British Virgin Islands leaks
On April 4, 2013, the International Consortium of Investigative Journalists (ICIJ) began leaking the details of 2 million emails and other documents naming prominent public figures from around the world who were concealing their wealth through the offshore tax haven of the British Virgin Islands. Based on this leak, the ICIJ released a report focussing on China's elite on January 22, 2014.
Hong Kong firm at core of fraud that sparked investigation into tax havens
Discovery of scam led to three-year inquiry that uncovered huge trove of tax-haven data
A huge trove of tax-haven data uncovered by the International Consortium of Investigative Journalists (ICIJ) is the result of a three-year investigation by its director, Gerard Ryle, into one of Australia's biggest frauds.
That fraud involved a Hong Kong-based firm called Firepower International and offshore havens. Through connections with Australian officials, the governments of Britain, Russia, Romania and other nations were persuaded to believe Firepower had solutions to global warming and the energy crisis. After the fraud was discovered, Firepower's Australian operations were liquidated in 2008.
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The Australian investigation yielded one of the biggest collections of leaked data gathered by journalists, the ICIJ said. The offshore information totalled more than 260 gigabytes of data and more than two million e-mails. The data originated in 10 offshore jurisdictions, including the British Virgin Islands (BVI), Cook Islands and Singapore. It included details of more than 122,000 offshore companies or trusts, and 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies.
A large number of positions are held by "nominee directors", people who, for a fee, lend their names as office holders of companies they know little about. It is a legal device widely used in the offshore world.
To analyse such a trove of information, ICIJ investigators used text retrieval software able to handle vast volumes of data.
"I'm surprised they got the information, because it is really quite protected," said John Bruce, director of operations at Hill & Associates, a Hong Kong risk consultancy.
Beyond the nominees, who were often not the real owners of an offshore company, offshore company records did not divulge the actual shareholders, Bruce said. "It is very hard to track BVI companies."
It was probable that some Western governments were supporting the ICIJ probe, said Hugo Williamson, managing director of the Risk Resolution Group, a British risk consultancy. "There is a wider story here. There is a concerted effort by Western governments to chase high-net-worth individuals who avoid taxes through offshore havens."
The euro-zone debt crisis has compelled some Western governments to try to alleviate their debt with the hidden wealth of the rich who had avoided taxes through offshore havens, Williamson said. "The British government is forcing offshore jurisdictions to make visible the holdings of UK-based individuals."
Hong Kong corporate governance activist David Webb said: "Since the global financial crisis in 2008, Western governments have been more interested in cracking down on people who are avoiding tax in offshore havens. There is more international co-operation than before."
However, Bruce was sceptical that governments were behind the ICIJ investigation. It was likely to expose people close to some governments, he said, "so it's not government-driven".