There’s nothing new about wealthy individuals’ use of shell corporations, registered in locations such as Panama or the Isle of Jersey, to conceal their holdings from competitors, tax authorities and the media. What’s especially troubling, though, is the degree to which so many people whose political roles should not make them rich can exploit corporate secrecy laws to hide enormous wealth of dubious origin. One example: the Pandora Papers revealed that the family and associates of President Ilham Aliyev of Azerbaijan used offshore companies to acquire $700 million worth of property in Britain, mostly in London. Art collector Douglas Latchford (now deceased) used offshore trusts essentially to launder the sale of looted antiquities from Cambodia, some of which eventually wound up in major museum collections.
Of course, by no means is all the money being sheltered ill-gotten. But the big picture — of a vast, no-questions-asked-zone, open to legitimate and illegitimate transactions alike — is concerning. Corruption and cronyism can undermine political stability and legitimacy as surely as violence can, albeit more insidiously. To the extent the world’s offshore havens are facilitating official malfeasance, they are contributing to the global decline of democracy.
The Pandora Papers also showed that one such haven is located right here in the United States: South Dakota’s permissive trust laws have made it a popular destination for foreign wealth. As The Post reported, there is no evidence that any of the money parked in South Dakota came from criminal activity. Trust companies are legally forbidden knowingly to accept such funds. There may nevertheless be a need to require greater due diligence by the intermediaries — trust companies, lawyers and real estate professionals — who handle international fortunes in the United States, as suggested in a new legislative proposal, the Enablers Act, with bipartisan support in the House. Multilateral cooperation on corruption and money-laundering should be a major part of the Biden administration’s promised effort to restore global democratic development.
As long as there are ill-gotten gains, there will be a market for hiding them. Realistically, there is only so much governments can do. In the myth, though, hope remained even after Pandora’s mistake. By exposing the machinations of the world’s kleptocrats, the Pandora Papers gave hope to those who favor greater accountability — and, equally usefully, fear to those who oppose it.