British Virgin Islands leaks

Hard disk gave investigators data to expose tax havens, account holders

Investigating journalists used hi-tech software to scour 260 gigabytes of secret information to expose the real owners of accounts

PUBLISHED : Friday, 05 April, 2013, 12:00am
UPDATED : Tuesday, 05 April, 2016, 3:01pm

An investigation into an offshore tax haven that is exposing secret accounts held by the wealthy around the world began when a computer hard drive packed with corporate data arrived in the post at the International Consortium of Investigative Journalists (ICIJ).

Its director, Gerard Ryle, obtained the small black box as a result of his three-year investigation of Australia's Firepower scandal, a case involving offshore havens and corporate fraud.

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The hard drive contained more than 260 gigabytes, the equivalent of half a million books. Its files included 2 million e-mails, four large databases, details of more than 122,000 offshore companies or trusts, and nearly 12,000 intermediaries.

Unlike the smaller cache of US cables and war logs passed in 2010 to WikiLeaks, the offshore data was not structured or clean, but an unsorted collation of internal memos and instructions, official documents, e-mails, large and small databases and spreadsheets, scanned passports and accounting ledgers.

Analysing the immense quantity of information required "free-text-retrieval" software, which can work with huge volumes of unsorted data. Such high-end systems have been sold for more than a decade to intelligence agencies, law firms and commercial corporations. Journalism is just catching up.

The named people who administered offshore companies included shareholders, directors, secretaries, lawyers, accountants, nominees and trustees. But many of such structures were simply legal devices designed to conceal. The real beneficial owners proved often to be the so-called "settlors" or "protectors" of offshore trusts, and those holding legal powers of attorney that enable them to exert secret control over the bank accounts.

China, Hong Kong, Taiwan, the Russian Federation and former Soviet republics appeared to provide the majority of secret offshore owners. The British Virgin Islands are the second-largest source of capital investment in China - on paper at least. Cyprus, an offshore island currently in financial crisis as a result, is also identified in the data as a huge source of Russian investment.

The ICIJ's collaborating journalists from 46 countries constituted one of the largest groups ever to have worked together on a data project.

Interestingly, the team's attempts to use encrypted e-mail systems such as PGP ("Pretty Good Privacy") were abandoned because of complexity and unreliability that slowed them.

Meanwhile, computer programmers in Germany, Britain and Costa Rica also designed sophisticated data-mining and cleaning software for the ICIJ. Manual analysis in New Zealand proved crucial in early decisions on what countries the ICIJ needed reporters.

The ICIJ's own search system - named Interdata - was developed by a British programmer as dozens of new journalists joined the expanding project. Interdata allowed them to download copies of those of the 2.5 million offshore documents relevant to their countries.

The ICIJ rebuilt some of the databases in an effort to run them in their original format. There were surprises. The databases were formatted to record who really lay behind each entity, as required by international rules on money laundering and "due diligence". Journalists hoped the truth was just a click away.

In fact, entries for "beneficial owners" were often empty. The offshore agencies had frequently passed off their supposed legal responsibility to intermediaries in other countries. The lesson was that the empty fields were not an accident; it was the design. Only occasionally would screen give contact details for those who really owned the assets.

Persistence with leads yielded some great rewards: not just occasional and unexpected top names, but also the inside details of many nuanced and complex schemes for hiding wealth.

More than 175,000 British-registered companies have used directors giving addresses in offshore jurisdictions. More than 60,000 of those firms are listed as currently active on the official register of British businesses.

Having directors in offshore jurisdictions does not indicate anything illegal, or that a director is a sham. But the figures reveal the huge scale of company registration relative to some of the islands' tiny populations: 47,161 companies have listed directors from the Isle of Man - representing one British company for every 1.8 residents of the island.

Some of the British Virgin Islands investors fingered

The president of oil-rich Azerbaijan, Ilham Aliyev, heads the list of names of owners of secret offshore companies in the British Virgin Islands to have emerged so far. Also on the list are prominent figures in Pakistan, India, Thailand and Indonesia. Here are some of them:

President Ilham Aliyev Three BVI entities set up in 2008 in the names of the Azerbaijani president's daughters Arzu and Leyla. Another BVI entity set up in 2003 lists the president and his wife Mehriban as owners.

Bidzina Ivanishvili The billionaire businessman became prime minister of Georgia last year. Listed from 2006-9 as director of the BVI company Bosherston Overseas Corp, administered via an agent in Panama, incorporated in 2006 and still active. His spokesman said he has done everything according to law.

Bayartsogt Sangajav One of Mongolia's most senior politicians is linked to Legend Plus Capital. He said he is considering resigning from office after being confronted with evidence of the offshore entity and a secret Swiss bank account. He was his country's finance minister from September 2008 until a cabinet reshuffle in August last year. He is now the deputy speaker of Parliament.

Maria Imelda Marcos Manotoc Late Philippine president Marcos' eldest daughter, a provincial governor, is listed in 2005 in the BVI as the "investment advisor" and beneficiary of the Sintra Trust, set up by her associate, Mark Chua of Singapore. She does not mention the trust in her declaration of financial interests.

Stephen Riady The Riady family, one of many wealthy Indonesian families and owners of the Lippo Group, had at least 11 offshore entities. The agents, TrustNet, noted "client does not want to be seen dealing offshore". A spokeswoman for Stephen Riady said there was "nothing illegal or improper in protecting the privacy of one's own information".

Nalinee "Joy" Taveesin Thailand's international trade representative, and previously a government minister and adviser to the commerce minister. The offshore company naming her and her brother Anuraj Mishra was set up 2008, according to TrustNet records. In the same year, the US treasury department blacklisted her and her assets as a "crony" of the Zimbabwean leader, Robert Mugabe.

Gaddam Vivekanand A Congress party MP, Vivekanand is also vice-chairman of Visaka Industries, which produces about one quarter of India's asbestos supplies. He and his wife, Saroja, are listed as directors and shareholders of Belrose, incorporated in the BVI on September 2008. Vivekanand said: "I do not remember being involved with such a company.''

The Guardian