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Offshore Leaks and the New Transparency

Updated: Sep 8

The Following Guest Post is by Alison Taylor

Last week’s joint investigation by Huffington Post and Fairfax Media into oil intermediary Unaoil, which offered up revelations that seem to implicate a number of big oil and gas companies in grand corruption, quickly provoked a dramatic raid by authorities in Monaco. Within days, the Unaoil case was dwarfed by history’s biggest data leak, 40 years’ worth of beneficial ownership data from Mossack Fonseca, a law firm specializing in the structuring and management of offshore corporate structures in Panama and across the globe. While hardly new, the Mossack Fonseca story offers a trove of evidence of involvement by at least a dozen current and former political national leaders. The twin leaks, which accompany a popular focus on inequality and an unprecedented public mistrust of business and government, give a massive adrenalin shot to transparency. The revelations should inspire a fresh approach to ethics and anti-corruption, causing companies to change how they operate.

The transformation of the transparency environment traces back to 2010, when (thanks to WikiLeaks) Tunisians were suddenly able to read the contents of a diplomatic cable describing in detail the web of assets held by the country’s ruling family — wealth often secured via extortion and expropriation. Anger led to the overthrow of Tunisia’s regime, setting off the so-called Arab Spring and a general worldwide rage against self-interested, inefficient regimes. In Russia, activist journalists began flagging and highlighting corrupt relationships. China’s government launched a broad crackdown that, while unquestionably convenient to the authorities in its targeting, was partially intended to placate public rage. And in Brazil, the Petrobras revelations revealed a cancer of corruption riddling the private sector and national political class. Everywhere, unease and outrage has been fueled by disillusionment among mainly middle-class protestors who are economically ambitious, technologically savvy, and bent on asserting the right to be free of corrupt governance.

Meanwhile, in New York, London, and Hong Kong, ordinary residents were being priced out of their homes. As they began asking questions, it became clear that the movement of offshore money was driving much of the inflation in “local” property prices. Governments started mulling crackdowns on anonymous investors and companies. In 2011, for instance, Prime Minister David Cameron promised to end “tax secrecy” in the U.K. But little action was taken. The problem? Offshore companies are not only legal; they are standard business conduits for most of the world’s biggest companies. The breadth and depth of vested interests in the offshore economy means that national regulators and political leaders necessarily lack both the will and the agency to tackle the problem effectively. This is a problem that requires global collaboration to solve, and the effort is complicated by the fact offshore ownership is only a problem sometimes. While transparency campaigners were comforted to witness increased pressure on tax havens, they saw little movement. Companies conducted business as usual, and the public in the West shrugged.

But the arrival of Edward Snowden turns out to have driven a new form of transparency activism. Civil society organizations such as Global Witness, Sherpa, and the International Consortium of Investigative Journalists had long been conducting painstaking research into the financial networks of kleptocrats and criminals. But the launch in 2014 by Transparency International of its Unmask the Corrupt campaign was a definitive sign that times had changed.

Technologically sophisticated whistleblowing has boosted the work of this network of NGOs and investigators. However advanced any company’s cyber-security program, it is difficult for administrators to control the actions of disgruntled ex-employees who may perceive little to lose amid a growing market for leaks of information about corruption. Unlike the financial crisis — where banker misuse of obscure derivative instruments did not lend itself to an exciting storyline— Unaoil and the Panama Papers proffer juicy tales of wealth, greed, and hypocrisy. In the context of economic inequality and political populism, this is an incendiary mix.

In 2016, it appears that the secrecy that has historically protected beneficial ownership structures or illegitimate payments can no longer be guaranteed. Both Unaoil and Mossack Fonseca are intermediaries – the former accused of paying bribes to secure contracts and the latter said to have guaranteed that ill-gotten assets could be reliably secured from public scrutiny. There are in fact relatively few such intermediary operations, and they serve as critical connection points. A finite number of agents, fixers, brokers and incorporation agents serve a high proportion of the world’s wealthiest, most influential people. Penetrating a single channel can trigger quite a domino effect.

The threat of reputational risk is evolving and growing rapidly. Companies and individuals must begin operating on the principle that anything and everything they do might become public knowledge at any moment. With hyper-transparency now a contextual reality, ticking a compliance box on some form and pledging to “do the right thing” won’t count for much. Avoiding exposure to bribery and corruption charges has become a matter of hard-core self-interest.



In today’s context, ticking the #compliance box won’t count for much via @followalisont

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Alison Taylor is the  Director of Advisory Services for  BSR (Business for Social Responsibility). Her bio can be found here. Also, here is a link to my video interview with Alison on “How Organizations Impact Corruption.”


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