Guardian and other news outlets reported on the Pandora Papers, a cache of 12 million documents leaked from companies that conceal money for the world’s rich and powerful in various tax or secrecy havens.
The cache, leaked to the International Consortium of Investigative Journalists, names world leaders, celebrities, judges, officials and business owners who hid their money offshore. Among them are Ukrainian President Volodymyr Zelensky and associates of Russian President Vladimir Putin.
Reacting to the Pandora Papers revelations on her Telegram messenger channel, Russian Foreign Ministry spokesperson Maria Zakharova wrote:
“On June 4, 2021, US President Joe Biden announced the publication of a National Security Study Memorandum on the Fight Against Corruption to establish combatting corruption as a core US national security interest. That’s what he said. Today, according to The Guardian, the ICIJ investigation named the US as the largest tax haven."
In fact, Biden did the sign memo. But the claim attributed to the ICIJ is false, and Zakharova and Russian state media have ignored or played down the outsized proportion of Russian nationals and oligarchs represented in the offshore secrecy documents.
The ICIJ did not name the U.S. as the largest “tax” haven, but rather as “one of the biggest players in the offshore [secrecy] world.” Other research suggests the U.S. is the world’s second-biggest tax haven – behind Cayman Islands and ahead of Switzerland.
Zakharova leaves out one of biggest findings.
“ICIJ’s analysis reveals that Russians are behind about 14% of the more than 27,000 companies whose ownership details are revealed by the leak,” the news outlet wrote in one article.
“Among them, at least 46 Russian oligarchs were using offshore companies, the analysis found.”
Those quotes were at the end of an ICIJ article detailing information about Konstantin Ernst, a former head of several Russian state media. The ICIJ story dubbed Ernst “Putin’s chief image-maker.”
The billionaires named in the Pandora Papers “come from 45 countries, with the largest number from Russia (52), Brazil (15), the U.K. (13) and Israel (10),” the ICIJ reported.
The fact that the U.S. has become one of the world’s largest “tax” havens is old news: Bloomberg reported it back in 2016. But the Pandora Papers are also about not just taxes, but hiding money in virtually impenetrable trust arrangements.
Some of that hidden money is coming to the United States. The ICIJ and its partners report that the state of South Dakota, for instance, has become a favorite destination. At the same time, U.S. politicians, including Biden, have been upfront about the risks of money laundering. Moreover, they have taken action to combat it.
Zakharova noted the Biden memo, officially titled “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest,” signed and published online June 3.
“Corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself,” the memo states. “My Administration will lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”
The memo outlines a strategy of working with foreign partners, modernizing U.S. agencies that investigate laundering, and lifting secrecy about business ownership.
When Biden took office, anti-money laundering and anti-corruption legislation had been gaining bipartisan support in the U.S. Congress
In January 2021, Congress passed the Corporate Transparency Act, which requires all U.S. businesses to file ownership information with the Financial Crimes Enforcement Network (FinCEN). The goal is to end anonymous shell corporations, a popular mechanism for tax evasion and concealing assets.
The Anti-Money Laundering Act of 2020 was passed to support the provisions in the Corporate Transparency Act. Among other things, it makes it easier for U.S. justice officials to subpoena foreign financial records and provides rewards for whistleblowers who step forward to expose wrongdoing.
Zakharova hasn't been the only one to ridicule Biden.
In April, Swiss officials lambasted the U.S. president after he called the European country, known for its banking secrecy, a "tax haven." International regulators, the Swiss now say, have affirmed the country’s steps to meet international transparency standards.
Others noted the irony of calls for transparency from a president who hails from the state of Delaware, with its history of business secrecy.
“Delaware, the state that Biden represented in the Senate for 36 years, has long had a reputation for allowing companies and wealthy individuals to hide the true beneficiaries of anonymous shell companies registered there,” the Associated Press reported.
Biden campaigned on cracking down on tax evasion and money laundering, however.
The administration has asked for a major increase in funding for the Internal Revenue Service (IRS) to help audit high earners. For years, budget cuts crippled the agency's ability to audit the finances of wealthier taxpayers.
American billionaires like Amazon owner Jeff Bezos, Microsoft founder Bill Gates, and investor Warren Buffett, are not named in the Pandora Papers. More than 40 Russian oligarchs were named, however, as was the aforementioned Konstantin Ernst.
Ernst was tasked with orchestrating the opening ceremonies for the 2014 Winter Olympics in Sochi, for which he was supposedly paid only one ruble. However, the ICIJ discovered that after the games, Ernst was cut in on a billion-dollar privatization deal that began with the incorporation of a company in the British Virgin Islands, a well-known international tax shelter.
"The leaked files also show that Ernst was the beneficiary of a $16.2 million loan – from a Cyprus bank partly owned by VTB – used to fund his stake in the deal," the ICIJ wrote. (VTB is a state-owned Russian bank.)
"The files show the bank explicitly instructed offshore lawyers to keep documents detailing Ernst’s connection to the loan out of government records in the British Virgin Islands, where the shell companies concealing the deal were incorporated."
In responding to the ICIJ, Ernst denied that he ever concealed his involvement in the privatization deal and accused the organization of working for "the U.S. secret services."