The Pandora Papers and the challenges of multijurisdictional investigations

The Pandora Papers investigation was unprecedented in terms of the volume of material disclosed about the global use of secret offshore companies to hide wealth.

By Lloydette Bai-Marrow, Serious Fraud and Economic Crime Consultant, ESA Risk

Vit-Mar / shutterstock.com

Based on almost 12 million documents leaked by whistleblowers in 2021, the journalist-led investigation resulting in the Pandora Papers exposed the opaque financial practices deployed by the rich and powerful to avoid tax and, in some instances, mask criminal wrongdoing.

Painstaking process

However, the Pandora Papers is a misleading case study when it comes to the myriad challenges around conducting multijurisdictional investigations.

The legal, consulting or investigatory firms that typically conduct cross-border investigations don’t usually have millions of documents, images, emails and spreadsheets serendipitously land in their lap, as was the case with the International Consortium of Investigative Journalists (ICIJ) and the Pandora Papers.

Rather, ordinarily they must surmount regulatory, cultural and geopolitical barriers that vary between jurisdictions to painstakingly unearth relevant data themselves.

As investigators we are first and foremost finders of fact.

Some investigators place great emphasis on the interviews conducted with relevant parties to ascertain these facts; others say the data will tell you everything you need to know. But most of us recognise we need a dual approach in order to establish the facts of a case as fully and accurately as possible.

Cross-border expertise

Finance and big business operate transnationally, meaning investigations can involve dealing with multiple corporate units in various countries as well as navigating the treacherous terrain of cooperating with law enforcement in those jurisdictions.

As such, we need a deep understanding of the laws and cultural environment of the countries our investigation encompasses, assisted by local legal and other experts.

Moreover, we must keep track of regulatory, geopolitical and other changes that make information easier or harder to obtain.

This helps us distinguish between outright illegality and practices that might be legal in some jurisdictions (albeit sometimes ethically dubious). Setting up shell companies in tax havens usually falls into the latter category, but could, in rare cases, be a means to cloak criminal activity.

Whitewash hazard

We must also be mindful that our role can be undermined at the very outset. There have been multiple instances where investigators have been brought in to effectively create cover for illegal activities and stonewalled or given misleadingly partial data or outright disinformation. This gives the company the credibility to say to the world: “Look! We had investigators in and there’s nothing to see here.”

Therefore, it is important that investigators have the requisite independence to obtain the information required and establish the facts of the case at hand.

Have we been instructed as an investigator in good faith? Do our engagement instructions allow us to do the job we were ostensibly brought on to do?

Data access policies and regulations

Some multinational corporations make our job easier by having a shared server and consistent systems and policies across their global operations.

Conversely, there are subsidiaries that are only loosely integrated with their parent organisation and effectively function as independent companies. This means you need a strategy for accessing information they hold and corralling on-the-ground resources to support data access.

Divergent data protection regimes, and even differences between how the General Data Protection Regulation (GDPR) is enforced across the EU, also create obstacles to obtaining, sharing and using information.

‘Low trust’ jurisdictions

When you enter a jurisdiction with low levels of ‘trust’ and high levels of economic crime there are several questions to address.

How do you manage people you recruited in this jurisdiction? Are they aligned with the values and culture of your wider organisation? Do you have training, controls and processes in place to ensure people stay on the straight and narrow? Do you conduct regular audits and visit their premises (Covid-19-permitting)?

People can be wary of speaking to investigators for a variety of understandable reasons.

For instance, they might live in low-trust countries with dysfunctional institutions, be female in a patriarchal culture, or be a member of a marginalised socioeconomic group (such as a low caste in India).

Therefore, investigators must have an eye on cultural context and sensitivities and have a plan for navigating those challenges.

How, for instance, can you empower people to speak up mid-investigation if their boss has told them not to speak to anyone?

We can assuage their misgivings by guaranteeing anonymity and a safe location to conduct an interview, such as by arranging to meet in a nearby hotel rather than their office.

Covert and Covid-19 challenges

Gathering data becomes tougher still if your investigation is operating covertly.

Covid-19 has complicated matters too, forcing investigators to do their work remotely when in normal times they might board a plane to retrieve material themselves.

With travel restrictions still onerous in many jurisdictions, we must in many cases still rely on employees and contacts based in the countries in question. But are those individuals trustworthy and reliable? Can you count on them to observe confidentiality and not tip off potential subjects of the investigation?

Data as disinfectant

Bribery and corruption are not isolated to one jurisdiction or region, or the global north or south — but pervasive in every part of the world.

While they fall into a different category of investigation, journalist-led investigations like the Pandora, Panama, and Paradise Papers leaks demonstrate how the disclosure of incriminating data can spark meaningful action by lawmakers, regulators and courts.

Consider how, for instance, the 2016 Panama Papers revelations have precipitated ongoing money laundering investigations involving a Peruvian presidential candidate and a former Maltese chief of staff, while US lawmakers have cited the coverage in advocating for the Stop Tax Haven Abuse Act (PDF).

Sunlight really can be an effective disinfectant in these scenarios.

Originally published on 7th March 2022 in the ESA Risk Knowledge Base.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store