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‘Pandora Papers’ expose offshore assets of heads of state


More than a dozen heads of state and government, including the King of Jordan and the Czech Prime Minister, have hidden millions in offshore tax havens, according to the so-called “Pandora Papers” investigation published by the International Consortium of Investigative Journalists (ICIJ) media consortium.


GS-III: Internal Security Challenges (Money Laundering), GS-II: International Relations

Dimensions of the Article:

  1. About the ‘Pandora Papers’ Investigation
  2. What is a Tax Haven?
  3. Legislations in India: Fugitive Economic Offenders Act
  4. Prevention of Money Laundering Act (PMLA), 2002
  5. Extra information: British Virgin Islands (Top Tax Haven)

About the ‘Pandora Papers’ Investigation

  • The “Pandora Papers” investigation — involving some 600 journalists from media is based on the leak of some 12 million documents from 14 financial services companies around the world.
  • Some 35 current and former leaders are featured in the documents analyzed by the ICIJ – facing allegations ranging from corruption to money laundering and global tax avoidance.
  • In total, the ICIJ found links between almost 1,000 companies in offshore havens and 336 high-level politicians and public officials, including country leaders, cabinet ministers, ambassadors and others.
  • More than two-thirds of the companies were set up in the British Virgin Islands.
  • The ICIJ stresses that in most countries it is NOT illegal to have assets offshore or to use shell companies to do business across national borders.
  • The documents notably expose how King Abdullah II created a network of offshore companies and tax havens to amass a $100 million property empire from Malibu to London. Also, members of Pakistan Prime Minister Imran Khan’s inner circle, are said to secretly own companies and trusts holding millions of dollars.

What is a Tax Haven?

  • A tax haven is a country that offers foreign businesses and individuals minimal or no tax liability for their bank deposits in a politically and economically stable environment. They have tax advantages for corporations and for the very wealthy, and obvious potential for misuse in illegal tax avoidance schemes.
  • Characteristics of tax haven countries generally include no or low taxes, minimal reporting of information, lack of transparency obligations, lack of local presence requirements, and marketing of tax haven vehicles.
  • Companies and wealthy individuals may use tax havens legally as a means of stashing money earned abroad while avoiding higher taxes in their home countries.
  • Tax havens may also be used illegally to hide money from tax authorities at home.
  • As of 2021, the worst countries helping offenders evade taxes are: the British Virgin Islands, the Cayman Islands, and Bermuda.

Legislations in India: Fugitive Economic Offenders Act

  • The Fugitive Economic Offenders Act, 2018 seeks to confiscate properties of economic offenders who have left the country to avoid facing criminal prosecution or refuse to return to the country to face prosecution.
  • A Fugitive Economic Offender (FEO) is a person against whom an arrest warrant has been issued for committing an offence listed in the Act and the value of the offence is at least Rs. 100 crore.
  • Some of the offences listed in the act are:
    • Counterfeiting government stamps or currency.
    • Cheque dishonour.
    • Money laundering.
    • Transactions defrauding creditors.

Prevention of Money Laundering Act (PMLA), 2002

  • According to the Prevention of Money Laundering Act (PMLA) 2002, Money laundering is concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources. It is frequently a component of other, much more serious, crimes such as drug trafficking, robbery or extortion.
  • Money laundering is punishable with rigorous imprisonment for a minimum of 3 years and a maximum of 7 years and Fine under the PMLA.
  • The Enforcement Directorate (ED) is responsible for investigating offences under the PMLA.
  • The Financial Intelligence Unit – India (FIU-IND) is the national agency that receives, processes, analyses and disseminates information related to suspect financial transactions.
  • After hearing the application, a special court (designated under the Prevention of Money Laundering Act PMLA, 2002) may declare an individual as a fugitive economic offender and also confiscate properties which are proceeds of crime, Benami properties and any other property, in India or abroad.
  • The authorities under the PMLA, 2002 will exercise powers given to them under the Fugitive Economic Offenders Act. These powers will be similar to those of a civil court, including the search of persons in possession of records or proceeds of crime, the search of premises on the belief that a person is an FEO and seizure of documents.

Extra information: British Virgin Islands (Top Tax Haven)

  • The British Virgin Islands (BVI) are a British Overseas Territory in the Caribbean, to the east of Puerto Rico and the U.S. Virgin Islands and north-west of Anguilla.
  • The islands are geographically part of the Virgin Islands archipelago and are located in the Leeward Islands of the Lesser Antilles and part of the West Indies.
  • About 16 of the more than 50 islands and cays in the British Virgin Islands are inhabited – The capital, Road Town, is on Tortola (population: 35 thousand+) the largest island.
  • British Virgin Islanders are British Overseas Territories citizens and since 2002 are British citizens as well.
  • The British Virgin Islands enjoys one of the more prosperous economies of the Caribbean region and is widely known to be a tax haven due to its opaque banking system.

-Source: The Hindu

November 2023