tag:theconversation.com,2011:/ca-fr/topics/panama-papers-26281/articlesPanama papers – La Conversation2023-02-23T19:57:31Ztag:theconversation.com,2011:article/2000342023-02-23T19:57:31Z2023-02-23T19:57:31Z$1 trillion in the shade – the annual profits multinational corporations shift to tax havens continues to climb and climb<figure><img src="https://images.theconversation.com/files/512027/original/file-20230223-2492-ja174s.jpg?ixlib=rb-1.1.0&rect=45%2C32%2C1033%2C685&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Looks like paradise – especially if you're a multinational corporation in need of a tax haven.
</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/relaxing-on-hammock-after-a-beach-day-in-the-royalty-free-image/897476216?phrase=cayman%20islands">LeoPatrizi/E+ via Getty Images</a></span></figcaption></figure><figure class="align-center ">
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<p>About a decade ago, the world’s biggest economies <a href="https://www.oecd.org/g20/summits/los-cabos/">agreed to crack down</a> on multinational corporations’ abusive use of tax havens. This <a href="https://doi.org/10.1787/23132612">resulted in a 15-point action plan</a> that aimed to curb practices that shielded a large chunk of corporate profits from tax authorities.</p>
<p>But, according to our estimates, it hasn’t worked. Instead of reining in the use of tax havens – countries such as the Bahamas and Cayman Islands with very low or no effective tax rates – the problem has only gotten worse. </p>
<p><a href="https://doi.org/10.35188/UNU-WIDER/2022/254-6">By our reckoning</a>, corporations shifted nearly US$1 trillion in profits earned outside of their home countries to tax havens in 2019, up from $616 billion in 2015, the year before the <a href="https://doi.org/10.1787/23132612">global tax haven plan was implemented</a> by the group of 20 leading economies, also known as the G-20. </p>
<p><a href="https://doi.org/10.35188/UNU-WIDER/2022/254-6">In a new study</a>, we measured the excessive profits reported in tax havens that cannot be explained by ordinary economic activity such as employees, factories and research in that country. Our findings – which you can explore in more detail along with the data and an interactive map in <a href="https://missingprofits.world">our public database</a> – show a striking pattern of artificial shifting of paper profits to tax havens by corporations, which has been relentless since the 1980s. </p>
<h2>Global crackdown</h2>
<p>The current effort to curb the legal corporate practice of using tax havens to avoid paying taxes began in June 2012, when world leaders at the <a href="https://www.oecd.org/g20/summits/los-cabos/">G-20 meeting in Los Cabos, Mexico</a>, agreed on the need to do something.</p>
<p>The Organization for Economic Cooperation and Development, a group of 37 democracies with market-based economies, <a href="https://doi.org/10.1787/23132612">developed a plan that consisted</a> of 15 tangible actions it believed would significantly limit abusive corporate tax practices. These included creating a single set of international tax rules and cracking down on harmful tax practices.</p>
<p>In 2015, the G-20 adopted the plan officially, and implementation began across the world the following year.</p>
<p>In addition, following leaks like the <a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a> and <a href="https://www.icij.org/investigations/paradise-papers/">Paradise Papers</a> – which shed light on dodgy corporate tax practices – public outrage led <a href="https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-a-comparison-for-businesses">governments in the U.S.</a> and Europe to initiate their own efforts to lower the incentive to shift profits to tax havens. </p>
<h2>Profit-shifting soars</h2>
<p><a href="https://doi.org/10.35188/UNU-WIDER/2022/254-6">Our research shows</a> all these efforts appear to have had little impact. </p>
<p>We found that the world’s biggest multinational businesses shifted 37% of the profits – or $969 billion – they earned in other countries (outside the headquarter country) to tax havens in 2019, up from about 20% in 2012 when G-20 leaders met in Los Cabos and agreed to crack down. The figure was less than 2% back in the 1970s. The main reasons for the large increase were the growth of the tax avoidance industry in the 1980s and U.S. policies that made it easier to shift profits from high-tax countries to tax havens.</p>
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<p>We also estimate that the amount of corporate taxes lost as a result reached 10% of total corporate revenue in 2019, up from less than 0.1% in the 1970s. </p>
<p>In 2019, the total government tax loss globally was $250 billion. U.S. multinational corporations alone accounted for about half of that, followed by the U.K. and Germany.</p>
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<h2>Global minimum tax</h2>
<p>How do policymakers fix this?</p>
<p>So far, the world as a whole has been trying to solve this problem by cutting or scrapping corporate taxes, albeit in a very gradual way. In the past 40 years, the global effective corporate tax rate <a href="http://globaltaxation.world/">has fallen from 23% to 17%</a>. At the same time, governments have relied more heavily on <a href="https://gabriel-zucman.eu/files/PikettySaezZucman2022RKT.pdf">consumption taxes</a>, which are regressive and tend to increase income inequality.</p>
<p>But the root cause of profit-shifting is the incentives involved, such as generous or lenient corporate tax rates in other countries. If countries could agree on a <a href="https://www.jstor.org/stable/24437292">global minimum corporate tax rate</a> of, say, 20%, the problem of profit-shifting would, in our estimation, largely disappear, as tax havens would simply cease to exist. </p>
<p>This type of mechanism is exactly what more than <a href="https://www.oecd.org/newsroom/130-countries-and-jurisdictions-join-bold-new-framework-for-international-tax-reform.htm">130 countries signed onto in 2021</a>, with implementation of a 15% minimum tax set to begin in 2024 in the EU, U.K., Japan, Indonesia and many other countries. While the <a href="https://apnews.com/article/russia-ukraine-biden-poland-2577a450b3cb18f325d61e9920e2593d">Biden administration has helped spearhead</a> the global effort to implement the tax, the U.S. <a href="https://www.politico.com/news/2022/07/15/manchin-rejects-global-tax-plan-00046103">has notably not been able</a> to get legislation through Congress. </p>
<p>Our research suggests implementing this type of tax reform is necessary to reverse the shift of ever-greater amounts of corporate profits going to tax havens – instead of being taxed by the governments where they operate and create value.</p><img src="https://counter.theconversation.com/content/200034/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ludvig Wier is also Head of Secretariat at the Danish Ministry of Finance, holds a PhD from the University of Copenhagen and does research for UNU-WIDER, which provided funding for the underlying research in this story. The views expressed in this paper are those of the authors, and do not necessarily reflect the views of the Ministry of Finance of Denmark, UNU-WIDER, the United Nations University, nor its program/project donors. All data are available online at <a href="https://missingprofits.world">https://missingprofits.world</a>.</span></em></p><p class="fine-print"><em><span>Gabriel Zucman receives funding from the Stone Foundation, the Carnegie Foundation, the European Research Council, and the European Commission grant TAXUD/2020/DE/326.</span></em></p>New research shows that companies are shifting record amounts of their profits to tax havens, despite a global effort to crack down on the practice.Ludvig Wier, External Lecturer of Economics, University of CopenhagenGabriel Zucman, Associate Professor of Economics, University of California, BerkeleyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1704352021-10-31T11:56:33Z2021-10-31T11:56:33ZThe Pandora Papers: How punishing tax cheats can serve as a deterrent<figure><img src="https://images.theconversation.com/files/429186/original/file-20211028-15-gg3tme.jpg?ixlib=rb-1.1.0&rect=0%2C31%2C5192%2C2958&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Enforcing punishments on proven tax cheats could provide benefits beyond improving compliance to tax laws. Once offenders pay up, billions lost to offshore scandals could be recouped and the tax burden more fairly shared among taxpayers.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Law-abiding taxpayers look on with disappointment and disdain as details about the illicit financial arrangements of the ultra-wealthy surface — again. The latest leak of nearly 12 million offshore financial records — the so-called <a href="https://www.icij.org/investigations/pandora-papers/about-pandora-papers-leak-dataset/">Pandora Papers</a> — provides clues as to <a href="https://www.cbc.ca/news/jacques-villeneuve-pandora-papers-offshore-accounts-1.6226467">how the rich avoid paying their fair share of taxes</a>. </p>
<p>Sports stars Jacques Villeneuve, a former Formula One racer, and figure skating legend Elvis Stojko <a href="https://www.cbc.ca/news/pandora-papers-offshore-tax-avoidance-1.6197303">are among the Canadians who have been named in the Pandora Papers</a>. </p>
<p>This is not the first time the public has learned about how the wealthy evade taxes and shield their riches. The <a href="https://www.cbc.ca/news/world/panama-leak-offshore-records-putin-messi-money-1.3518951">Panama Papers</a>, <a href="https://globalnews.ca/news/3845716/the-paradise-papers-canada/">Paradise Papers</a> and <a href="https://www.cbc.ca/news/business/leaked-luxembourg-files-expose-global-companies-secret-deals-to-avoid-tax-1.2825627">Luxembourg Leaks</a> uncovered <a href="https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/tax-alert/aggressive-tax-planning.html">aggressive tax planning</a> and <a href="https://www.taxfairness.ca/en/news/tax-avoidance-or-tax-evasion-whats-difference-0">tax evasion</a> undertaken by the global elite.</p>
<p>When the rich, famous and infamous don’t pay their fair share of taxes, the public looks to authorities to enforce tax laws and punish the offenders. Punishment creates a sense of <a href="https://www.britannica.com/topic/retributive-justice">retributive justice</a> and serves as a reminder that tax compliance laws should be obeyed for the collective good of society. However, authorities often <a href="https://www.cbc.ca/news/business/cra-kmpg-settlement-taxes-1.5154610">fail to deliver</a>, perpetuating the cycle of injustice. </p>
<h2>Does punishment deter tax evasion?</h2>
<p>What we don’t know for sure is whether punishing the offenders involved in global tax scandals benefits the reported income compliance of observers and deters tax cheats. My <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3826736">preliminary research</a> suggests that the answer is “yes,” but only if observers perceive that the tax offender is fully blameworthy or responsible. </p>
<p>If the punishment of blameworthy offenders can improve compliance, it would seem logical for tax authorities to actively prosecute all suspected offenders. But this is hardly the case. </p>
<p>With <a href="https://www.cbc.ca/news/politics/offshore-tax-avoidance-evasion-1.6017316">limited resources</a> and the risk of losing costly legal battles, <a href="https://www.cbc.ca/news/politics/kpmg-isle-of-man-taxes-house-commons-finance-committee-1.6047111">not everyone</a> who evades taxes and shields wealth gets punished. Even worse, if prosecutors’ cases don’t stand up in court, it can encourage aggressive tax planning or tax evasion because a precedent is set that undermines tax authorities.</p>
<figure class="align-right ">
<img alt="A Canadian tax form" src="https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/429358/original/file-20211029-27-1o7j5be.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Does punishing tax evaders serve as a deterrent?</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<p>Why does compliance increase when tax cheats are punished? My research findings reveal that compliance improves when wrongdoers appear more deserving of prosecution and are ultimately punished. Observers experience satisfaction when authorities uphold justice, especially for the wealthy. </p>
<p>When justice is applied equally, authorities reinforce their requirement to be obeyed, which signals both their competence and that tax evaders will be found and held accountable. </p>
<h2>Pointing the finger at advisers</h2>
<p>Being perceived as guilty increases perceptions of an offender deserving a punishment. As such, a strategic course of action for those exposed in global tax scandals is to deny responsibility. Ultra-wealthy individuals named in the Pandora Papers and other tax scandals often blame lawyers or advisers. </p>
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<img alt="Elvis Stojko shoots T-shirts into a crowd from a plastic tube." src="https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=552&fit=crop&dpr=1 754w, https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=552&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/429354/original/file-20211029-25-ascu4b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=552&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Canadian figure skating legend Elvis Stojko shoots T-shirts into the crowd during a break at the 2019 National Skating Championships at Harbour Station in Saint John, N.B., in 2019.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Andrew Vaughan</span></span>
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<p>Stojko <a href="https://www.cbc.ca/news/canada/elvis-stojko-offshore-trust-belize-anthony-malcolm-1.6199821">has denied responsibility</a> and said he trusted his lawyer to manage his financial details.</p>
<p>Similarly, <a href="https://www.timescolonist.com/local-news/victoria-family-cited-in-cra-crackdown-on-tax-evasion-4626724">the wealthy Cooper family of British Columbia</a> — named in the Panama Papers — denied responsibility. Marshall Cooper, who grew up in South Africa, <a href="https://www.cbc.ca/news/business/kpmg-offshore-sham-deceived-tax-authorities-cra-alleges-1.3209838">stated that he was unaware of Canadian tax laws</a> and simply hired the best advisers to manage the family’s finances. </p>
<p>With blame being tossed back and forth, perhaps authorities should <a href="https://theconversation.com/pandora-papers-its-time-to-pursue-lawyers-and-accountants-who-enable-tax-evasion-offshore-tax-expert-qanda-169192">pursue the lawyers and advisers</a> of the wealthy rather than simply punishing tax evaders. </p>
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Read more:
<a href="https://theconversation.com/paid-millions-to-hide-trillions-pandora-papers-expose-financial-crime-enablers-too-169326">Paid millions to hide trillions: Pandora Papers expose financial crime enablers, too</a>
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<p>The media may <a href="https://www.cbc.ca/news/pandora-papers-offshore-tax-avoidance-1.6197303">shame the wealthy,</a> but lawyers, accountants and other advisers act as enablers who facilitate aggressive tax planning, and likely in some cases tax evasion. If enablers share responsibility, they too should be punished. It’s possible that punishing enablers could also compel taxpayers to comply with tax laws.</p>
<h2>Billions recouped?</h2>
<p>Enforcing punishments on proven tax cheats could provide added benefits beyond improving compliance to tax laws. Once offenders pay up, <a href="https://www.cbc.ca/news/business/cra-tax-gap-foreign-holdings-1.4726983">billions lost to offshore scandals</a> could be recouped and the tax burden more fairly shared among taxpayers. </p>
<p>Still, in the aftermath of the Pandora Papers, taxpayers are likely wondering what the authorities will do this time and whether tax offenders will get the punishments they deserve. <a href="https://www.oecd.org/tax/crime/oecd-calls-on-countries-to-crack-down-on-the-professionals-enabling-tax-and-white-collar-crimes.htm">Global tax transparency efforts</a> are ratcheting up, possibly offering a glimmer of hope that justice will prevail. But even with this silver lining, <a href="https://theconversation.com/the-next-pandora-papers-expose-is-inevitable-unless-governments-do-more-on-two-key-reforms-169357">some remain pessimistic</a>. </p>
<p>With evidence that punishment can re-establish a sense of justice, authorities should use their resources to ensure culpable offenders are held accountable. Upholding justice, especially for the wealthy and privileged, serves the collective good of society.</p><img src="https://counter.theconversation.com/content/170435/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tisha King does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Research suggests punishing tax cheats can re-establish a sense of justice among the general public, so authorities should use their resources to ensure culpable offenders are held accountable.Tisha King, Assistant Professor, Accounting, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1693532021-10-10T19:08:56Z2021-10-10T19:08:56ZThe Pandora Papers show the line between tax avoidance and tax evasion has become so blurred we need to act against both<figure><img src="https://images.theconversation.com/files/425400/original/file-20211008-15-qg06rl.jpg?ixlib=rb-1.1.0&rect=221%2C329%2C3215%2C1628&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Aekawit Rammaket/Shutterstock</span></span></figcaption></figure><p>What’s the difference between tax avoidance and tax evasion? </p>
<p>The difference used to matter. Evasion was illegal. It meant not paying tax that was due. Avoidance meant arranging your affairs so tax wasn’t due.</p>
<p>Australian media mogul Kerry Packer used the distinction as a complete defence when he told a <a href="https://youtu.be/LnwYoOeWZGA?t=312">parliamentary committee</a> in 1991 he was</p>
<blockquote>
<p>not evading tax in any way, shape or form. Of course, I am minimising my tax. Anybody in this country who does not minimise his tax wants his head read.</p>
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<p>The Pandora Papers — the biggest-ever leak of records showing how the rich and powerful use the financial system to maximise their wealth — shows the distinction has lost its meaning.</p>
<p>The dump of almost <a href="https://www.icij.org/investigations/pandora-papers/">12 million documents</a> lays bare the ways in which 35 current or former leaders and 300 high-level public officials in more than 90 countries have used offshore companies and accounts to protect their wealth.</p>
<p>Only in some of the cases could their activities be categorically declared illegal.</p>
<h2>Tax havens are legal</h2>
<p>Here’s how tax havens are used. Trusts and companies are set up in places with low tax rates and secrecy laws such as the Bahamas, Cayman Islands, Hong Kong, Singapore, Switzerland, the US state of Delaware and the Republic or Ireland.</p>
<p>If, for example, a wealthy celebrity or a politician wants to buy a new yacht or a luxury villa but doesn’t want to pay tax or stamp duty or expose their wealth to scrutiny they can get their lawyer or accountant to do it through such a trust.</p>
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Read more:
<a href="https://theconversation.com/the-pandora-papers-why-does-south-dakota-feature-so-heavily-169291">The Pandora Papers: why does South Dakota feature so heavily?</a>
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<p>For somewhere between <a href="https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore/">US$2,000 and US$20,000</a> to set up the trust, the name of the real owner or beneficiary can be hidden.</p>
<p>It isn’t illegal for the celebrity or a politician to move their money (so long as it is theirs to begin with). Assets within the trust are subject to local tax laws (sometimes zero tax) and local secrecy laws (sometimes complete secrecy).</p>
<h2>Legal, but used by criminals</h2>
<p>These legal means of using complex networks of secret entities to move around money are the same as those used by criminals.</p>
<p>Alongside the likes of India’s cricket superstar Sachin Tendulkar, Colombian pop singer Shakira and Elton John in the Panama Papers are Italian crime boss <a href="https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore/">Raffaele Amato</a>, serving a 20-year jail sentence for weapons and drugs trafficking, and the deceased British art dealer <a href="https://www.theguardian.com/news/2021/oct/05/offshore-trusts-used-pass-on-looted-khmer-treasures-leak-shows-douglas-latchford">Douglas Latchford</a>, suspected of smuggling looted treasures and money laundering.</p>
<figure class="align-center ">
<img alt="Colombian singer Shakira is one of the celebrities named in the Pandora Papers as using offshore companies. Others are Elton John, Ringo Starr, Julio Iglesias and Claudia Schiffer." src="https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Colombian singer Shakira is one of the celebrities named in the Pandora Papers as using
offshore companies. Others are Elton John, Ringo Starr, Julio Iglesias and Claudia Schiffer.</span>
<span class="attribution"><span class="source">Gregory Payan/AP</span></span>
</figcaption>
</figure>
<h2>It’s far from clear these arrangements should be legal</h2>
<p>The big question raised by the Pandora Papers is why any hiding of private wealth from tax authorities ought to be legal.</p>
<p>The International Monetary Fund estimated in 2019 that tax haven deprived governments globally of <a href="https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-global-tax-havens-shaxon.htm">US$500 billion to US$600 billion</a> per year. </p>
<p>To put that into perspective, the estimated cost of vaccinating the world against COVID-19 is <a href="https://www.nytimes.com/2021/06/11/briefing/biden-g7-vaccine-donations.html">US$50-70 billion</a>. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=968&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=968&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=968&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1216&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1216&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1216&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">OECD chief Mathias Cormann has brokered a deal for a global minimum corporate tax rate.</span>
<span class="attribution"><span class="source">OECD (CC BY-NC 3.0 IGO)</span></span>
</figcaption>
</figure>
<p>Some of what’s been uncovered in the Pandora Papers is illegal (“evasion”) but much might not be (“avoidance”, aided by anonimity).</p>
<p>The effect is the same. Dollars that ought to have been paid in tax are withheld and used for the benefit of people who aren’t keen to admit to owning them.</p>
<p>Over the weekend the Organisation for Economic Co-operation and Development, now led by Australian Mathias Cormann, brokered a deal under which 136 countries agreed to charge multinational corporations a tax rate of at least <a href="https://www.oecd.org/tax/international-community-strikes-a-ground-breaking-tax-deal-for-the-digital-age.htm">15%</a>, making tax havens harder to find.</p>
<p>Ireland, previously used as tax haven, signed up.</p>
<p>The nations concerned did this because because, even where legal, the use of tax havens costs billions.</p>
<p>We’ll soon have to consider removing a distinction in law that vanished in practice some time ago.</p><img src="https://counter.theconversation.com/content/169353/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alex Simpson has received funding from Economic and Social Research Council, UK. </span></em></p>It’s become hard to tell where avoidance stops and evasion starts. Tax havens enable both.Alex Simpson, Senior Lecturer in Criminology, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1693262021-10-06T16:30:18Z2021-10-06T16:30:18ZPaid millions to hide trillions: Pandora Papers expose financial crime enablers, too<figure><img src="https://images.theconversation.com/files/424838/original/file-20211005-25-gfjrt7.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3072%2C1825&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The world's wealthiest people wouldn't be able to shield their riches from tax authorities without enablers.</span> <span class="attribution"><span class="source">(Piqsels)</span></span></figcaption></figure><p>The <a href="https://www.icij.org/investigations/pandora-papers/about-pandora-papers-investigation/">Pandora Papers investigation</a> by the International Consortium of Investigative Journalists (ICIJ), a non-profit newsroom and network of journalists based in Washington, D.C., has revealed there are still some go-to havens for those looking to hide illicit wealth.</p>
<p>The people who don’t get mentioned as much in the media coverage of the Pandora Papers, however, are the enablers devoted to helping the richest people in the world get richer and to pass on their wealth while avoiding or evading taxes. These enablers help criminals and kleptocrats launder their ill-gotten gains.</p>
<p>They may not be as wealthy as their clients, but they are paid millions to hide trillions.</p>
<h2>The wealth defence industry</h2>
<p>For many years there has been a well-established “<a href="https://www.tandfonline.com/doi/full/10.1080/13563467.2020.1816947">wealth defence industry</a>” made up of a coalition of professionals — ranging from advisers and bankers to lawyers, accountants, notaries and estate agents — who use anonymous shell companies, family offices, offshore accounts and trusts to help the world’s richest people shield their wealth from tax collectors.</p>
<p>These highly compensated “enablers” are assisting oligarchs, dictators and criminals around the world. </p>
<p>There’s been <a href="https://www.bbc.com/news/world-58780561">a lot of mainstream reporting</a> on the actual crimes, abuses and financial misdeeds of malicious foreign states and wealthy individuals. But what about the intermediaries to the financial system who handle the details and provide the get-away mechanisms for the criminals?</p>
<figure class="align-center ">
<img alt="A group of men gather around a selection of newspapers, one of them reading one." src="https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=412&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=412&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=412&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=517&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=517&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424852/original/file-20211005-25-44kucm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=517&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Kenyans read the morning newspapers reporting a statement issued by President Uhuru Kenyatta following reports that he’s among more than 330 current and former politicians identified as beneficiaries of secret financial accounts in the Pandora Papers.</span>
<span class="attribution"><span class="source">(AP Photo/Brian Inganga)</span></span>
</figcaption>
</figure>
<p>Some elites pay respected professionals and businesses to open political doors, to lobby against sanctions, to fight legal battles and to launder money and reputations. In doing so, these institutions and individuals push the boundaries of the law and degrade the principles of our democracy.</p>
<p>According to the <a href="https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/Forensic/in-forensic-AML-Survey-report-2020-noexp.pdf">Deloitte Anti-Money Laundering Preparedness Survey Report 2020</a>, the amount of money laundered in one year is estimated to be between two per cent and five per cent of global GDP, or from US$800 billion to US$2 trillion annually.</p>
<p>The ICIJ’s <a href="https://www.icij.org/investigations/fincen-files/">FinCEN Files</a> offer unprecedented insights into a secret world of international banking, anonymous clients and, in many cases, financial crime.</p>
<p>They show how banks blindly move cash through their accounts for people they can’t identify, failing to report transactions with all the hallmarks of money laundering until years after the fact, and even do business with clients enmeshed in financial frauds and public corruption scandals.</p>
<h2>The insidiousness of ‘dark money’</h2>
<p>Corruption and financial wrongdoing are by their nature secretive and often deeply complex. <a href="https://www.opensecrets.org/dark-money/basics">Dark money</a> — essentially spending meant to sway political outcomes with no information about the source of the money — buys <a href="https://www.opensecrets.org/news/2020/01/dark-money-10years-citizens-united/">access to courts and politicians</a>, consequently making society less fair and more inequitable.</p>
<p>What often distinguishes ordinary rich people <a href="https://www.nationalgeographic.org/encyclopedia/oligarchy/">from the oligarchy</a> is that all oligarchs invest in wealth defence. They use their power and wealth to amass more power and wealth, to lobby and to rig the rules around them.</p>
<p>One of the challenges in cracking down on financial crime is the global race to the bottom among tax havens that are trying to entice customers by offering more lucrative incentives and a higher degree of secrecy for companies. Enablers who are part of the wealth defence industry develop and market strategies, structures and schemes to avoid tax liabilities and regulatory scrutiny.</p>
<p><a href="https://www.openownership.org/blogs/modelling-beneficial-ownership-data/">Beneficial ownership databases</a> aimed at combating money-laundering have become an <a href="https://www.osler.com/en/blogs/risk/april-2021/canada-s-budget-introduces-long-awaited-beneficial-ownership-registry-to-combat-money-laundering">increasingly popular reform</a> around the world <a href="https://www.icij.org/investigations/panama-papers/five-years-later-panama-papers-still-having-a-big-impact/">in the aftermath of the Panama Papers</a>, which focused international attention on how corporate anonymity can enable a range of social ills. </p>
<p>As this trend continues, there’s hope that as more jurisdictions institute greater beneficial ownership initiatives and tax transparency, remaining “outlier” offshore destinations like Bermuda, <a href="https://www.caymancompass.com/2021/10/01/government-extends-beneficial-ownership-consultation/">the Cayman Islands</a> and Malta will be sanctioned into compliance by the threat of exclusion from the global financial system.</p>
<figure class="align-center ">
<img alt="Two tourists walk along a white-sand beach lined with trees and shrubs." src="https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424855/original/file-20211005-20911-y7w6j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tourists walk along the shore of Seven Mile Beach in Grand Cayman Island.</span>
<span class="attribution"><span class="source">(AP Photo/David McFadden)</span></span>
</figcaption>
</figure>
<h2>Promising signs</h2>
<p>In the meantime, many jurisdictions continue to evade law enforcement agencies that chase the secret money trails of tax dodgers and criminals.</p>
<p>Due to all the obvious regulatory and enforcement gaps, and to the seeming lack of political will to address those gaps actively and practically, there are some encouraging signs suggesting governments around the world are being forced to act. </p>
<p>There’s now a growing global demand for greater transparency and accountability, combined with <a href="https://www.aljazeera.com/economy/2021/3/19/bb-radicalchangeleaders-call-for-measures-to-tackle-inequality">calls to address the widening wealth inequity</a> as well <a href="https://hbr.org/2019/05/the-investor-revolution">as demands from investors for the adoption of ESG (environmental, social and governance) principles</a>. </p>
<p>While those factors play a role in getting the attention of senior political leaders, the cynical reality is that the probable primary motivation of these leaders is the serious and alarming trend of a <a href="https://www.oecd.org/tax/oecd-tax-revenues-fall-slightly-before-the-covid-19-pandemic-but-countries-face-much-larger-decreases-ahead-particularly-from-consumption-taxes.htm">reduction in tax revenues</a>. The endorsement of the concept of a <a href="https://www.reuters.com/business/countries-backs-global-minimum-corporate-tax-least-15-2021-07-01/">15 per cent minimum global tax rate</a> by G7 leaders at their June 2021 summit is a clear indication that the winds of change are coming.</p>
<figure class="align-center ">
<img alt="Boris Johnson stands with his arms raised in front of other G7 leaders on a beach." src="https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424849/original/file-20211005-30173-ycuwu5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Leaders of the G7 nations pose for a photo in Cornwall, England in June 2021.</span>
<span class="attribution"><span class="source">(Leon Neal/Pool Photo via AP)</span></span>
</figcaption>
</figure>
<p>The current model is not sustainable. Fiscal realities, along with political pressure and necessity, will force political leaders to act. They’ll soon have to do much more than pay lip service to wealth inequality and power imbalance, which allows the wealth defence industry and their clients to subvert the system and avoid paying their fair share. </p>
<p>Greater transparency and accountability are needed to expose the enablers and to reduce the loopholes that enable wealthy individuals and criminals, along with corporate entities, to operate with impunity.</p><img src="https://counter.theconversation.com/content/169326/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc Tassé does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Highly compensated ‘enablers’ such as financial experts, lawyers, accountants, notaries, estate agents and company service providers are assisting oligarchs, dictators and criminals around the world.Marc Tassé, Professor, Accounting, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1693572021-10-06T05:54:42Z2021-10-06T05:54:42ZThe next Pandora Papers exposé is inevitable – unless governments do more on two key reforms<figure><img src="https://images.theconversation.com/files/424926/original/file-20211006-15-df0a53.jpg?ixlib=rb-1.1.0&rect=0%2C161%2C6000%2C3826&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The International Consortium of Investigative Journalists (<a href="https://www.icij.org/">ICIJ</a>) is in the process of working through another mountain of documents showing how the rich and powerful use the global financial system to hide their wealth and avoid taxes. </p>
<p>Those 11.9 million records, dubbed the <a href="https://www.bbc.com/news/world-58780561">Pandora Papers</a>, follows similar leaks in 2017 (the <a href="https://theconversation.com/three-strategies-to-fight-the-tax-avoidance-revealed-by-the-paradise-papers-87002">Paradise Papers</a>), in 2016 (<a href="https://theconversation.com/panama-papers-information-sharing-could-bust-open-secretive-companies-in-tax-havens-57214">the Panama Papers</a>) and in 2014 (the <a href="https://theconversation.com/luxembourg-leaks-how-harmful-tax-competition-leads-to-profit-shifting-33940">Luxembourg Leaks</a>, or LuxLeaks).</p>
<p>Commenting on the 13 million financial and tax documents comprising the Paradise Papers in 2017, <a href="https://theconversation.com/three-strategies-to-fight-the-tax-avoidance-revealed-by-the-paradise-papers-87002">we wrote that</a> “governments have not learnt their lesson and taken action”. </p>
<p>Four years later here we are again. Some progress has been made on the critical reforms needed – in particular, eliminating the secrecy that shrouds tax havens – but there’s still more to do. </p>
<h2>Systemic issues</h2>
<p>In sorting through these new documents, journalists have quite reasonably tended to focus on the “easy connections” and “known individuals”. This work has identified at least 956 companies with more than 336 beneficiaries who are “high-level politicians and public officials”. </p>
<p>This includes Vladimir Putin’s mistress allegedly having assets worth US$100 million, Jordan’s King Abdullah II using offshore companies to buy <a href="https://www.washingtonpost.com/world/interactive/2021/jordan-abdullah-shell-companies-luxury-homes/">three Malibu mansions</a> for US$70 million, and the 11-year-old son of Azerbaijani president Ilham Aliyev <a href="https://www.nbcnews.com/id/wbna35720827">owning nine waterfront mansions</a> in Dubai worth US$44 million.</p>
<p>Also on the list of 35 current and former national leaders, including Czech prime minister Andrej Babiš, Kenyan president Uhuru Kenyatta, Ukrainian president Volodymyr Zelensky and former British prime minister Tony Blair. </p>
<p>But as juicy as these stories are, we should not be distracted from the systemic issues that lead to the wealthy using offshore legal entities and accounts. It’s not always nefarious or illicit.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/pandora-papers-its-time-to-pursue-lawyers-and-accountants-who-enable-tax-evasion-offshore-tax-expert-qanda-169192">Pandora papers: 'it's time to pursue lawyers and accountants who enable tax evasion' – offshore tax expert Q&A</a>
</strong>
</em>
</p>
<hr>
<h2>Protecting assets</h2>
<p>In the Pandora Papers are arrangements that, with incomplete information, may appear suspect but may be quite legitimate.</p>
<p>An example might be the 81 trust structures established in the US state of South Dakota and at least 100 more in various other US states where trust disclosures, especially about beneficial ownership, are not mandatory. To properly assess these transactions we really need more information.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-pandora-papers-why-does-south-dakota-feature-so-heavily-169291">The Pandora Papers: why does South Dakota feature so heavily?</a>
</strong>
</em>
</p>
<hr>
<p>The use of complex business structures, involving countries with high levels of secrecy, may be done to facilitate tax avoidance. But it might also be “asset protection”. </p>
<h2>Weak property rights</h2>
<p>In countries with weak property rights and unreliable judicial systems, even those who accrue wealth legitimately can fear losing it. </p>
<p>Consider, for example, the case of China’s billionaire actress and singer Zhao Wei, who in August was “<a href="https://www.wsj.com/articles/zhao-wei-china-biggest-movie-star-erased-from-internet-11631713293">erased from history</a>”, or <a href="https://www.reuters.com/article/us-china-alibaba-jackma-idUSKBN2AU0QL">Jack Ma</a>, China’s richest man until he <a href="https://www.nytimes.com/2020/12/24/technology/china-jack-ma-alibaba.html">criticised financial regulators</a> last year. </p>
<p>This creates a demand for assets held in other countries (preferably secretly) and a legal system that protects ownership of those assets. It also likely explains why 3.3 million of the 6.9 million documents in this latest leak relate to offices located in Hong Kong. </p>
<p>An analysis of these documents recognising the relative strength of property rights in the countries where individuals, or their businesses, are based would be interesting — and not just as an “academic” exercise. </p>
<p>In many countries, particularly developing countries, weak property rights contribute to lack of capital for economic development by creating incentives for the legitimately wealthy to use offshore accounts and assets. </p>
<p>This suggests a critical need to enhance property rights in these countries. </p>
<p>Weak legal systems also facilitate wealth accumulation through corruption or exploitation. </p>
<h2>Unfinished business</h2>
<p>Five years ago when discussing the revelations from the Panama Papers, we suggested the first thing the global community needed to do was require the public disclosure of country-by-country reporting of company tax affairs by all tax authorities. This idea (known as CbCR) emerged from OECD and G20 recommendations made about the time of the Luxembourg Leaks in 2014. </p>
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Read more:
<a href="https://theconversation.com/three-strategies-to-fight-the-tax-avoidance-revealed-by-the-paradise-papers-87002">Three strategies to fight the tax avoidance revealed by the Paradise Papers</a>
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<p>About 100 countries have adopted the CbCR policy, at least in part. The problem is that in too many cases – such as Australia and the US – the disclosures are only to the tax authority, not to the public.</p>
<p>In 2017 we also recommended all countries have public registers of beneficial ownership of all entities.</p>
<p>There has also been some progress on this. Significant pressure has been applied to tax havens or secrecy jurisdictions such as the Bahamas and Switzerland. But more is needed. </p>
<p>In Australia, for example, the Paradise Papers led to the government floating the idea of a public register of beneficial ownership, but this was shut down soon after. In the US, states such Delaware and South Dakota are still “secrecy jurisdictions”. </p>
<p>Some progress has been made in making tax havens and secrecy jurisdictions more transparent. But many would say the progress has been mainly benefited wealthy countries, helping them increase tax revenue and to be seen to be doing something to fight corruption, while still allowing corruption to flourish in poorer nations. </p>
<p>Until countries such as the US and Australia embrace the reforms that have been on the table since LuxLeaks, expect further document leaks with similar results in the next five years.</p><img src="https://counter.theconversation.com/content/169357/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Juicy stories of political leaders stashing loot overseas make good headlines. But the real story is the need for systemic solutions, especially on property rights and transparency.Roman Lanis, Associate Professor, Accounting, University of Technology SydneyPeter Wells, Professor, Accounting Discipline Group, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1692912021-10-05T20:22:00Z2021-10-05T20:22:00ZThe Pandora Papers: why does South Dakota feature so heavily?<figure><img src="https://images.theconversation.com/files/424836/original/file-20211005-21-1q0jxlm.jpg?ixlib=rb-1.1.0&rect=0%2C296%2C3000%2C1697&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Why the super-rich are targeting the Mount Rushmore state.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/in-this-handout-image-provided-by-the-world-archery-news-photo/1235614103?adppopup=true">Dean Alberga/Handout/World Archery Federation via Getty Images</a></span></figcaption></figure><p><em>A trove of confidential documents outlining how global elites squirrel away their wealth to avoid tax has been laid bare in the “<a href="https://www.icij.org/investigations/pandora-papers/">Pandora Papers</a>.”</em></p>
<p><em>Consisting of around <a href="https://www.bbc.com/news/world-58780561">12 million documents</a>, the data was obtained by the <a href="https://www.icij.org/">International Consortium of Investigative Journalists</a>, a Washington, D.C.-based think tank that worked with media organizations around the world to publish details of the leaked information.</em></p>
<p><em>As well as giving an insight into <a href="https://www.pbs.org/newshour/show/pandora-papers-expose-how-world-leaders-and-the-ultra-rich-move-their-money">the wealth of world leaders</a>, former presidents and prime ministers, the Pandora Papers reveal how tax havens – including in the the U.S. – are used to hide money from tax authorities. Taxation expert <a href="https://law.vanderbilt.edu/bio/beverly-moran">Beverly Moran of Vanderbilt University</a> walked The Conversation through three takeaways from the leaked documents.</em></p>
<h2>How the super-rich use tax loopholes</h2>
<p>The Pandora Papers come five years after a similar leak of documents called the “<a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a>.” Those documents showed how many of the world’s wealthiest people routinely avoided any type of tax by placing their assets in tax havens – nations or jurisdictions with low tax rates. </p>
<p>In response to the Panama Papers, many countries took measures that made some of the techniques exposed in the Panama Papers obsolete. For example, after decades of offering rich people the greatest bank secrecy in the Western world, the Swiss forced their <a href="https://www.forbes.com/sites/oliverwilliams1/2019/10/05/secret-banking-secrecy-became-extinct-one-year-ago-today/?sh=51cd79055cb8">banks to open their books</a>. The latest release also comes amid scrutiny over how little tax some wealthy individuals pay. The intergovernmental Organization for Economic Cooperation and Development recently pushed for <a href="https://www.hklaw.com/en/insights/publications/2021/07/agreement-on-global-tax-reform-what-happened-and-whats-next">a corporate minimum tax of 15% as another way to attack the tax haven problem</a>.</p>
<p>The Pandora Papers reveal the tactics wealthy people developed to replace the no longer secret means they used in the past. In particular, the Pandora Papers shine a light on the role of <a href="https://www.washingtonpost.com/world/interactive/2021/jordan-abdullah-shell-companies-luxury-homes/">shell companies</a> in making it harder to tax high-net-worth individuals. Included in the leak are documents revealing aspects of the finances of <a href="https://www.axios.com/pandora-papers-politicians-countries-d8ca46fc-8422-4d39-b354-aa1de2a24a9f.html">hundreds of politicians from 90 countries</a>.</p>
<h2>The role of shell companies</h2>
<p>A <a href="https://apnews.com/article/leaked-pandora-records-show-how-powerful-shield-assets-b31daac39800f6a6423e24465df45ffc">shell company</a> is a legal entity that exists only on paper. It produces nothing and employs no one. Its value lies in a certificate that sits in a government office. </p>
<p>With this certificate, the shell company – whose sole purpose is to hold and hide assets – becomes one of a series of Russian dolls, each fit snugly into the next, creating a type of three-card monte in which the taxing authorities can never find assets nor owners. With a series of shell companies, a billionaire can house his or her assets far from the taxman’s prying eyes.</p>
<p>For the billionaire to avoid the tax, the shell company must reside, for tax purposes, in a tax haven. In the past, that has meant a bank account in the Cayman Islands or Monaco. But as the Pandora Papers show, increasingly it could mean using <a href="https://www.cbsnews.com/news/pandora-papers-tax-haven-south-dakota/">a tax haven in the United States</a>.</p>
<h2>South Dakota as a tax haven</h2>
<p>South Dakota is mentioned throughout the Pandora Papers because many wealthy people use the state as a tax haven. Indeed, of the 206 U.S.-based trusts identified in the Pandora Papers – which combined hold assets worth more than US$1 billion – 81 <a href="https://www.icij.org/investigations/pandora-papers/us-trusts-offshore-south-dakota-tax-havens/">are based on South Dakota</a>.</p>
<p>South Dakota is a particularly good tax haven for a number of reasons. For one thing, it has strong secrecy protections thanks to its <a href="https://www.icij.org/investigations/panama-papers/what-is-a-tax-haven-offshore-finance-explained/">trust laws</a>, which makes it easy to hide the true ownership of property. Trusts are said to offer some of the <a href="https://www.theguardian.com/news/2021/oct/04/pandora-papers-reveal-south-dakotas-role-as-367bn-tax-haven">most powerful legal protections</a> in the world.</p>
<p>According to the Pandora Papers, trust-friendly legislation in South Dakota has resulted in <a href="https://www.startribune.com/foreign-money-flows-to-south-dakota/600103699/">assets in trusts growing fourfold</a> in the state over the past decade to $360 billion.</p>
<p>But South Dakota also benefits from the same things all U.S. states have: comparatively strong rule of law, a stable currency and good infrastructure – especially when compared with other known tax havens outside of Europe. A wealthy person can easily fly to the United States, purchase property in the U.S., put assets in American banks and feel secure knowing that his or her contracts will be respected and protected by a stable and transparent legal system.</p><img src="https://counter.theconversation.com/content/169291/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Beverly Moran does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A taxation expert explains why South Dakota has become a favorite state for the ultra-rich when it comes to squirreling away their wealth.Beverly Moran, Professor Emerita of Law, Vanderbilt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1691922021-10-04T14:21:14Z2021-10-04T14:21:14ZPandora papers: ‘it’s time to pursue lawyers and accountants who enable tax evasion’ – offshore tax expert Q&A<figure><img src="https://images.theconversation.com/files/425536/original/file-20211008-22-10i6w5n.jpg?ixlib=rb-1.1.0&rect=30%2C15%2C2499%2C1468&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What's inside the box?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/greek-mythology-pandora-opening-box-1858047022">delcarmat/Shutterstock</a></span></figcaption></figure><p><em>Many of the world’s richest and most powerful people are in the spotlight once more for using secretive tax havens and corporate structures to hide wealth and avoid paying taxes. The Pandora papers is the third in a series of huge leaks of documents to the media following the <a href="https://www.icij.org/investigations/panama-papers/">Panama papers</a> in 2016 and the <a href="https://www.icij.org/investigations/paradise-papers/">Paradise papers</a> in 2017 – and little seems to have changed in the interim.</em> </p>
<p><em><a href="https://www.theguardian.com/news/2021/oct/03/pandora-papers-biggest-ever-leak-of-offshore-data-exposes-financial-secrets-of-rich-and-powerful">Those included</a> so far in the new revelations include the leaders of the Czech Republic, Cyprus, Jordan and Ukraine, plus members of the ruling family in Azerbaijan and figures close to Vladimir Putin. In all, more than 100 billionaires are reportedly involved in the revelations, with transactions ranging from properties worth millions of pounds to slush funds and superyachts.</em></p>
<p><em>We asked Professor Ronen Palan, a specialist in offshore tax havens at City, University of London, about the story so far.</em></p>
<p><strong>What are your initial thoughts?</strong></p>
<p>I’m afraid I’m not surprised by these papers. There’s no evidence to suggest that the volume of transactions taking place through these offshore centres is declining, so the same financial structures that we heard about in the Panama and Paradise papers are still clearly being used. </p>
<p>It’s fascinating that so many of these people in the public eye must have known that eventually their activities would become common knowledge, and yet they opted for offshore secrecy anyway. I suppose any concerns may be overcome perhaps by greed and the knowledge that they will not be prevented from doing it. </p>
<p>In some cases we are talking about (illegal) tax evasion and in some cases it’s (legal) tax avoidance: the difference comes down to whether the people in question had fully notified the authorities in their home countries about the offshore structures they are using. In instances when I read that they are asked by the media to comment and they decline to respond, it creates the appearance that we are talking about evasion – although this remains unproven. </p>
<p><strong>Why does the situation not appear to be improving?</strong></p>
<p>Over the past 20 or 30 years, <a href="https://www.oecd.org/tax/beps/">international regulation</a> has <a href="https://ec.europa.eu/taxation_customs/common-consolidated-corporate-tax-base-ccctb_en">focused on</a> creating tools <a href="https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca">that allow</a> tax authorities to ensure that taxpayers are not evading taxation. Systems were introduced that focus on “know your customer” or KYC – requiring people transacting in particular jurisdictions to fully identify themselves so that this information can be shared with other jurisdictions. </p>
<p>This essentially creates transparency so that you know who has money where, so that tax authorities can use this information to make sure that their citizens are not evading taxation. But while that can be effective in countries where the tax authority is operating independently of the government and politics, it’s not going to work in Russia or China or many other developing countries. It’s therefore not surprising to me that many of the revelations are about activities outside of the developed world.</p>
<p><strong>But why hasn’t transparency forced tax havens to change?</strong></p>
<p>It has brought about change, but some jurisdictions comply more than others. So you have got some British jurisdictions such as Jersey or the Cayman Islands that are much more transparent than they used to be. On the face of it, they can claim to be more regulated than, say, Denmark or Sweden. </p>
<p>But the professionals who have the expertise to create structures that enable tax evasion are still often based in these places, and they create structures with different layers that will be partly registered in these jurisdictions but partly in those with looser transparency rules such as the British Virgin Islands or Panama – following the letter but not the spirit of the law. This makes it very difficult to see what is happening and whose money is involved. </p>
<p><strong>How do we improve the current situation?</strong></p>
<p>The Pandora papers show we are reaching the limits of what can be done with data transparency. Unless we find ways to tighten the net, this won’t be the last leak of its kind. This <a href="https://www.oecd.org/tax/crime/ending-the-shell-game-cracking-down-on-the-professionals-who-enable-tax-and-white-collar-crimes.htm">is recognised</a> at least implicitly by the OECD (Organisation for Economic Co-Operation and Development) and <a href="https://coffers.eu/">other international bodies</a> in their increasing interest in going after the enablers, rather than just focusing on the tax evaders themselves.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Professionals in the dusk with the sun behind them" src="https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=609&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=609&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=609&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=765&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=765&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424482/original/file-20211004-13-nu2mv7.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=765&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Meet the enablers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-people-travel-beach-trip-airport-245944036">RawPixel.com</a></span>
</figcaption>
</figure>
<p>Maybe it’s time to create something similar to what applies in medicine, so that, if enablers contravene certain standards, they can be prosecuted – even in countries who are not directly affected by their activities. If they went to such a country, they could be arrested on arrival. </p>
<p><strong>Should we create a new international institution dedicated to stamping out tax evasion?</strong></p>
<p>In practical terms, the three places that matter when it comes to creating international regulations are the US, EU and China. Unfortunately they are not agreeing with one another on much right now, so it will be difficult to reach an agreement about such an institution. Even if they did agree, they would be accused of imperialism by smaller countries, or of acting as dictators. </p>
<p>Of course, these three players would still need to agree on an initiative to really go after enablers, so you can make the same criticism of this strategy, but it is at least more modest in its scope and therefore potentially more realistic. </p>
<p><strong>Are all these revelations actually helpful?</strong></p>
<p>There’s certainly a danger of media saturation, in which the public knows about these kinds of activities and may be less interested by now. But we need to emphasise that the consequences are not going away: to run a modern state, it’s very expensive. To pay for a good education system, a good health system, properly functioning infrastructure and so forth, somebody has to pay for it. </p>
<p>If the rich are avoiding paying their share, somebody else is picking up the tab, and that’s either the poor or the squeezed middle classes. So if the public are tired of all this scandal, it doesn’t change the fact that they are suffering because of it.</p><img src="https://counter.theconversation.com/content/169192/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ronen Palan receives funding from the European Commission's Horizon 2020 fund, European Research Council Advanced Grant, and the OECD. Ronen Palan is a senior advisor to the Tax Justice Network</span></em></p>The latest instalment of leaks about the super-rich using offshore tax havens to hide their wealth has been published.Ronen Palan, Professor of International Politics, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1577262021-04-13T09:01:04Z2021-04-13T09:01:04ZMalta: how the rule of law has been challenged by murder and corruption allegations<p>When 11 people face court in Valletta, Malta, in coming weeks, the rule of law on the Mediterranean island will also be on trial. The defendants, who are facing charges relating to allegations of corrupt dealings, include Keith Schembri, the former chief of staff to the ex-prime minister, Joseph Muscat. Schembri was arrested and detained on March 20 on charges of corruption, money-laundering and “<a href="https://timesofmalta.com/articles/view/editorial-the-long-road-to-justice.859288">engaging in lucrative underhand business dealings</a>”, according to press reports. His fellow defendants include various prominent business figures.</p>
<p>The prosecutions stem from investigations, prompted by the publication in 2016 of the <a href="https://offshoreleaks.icij.org/search?c=MLT&cat=2">Panama Papers</a>, into widespread corruption and money laundering in Malta. The investigations were central to the work of murdered Maltese journalist <a href="https://www.theguardian.com/world/2017/oct/16/malta-car-bomb-kills-panama-papers-journalist">Daphne Caruana Galizia</a>, who was looking into alleged links between government figures and off-shore shell companies at the time of her assassination in October 2017. </p>
<p>All 11 defendants have now been <a href="https://timesofmalta.com/articles/view/live-blog-nexia-bt-four-face-money-laundering-charges-in-court.862806">granted bail</a>. Schembri has previously been questioned by police in <a href="https://www.theguardian.com/commentisfree/2019/nov/29/the-guardian-view-on-the-daphne-caruana-galizia-investigation-the-ministerial-connection">connection with the assassination</a>, while others – including former prime minister <a href="https://www.reuters.com/article/us-malta-daphne-muscat-resignation-idUSKBN26Q2RW">Joseph Muscat</a> and a cabinet minister, <a href="https://www.theguardian.com/world/2019/nov/26/malta-pm-chief-of-staff-schembri-daphne-caruana-galizia-fenech-muscat">Konrad Mizzi</a> – resigned their posts. None of the three were charged.</p>
<p>Three men accused of carrying out the murder await trial, though one of the three – hitman Vincent Muscat – <a href="https://timesofmalta.com/articles/view/live-blog-daphne-murder-suspects-in-court-as-vince-muscat-seeks-fast.853598">entered a guilty plea</a> and was sentenced to 15 years imprisonment in February 2021. A fourth man, businessman Yorgen Fenech, has been charged with “<a href="https://www.reuters.com/article/uk-malta-daphne/maltese-businessman-fenech-charged-with-complicity-to-murder-in-journalist-case-idUKKBN1Y40FI?edition-redirect=uk">complicity to murder</a>”, and his alleged links to figures in the government have been the focus of police inquiries in relation both to the corruption allegations and the murder investigation. Fenech, who also awaits trial, has claimed to police, according to evidence given in court reported by the Times of Malta, that <a href="https://timesofmalta.com/articles/view/live-blog-police-inspector-to-testify-about-yorgen-fenech.814473">Keith Schembri had an involvement with the attack</a>, although no evidence has been produced in court to support this allegation.</p>
<p>The various scandals engulfing Malta’s eight-year Labour government prompted former European commissioner and conservative Maltese politician Tonio Borg to write <a href="https://timesofmalta.com/articles/view/of-folly-and-arrogance-tonio-borg.857593">an article</a> in The Times of Malta asking: “What is happening to this country and its governing bodies?”</p>
<p>The rule of law is the ultimate test of a functioning state. Key to this is the principle that there be one rule for both powerful and powerless. This is why Schembri’s charges are so significant. The Daphne Caruana Galizia Foundation <a href="https://www.daphne.foundation/en/2021/03/20/keith-schembri-charged">reacted on its website</a> by saying that: </p>
<blockquote>
<p>Prosecuting Schembri today brings us a step closer to a Malta where no one is above the law. It is the country Daphne fought for and the one we all deserve.</p>
</blockquote>
<h2>Rule of law</h2>
<p>Also key to a functioning democracy is <a href="https://www.thenewfederalist.eu/how-is-malta-s-corruption-and-lack-of-good-governance-affecting-the-eu?lang=fr">freedom of the press</a>, a principle that was severely damaged when Caruana Galizia was murdered. But concern for the rule of law in Malta runs deeper than allegations of serious crime and the murdering of a journalist. It goes right to the heart of the constitutional system, in which one finds a concentration of power in the hands of the government. The government is currently under fire for its <a href="https://timesofmalta.com/articles/view/a-dangerous-abusive-bill.858112">proposed Bill 198</a>, which critics have said is a “dangerous, abusive bill which risks undermining the constitution”. </p>
<p>At present, under the Maltese constitution, criminal proceedings can only be held in a court of law, with any criminal penalties being within the exclusive discretion of a court. The constitutional court <a href="https://ecourts.gov.mt/onlineservices/Judgements/Details?JudgementId=0&CaseJudgementId=100432">ruled in 2016</a> that harsh administrative penalties should be regarded as of a criminal nature and remain within the exclusive domain of the courts. The <a href="https://theshiftnews.com/2021/03/07/dodgers-gone-dodge-city-remains/">reasoning is simple</a>: “The person facing severe fines and measures whether of a criminal or administrative nature needs all the protections of the courts.”</p>
<p>Malta’s justice minister, Edward Zammit Lewis, attempted in October 2020 to amend the constitution to enable the government to establish public authorities with the power to impose financial penalties, potentially usurping the authority of the courts. His amendment failed to achieve the two-thirds majority needed to pass. So instead the government has presented Bill 198, which attempts to amend the <a href="https://www.maltatoday.com.mt/news/national/108395/delia_will_take_interpretation_act_to_constitutional_court_if_bill_is_passed#.YFnxsy2l1hE">Interpretation Act</a>, which concerns the language in which laws in Malta are interpreted. </p>
<p>The amendment would effectively alter the definition of a criminal sanction, meaning penalties could be imposed by public authorities and not just courts. </p>
<p>The bill – which could pass with a simple majority of one vote – <a href="https://timesofmalta.com/articles/view/undermining-the-constitution.855481">provides that</a> “administrative penalties, some of them running into exorbitant amounts of hundreds of thousands of euros, will no longer need to be imposed by a court of law”.</p>
<p>But access to the protection of courts is at the very heart of the rule of law. Allowing public authorities to impose criminal sanctions bypasses the courts and permits “<a href="https://timesofmalta.com/articles/view/undermining-the-constitution.855481">government-appointed officers</a>” to issue penalties. </p>
<p>This would be bad enough on its own, but the way the government is attempting to go about this reform makes matters worse. Having failed to achieve the votes for formal constitutional amendment, the government is now trying to change the meaning of the constitution’s words by taking advantage of a constitutional loophole. </p>
<p>This could set the unwelcome precedent of the government amending the constitution through technical adjustment. Indeed, <a href="https://timesofmalta.com/articles/view/undermining-the-constitution.855481">leading constitutional lawyers</a> have said that the Labour government was “using its … parliamentary majority to cripple … the supreme law of the land. The supremacy of the constitution would translate into the will and whim of transient politicians.”</p>
<p>There has been serious concern for some time that elements of the political and business elite have considered themselves above the law, something highlighted by the murder of Caruana Galizia, the corruption allegations and the Malta government’s seeming disregard for the constitution. As Tonio Borg asked in his passionate polemic in The Times of Malta: </p>
<blockquote>
<p>Are these incidents the result of arrogance or folly of the powers that be? Is it possible that these extreme, unreasonable and disproportionate actions are the fruit of arrogance after eight years in government or merely the folly of politicians who have lost the plot? Probably they are both.</p>
</blockquote>
<p>The looming trial of a former high-ranking government adviser may well shed some light on his conclusions.</p><img src="https://counter.theconversation.com/content/157726/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Stanton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The life, death and work of murdered journalist Daphne Caruana Galizia may finally be bearing fruit.John Stanton, Senior Lecturer in Law, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1466852020-09-22T13:22:37Z2020-09-22T13:22:37ZWhy do bankers behave badly? They make too much to ask questions<figure><img src="https://images.theconversation.com/files/359379/original/file-20200922-20-1l1kf4n.jpg?ixlib=rb-1.1.0&rect=24%2C60%2C2676%2C1287&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Rudy Balasko/Shutterstock</span></span></figcaption></figure><p>Over the past 16 months journalists have been scouring through more than 2,000 Suspicious Activity Reports originally sent by banks to the United States Treasury, before being leaked to Buzzfeed and then passed along to the <a href="https://www.icij.org/investigations/fincen-files/">International Consortium of Investigative Journalists</a>.</p>
<p>The reports relate to more than US$2 trillion in transactions over the period from 2000 to 2017. Some of these transactions will already have been investigated, and may be legitimate. In the case of the Australian banks, the regulator AUSTRAC has already <a href="https://www.smh.com.au/business/banking-and-finance/macquarie-cba-face-fresh-money-laundering-scrutiny-after-data-leak-20200921-p55xmg.html">asked the US Treasury</a> for some of this information.</p>
<p>There are a number of questions raised by this latest episode of bad behaviour by banks. Firstly, why don’t banks have better controls to stop these kinds of transactions from occurring?</p>
<p>With transactions from tax havens, from shell companies, or to countries under sanction why aren’t banks themselves doing some investigation rather than simply passing information along to the US Treasury? </p>
<p>The short answer is that banks make too much money and it is not in their interest to ask too many questions.</p>
<p>An obvious example are the transactions processed by JP Morgan relating to the <a href="https://www.theguardian.com/world/1mdb">1Malaysia Development Berhad scandal</a> which netted the bank millions of dollars in fees despite the obvious questions the transactions should have raised.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/xTXG_wiMI34?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">International Consortium of Investigative Journalists.</span></figcaption>
</figure>
<p>A second question is why do banks consistently seem to behave so badly? </p>
<p>Australia has seen banking scandal after banking scandal over the last 30 years, with the latest detailed in the report of the <a href="https://theconversation.com/au/topics/hayne-royal-commission-56073">Hayne Royal Commission</a> in 2019.</p>
<h2>Big rewards, less regulation</h2>
<p>I believe the reason the banking industry is particularly prone to scandals is because of the amount of cash sloshing through the system, and the fact that in recent years there have been fewer regulations and less policing than is needed.</p>
<p>Deregulation has been the general trend in finance since the mid-1980s, first in the United States and Britain, and then in countries such as Australia.</p>
<p>Australia’s deregulation began with the <a href="https://www.smh.com.au/entertainment/inside-the-floating-of-the-a-20131211-2z698.html">floating of the exchange rate</a> in 1983 followed by the removal of controls over bank interest rates and bank deposits with the Reserve Bank. </p>
<p>Sure enough, Australia’s first banking scandal was the <a href="https://theconversation.com/no-better-than-roulette-how-foreign-exchange-trading-rips-off-mum-and-dad-investors-113743">Swiss loans affair</a>
in 1985 in which unsophisticated Australians were encouraged to borrow in a foreign currency oblivious to the risk the Australian dollar might fall forcing them to pay back much more than they borrowed.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/no-better-than-roulette-how-foreign-exchange-trading-rips-off-mum-and-dad-investors-113743">No better than roulette. How foreign exchange trading rips off mum and dad investors</a>
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<p>In the United States the <a href="https://en.wikipedia.org/wiki/Savings_and_loan_crisis">Savings and Loan debacle</a> occurred at roughly the same time. A classic example is a large bank in Ohio, Home State, that failed in 1985. Depositors in Home State thought they were safe because their deposits were insured, but deregulation of deposit insurance led to private insurers. The deposit insurance company failed alongside Home State, leaving nothing for insurance payouts.</p>
<p>The next major banking disaster was the <a href="https://www.investopedia.com/terms/a/asian-financial-crisis.asp">Asian financial crisis</a> in 1997. Deregulated banks in countries including Korea and Thailand failed due to large unregulated inflows the systems in these countries couldn’t handle. </p>
<h2>No learning from history</h2>
<p>A follow-on was the failure of <a href="https://www.managementstudyguide.com/failure-of-long-term-capital-management.htm">Long Term Capital Management</a>, a highly leveraged (borrowed) hedge fund in 1998. The US Treasury engineered a bailout of Long Term Capital Management that was favourable to its shareholders and lenders instead of letting it fail.</p>
<p>There were a number of obvious regulatory problems that led to the crisis. Hedge funds were not required to report their positions in these markets and the risk they were creating or exposed to. They were highly leveraged. Unsophisticated financial markets suffered unmanageable large capital flows.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/359367/original/file-20200922-16-jaf8rx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Alan Greenspan was head of the US Federal Reserve but opposed to regulation.</span>
</figcaption>
</figure>
<p>During the crisis the Governor of the US Federal Reserve was Alan Greenspan, a man philosophically opposed to regulation. </p>
<p>He was a follower of the philosophy of <a href="https://www.vanityfair.com/culture/2000/12/hitchens-200012">Ayn Rand</a>, whose view was that the government was incompetent and regulation was unnecessary.</p>
<p>Greenspan noted the contradiction in being a public servant of this mindset, but tried to further deregulate finance wherever and however possible.</p>
<p>Despite the Asian crisis coming close to creating the first global financial meltdown, there was no slowing in deregulation afterwards. </p>
<p>The result was the <a href="https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html">global financial crisis</a>. </p>
<p>Once again, high leverage and opacity were culprits, along with deregulation in derivatives markets and poor design for some market structures.</p>
<h2>Even businesses want better regulation</h2>
<p>After the global financial crisis, deregulation continued, at times despite the wishes of industries affected. On Monday this week 381 companies signed a letter <a href="https://www.ft.com/content/dbb65603-ece2-45b9-988c-20847594a40b">arguing against</a> a proposal that would remove the need for hedge funds to disclose their stock market holdings. US Treasury Secretary Steve Mnuchin used to work in a hedge fund. He is unlikely to back down.</p>
<p>And this week the first details of the 16-month investigation were released, exposing major issues with transactions by the largest banks in the United States and United Kingdom in particular, but also all four of Australia’s major banks, and Macquarie Bank which was used for more than US$120 million (A$167 million) of suspicious transactions.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-credit-rating-agencies-economic-advice-shouldnt-be-trusted-63253">Why credit rating agencies' economic advice shouldn't be trusted</a>
</strong>
</em>
</p>
<hr>
<p>Many won’t be illegal, but the suspicious activity reports suggest that where there is a conflict between profit and ethical decision making, profit usually wins. </p>
<p>I don’t think the reason for this is that all people in finance are unethical, but an industry with such a lot of cash floating around and too little regulation is likely to attract people with questionable ethics.</p>
<h2>It needn’t mean a return to the old days</h2>
<p>Regulation needn’t mean a reversion to the old “3-6-3” banking days where deposit rates were 3%, lending rates were 6% and the bank manager was on the golf course by 3pm.</p>
<p>But regulation needs to address disclosure issues, leverage, and issues with “sophisticated” products that create a significant risk of blowing up the global financial system.</p>
<p>Reforms should also focus the minds of management and boards on better behaviour. A simple one would be non-payment of bonuses when the organisation is brought into disrepute. It could be structured along the lines of the <a href="https://www.afr.com/companies/financial-services/the-two-strikes-rule-must-go-20190326-p517kp">two strikes</a> rule on remuneration.</p>
<p>Consumers of financial products are at a considerable information disadvantage, and need better protection. Currently consumer protection in the financial services sector lies with the Australian Securities and Investments Commission (ASIC) and with state consumer affairs offices. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/lunch-with-bankers-even-theyre-unimpressed-with-their-new-banking-code-of-conduct-122036">Lunch with bankers. Even they're unimpressed with their new Banking Code of Conduct</a>
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<p>In some cases this works, but neither ASIC nor consumer affairs offices are focused exclusively on protecting consumers against abuses in the financial services sector. ASIC is responsible to businesses and finance professionals as well as consumers, and at times these responsibilities conflict.</p>
<p>The codes of conduct we have are voluntary, although industry bodies can seek ASIC approval. The Australian Banking Association code is <a href="https://theconversation.com/the-new-banking-code-looks-impressive-but-what-will-it-achieve-120582">essentially toothless</a>.</p>
<p>Until there is greater regulation in banking and finance we will continue to endure the kinds of bad behaviour we’ve been lumbered with for decades. And we will continue to pay for it too, when things go bad. It’s not enough to rely on banks to get banks to behave well.</p><img src="https://counter.theconversation.com/content/146685/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Crosby does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Not all people in banks are unethical, but banking attracts unethical people.Mark Crosby, Professor, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1226432019-09-19T04:25:04Z2019-09-19T04:25:04ZMedia Files: investigative journalist Bastian Obermayer, who led the Panama Papers tax exposé<figure><img src="https://images.theconversation.com/files/290037/original/file-20190829-106517-41qm2j.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3569%2C2548&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Panama Papers was the biggest-ever collaboration for investigative journalism, involving 400 journalists in 80 countries who collectively produced 6,000 stories in 100 different media outlets.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Today on <a href="https://theconversation.com/au/podcasts/mediafiles">Media Files</a>, a podcast on major themes and issues in the media, we meet <a href="https://www.icij.org/journalists/bastian-obermayer/">Bastian Obermayer</a>, the Pulitizer prize-winning journalist who led the Panama Papers investigation into global tax evasion and money laundering.</p>
<p>It was the biggest-ever collaboration for investigative journalism, involving 400 journalists in 80 countries who collectively produced 6,000 stories in 100 different media outlets.</p>
<p>Bastian Obermayer is the deputy editor for investigations at the Süddeutsche Zeitung in Munich, Germany. He was the person who received the original email from the anonymous source known as John Doe.</p>
<p>Bastian recently joined the Centre for Advancing Journalism at the University of Melbourne, courtesy of the <a href="https://about.unimelb.edu.au/strategy/governance/macgeorge/macgeorge">Macgeorge fellowship</a>. He recorded this discussion with Andrew Dodd for Media Files.</p>
<h2>New to podcasts?</h2>
<p>Podcasts are often best enjoyed using a podcast app. All iPhones come with the Apple Podcasts app already installed, or you may want to listen and subscribe on another app such as Pocket Casts (click <a href="https://pca.st/7anl">here</a> to listen to Media Files on Pocket Casts).</p>
<p>You can also hear us on any of the apps below. Just pick a service from one of those listed below and click on the icon to find Media Files.</p>
<p><a href="https://itunes.apple.com/au/podcast/media-files/id1434250621?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL21lZGlhZmlsZXMucnNz"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://radiopublic.com/go?url=https%3A%2F%2Ftheconversation.com%2Fau%2Fpodcasts%2Fmediafiles.rss"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a></p>
<hr>
<h2>Additional credits</h2>
<p>Producers: Andy Hazel and Henning Goll.</p>
<p>Theme music: Susie Wilkins.</p>
<h2>Image</h2>
<p>Shutterstock</p><img src="https://counter.theconversation.com/content/122643/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Dodd does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Today we meet Bastian Obermayer, the Pulitizer prize-winning journalist who led the Panama Papers investigation into global tax evasion.Andrew Dodd, Director of the Centre for Advancing Journalism, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1169722019-08-14T06:18:57Z2019-08-14T06:18:57ZAustralia’s tax office can use global data leaks to pursue multinationals, High Court rules<figure><img src="https://images.theconversation.com/files/279283/original/file-20190613-32342-od0r5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Glencore's lawyers argued anything about the company in the Paradise Papers was "privileged" and the tax office should be prevented from using that information.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Can something that has been seen be unseen? </p>
<p>It’s an <a href="https://knowyourmeme.com/memes/what-has-been-seen-cannot-be-unseen">axiom</a> of the internet age that it can’t – and though the world’s biggest mining company, <a href="https://www.glencore.com/who-we-are/at-a-glance">Glencore</a> would like it to be otherwise, it’s one with which the High Court of Australia has agreed in a landmark case concerning tax havens and data leaks.</p>
<p>Last year Glencore went to <a href="http://www.hcourt.gov.au/cases/case_s256-2018">the court</a> to demand the Australian Taxation Office unsee what it might have seen about Glencore’s use of offshore legal lurks to minimise its Australian tax obligations.</p>
<p>What had the Anglo-Swiss multinational bothered was information from the single biggest data leak in history – called the <a href="https://www.icij.org/investigations/paradise-papers/">Paradise Papers</a> because the documents exposed the use of “tax paradises” by corporations and wealthy individuals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-things-the-paradise-papers-tell-us-about-global-business-and-political-elites-86946">Four things the Paradise Papers tell us about global business and political elites</a>
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<p>Glencore’s lawyers argued anything about the company in the leaked documents was “privileged” and the tax office should be prevented from using that information to pursue the company for more money.</p>
<p>Today the <a href="http://eresources.hcourt.gov.au/downloadPdf/2019/HCA/26">High Court agreed</a> the leaked documents were privileged. But it also ruled the tax office could use them. This gives the tax office a green light to use leaked documents to go after any multinational corporation or individual using tax havens to minimise their tax obligations.</p>
<h2>The Paradise Papers</h2>
<p>Glencore was among about 120,000 companies and people mentioned in the Paradise Papers. The papers entail more than 13 million documents handed over to the <a href="https://www.icij.org/investigations/paradise-papers/">International Consortium of Investigative Journalists</a>, which published its first stories in November 2017. Other companies named in the documents include Apple, Facebook, McDonald’s, Nike, Twitter and Uber. Individuals include Queen Elizabeth and pop singer Shakira.</p>
<p>The data leak, like the <a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a>, <a href="https://www.icij.org/investigations/luxembourg-leaks/explore-documents-luxembourg-leaks-database/">Luxembourg Leaks</a> and <a href="https://eic.network/projects/football-leaks">Football Leaks</a>, illuminated the secretive tax-haven industry for tax agencies. </p>
<p>Prior to the Paradise Papers, the Panama Papers led about two-dozen national agencies to <a href="https://www.icij.org/investigations/panama-papers/panama-papers-helps-recover-more-than-1-2-billion-around-the-world/">collect more than US$1.2 billion</a> in fines and back taxes. The Australian Taxation Office was one of the biggest collectors, recovering more than US$92 million.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/these-five-countries-are-conduits-for-the-worlds-biggest-tax-havens-79555">These five countries are conduits for the world's biggest tax havens</a>
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<p>Glencore was hoping to ensure the tax office couldn’t use the Paradise Papers to do the same. While in Canada it agreed to pay regulators <a href="https://www.icij.org/investigations/paradise-papers/glencore-fights-transparency-on-one-continent-pays-22m-settlement-on-another/">US$22 million in fines</a> for corporate wrongdoings exposed by the leaked documents, it decided to take a different tack in Australia – where its operations include 25 mines extracting coal, copper, zinc, nickel and bauxite.</p>
<p>Even if the documents exposed Glencore’s connection to secretive deals and hidden companies, Glencore’s lawyers argued they were between lawyer and client, and therefore confidential, covered by “legal professional privilege”.</p>
<p>Because of this privilege, Glencore’s lawyers said, the tax office should not be able use the information to demand more money. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The possibilities that follow letting a cat out of a bag have been canvassed before the High Court of Australia.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>When a cat is let out of a bag</h2>
<p>Barristers on both sides discussed the case in terms of a cat being let out of a bag. </p>
<p>The tax office’s position was that “privilege” only meant someone could refuse to let a cat out of the bag. Once a cat was out of the bag, however,
“privilege” couldn’t be used to put the cat back. </p>
<p>Glencore’s position was that it could, because the cat was still a cat.</p>
<p>The High Court’s justices did not agree with Glencore’s barristers. In their unanimous decision, they state: </p>
<blockquote>
<p>“The Glencore documents are in the possession of the defendants and
may be used in connection with the exercise of their statutory powers unless the
plaintiffs are able to identify a juridical basis on which the Court can restrain that use.”</p>
</blockquote>
<p>This means “privilege” only prevents the tax office from demanding Glencore let the cat out the bag. Now the cat is out of the bag, Glencore can’t ask the tax office to pretend it has not seen the cat. </p>
<h2>Greater loopholes remain</h2>
<p>While this means the tax office can now use leaked documents to pursue a company or individual for more tax, it doesn’t necessarily mean the federal government is about to reap a revenue windfall.</p>
<p>To begin with, tax officials will still need to trawl through millions of documents. To do so will take time and money. </p>
<p>Then, to have a strong case, the tax office will need to find that companies or individuals aren’t just deliberately structuring their tax affairs to minimise tax – because that’s allowed – but are going further, into the illegitimate area of “aggressive tax planning”. </p>
<p>This is the greater problem for Australia’s tax office – not the companies doing something clearly shady but those whose legal resources are so far ahead of the tax office that they can achieve all they want in minimising tax through completely legal loopholes. </p>
<p>It takes years for loopholes to be closed, and once they are, corporate tax advisers just find news ones.</p>
<p>It’s a game between a nimble, well-advised mouse and a slower-moving cat. </p>
<p>That’s a problem no High Court decision can solve. Only a federal government committed to genuine tax reform can do it.</p><img src="https://counter.theconversation.com/content/116972/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The High Court of Australia has given the Australia Taxation Office a green light to use leaked information about Glencore and offshore tax havens.Ann Kayis-Kumar, Associate Professor, UNSW SydneyAnnet Oguttu, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1022932018-09-10T10:38:27Z2018-09-10T10:38:27ZNonprofit newsrooms are reaching bigger audiences by teaming up with other outlets<figure><img src="https://images.theconversation.com/files/235464/original/file-20180907-90549-1s144m1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">NBC News intern Cassie Semyon, dashing to beat the competition</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/APTOPIX-Trump-Russia-Probe-Manafort/1bf06ce516e44ca8ae5037c3eca9887b/1/0">AP Photo/Jacquelyn Martin</a></span></figcaption></figure><p>When <a href="https://www.usatoday.com/story/sports/highschool/2018/08/23/cassie-semyon-paul-manafort-trial-nbc-intern-cross-country-track-star/111256948/">images of NBC intern Cassie Semyon</a> sprinting out of the Paul Manafort trial to deliver the verdict to her newsroom went viral, questions bubbled up on <a href="https://twitter.com/NPRmelissablock/status/1032025814370582533">social media</a>. Is she a trained runner? Was she barefoot? What was she holding?</p>
<p>What no one asked was, why was she running so fast? That was obvious: to beat the competition. After all, everyone expects journalists to fight for scoops and guard sources jealously to make sure no one steals their stories.</p>
<p>But a new group of newsrooms is changing that. Instead of taking pride in beating the competition, these organizations are sharing their high-quality journalism with other outlets. By teaming up, they can inform bigger audiences about the problems like corruption, environmental dangers and abusive business practices.</p>
<p>I <a href="https://scholar.google.com/citations?user=n_3ICpcAAAAJ&hl=en&oi=sra">examine this behavior</a>, common among nonprofit news organizations across the U.S., in my new book, “<a href="https://global.oup.com/academic/product/journalism-without-profit-9780190641900%3Flang=en%26cc=us">Journalism Without Profit: Making News When the Market Fails</a>.” </p>
<h2>Growth followed long history</h2>
<p>The nonprofit news media has a long history in the U.S.</p>
<p>The biggest and oldest example, the <a href="https://www.ap.org/about/our-story/">Associated Press</a>, began to operate in the 1840s when newspapers teamed up to cover the Mexican-American War. The <a href="https://www.csmonitor.com/About">Christian Science Monitor</a> – which belongs to The First Church of Christ, Scientist and gets support from donors and grants – got its start in 1908. <a href="https://www.npr.org/about-npr/192827079/overview-and-history">National Public Radio</a>, which draws about 15 percent of its budget from the federal government and gets the rest of its funding from <a href="https://www.npr.org/about-npr/178660742/public-radio-finances">corporate and individual donors as well as foundations</a>, has been around since 1970.</p>
<p>But the modern nonprofit media <a href="https://theconversation.com/the-pace-of-nonprofit-media-growth-is-picking-up-98376">model really took off</a> about 10 years ago.</p>
<p>With the financial crisis hitting an already battered news industry, American journalists started to wonder how to fund journalism without relying on the <a href="http://www.pewresearch.org/fact-tank/2017/06/01/circulation-and-revenue-fall-for-newspaper-industry/ft_17-05-25_newspapers_revenue3/">plummeting advertising market</a> or on the capriciousness of clicks.</p>
<p>In 2009, 27 nonprofit publishers started what became the Institute for Nonprofit News, which today has more than 180 members operating on vastly different scales.</p>
<p>The East Lansing Info, a citizen-run, hyperlocal news co-op in Michigan had only <a href="https://eastlansinginfo.org/content/elis-2016-2017-fiscal-year-report">US$47,000 in funding in 2017</a> while the Center for Public Integrity, an investigative journalism organization had a nearly <a href="https://www.publicintegrity.org/about/our-organization/annual-reports">$10 million budget</a>. NPR, meanwhile, had a <a href="https://www.npr.org/about-npr/178660742/public-radio-finances">$220 million budget</a>.</p>
<p>Most are neither that big or that small. The median revenue for these organizations last year was $680,000, according to preliminary data from the Institute for Nonprofit News. No matter their size, what these newsrooms have in common is that they rely on philanthropy through foundation grants and audience donations, often supplementing that with earned revenue from activities like selling ads, holding events and subscriptions to print editions.</p>
<h2>Systemic collaboration</h2>
<p>Most of the people starting these organizations are worried about the fate of <a href="https://global.oup.com/academic/product/journalism-without-profit-9780190641900?lang=en&cc=us">public service journalism</a>. That is, the coverage society needs for democracy to function – including reporting on government policies and elections. This is often the kind of reporting that’s hard to fund through advertising and subscription revenue. </p>
<p>That means that many of these journalists make getting their work out as broadly as possible a primary goal. And since many of these outlets are tiny or aren’t commanding a regular readership, their websites have few regular readers. </p>
<p>Instead of publishing exclusively on its own website, for instance, ProPublica partners regularly with big media outlets like The New York Times, as it did in 2017 with <a href="https://www.propublica.org/article/trump-has-secretive-teams-to-roll-back-regulations-led-by-hires-with-deep-industry-ties">its reporting about deregulation in the Trump era</a>, to reach a mass audience. </p>
<p>You have probably never heard of the <a href="https://www.icij.org/">International Consortium of Investigative Journalists</a>, but you’ve likely heard of <a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a>, a global collaboration of more than 100 news organizations working together to expose tax evasion and publishing the stories in their own papers and websites around the world. The project’s many repercussions ultimately led to the <a href="https://www.icij.org/investigations/panama-papers/20160405-iceland-pm-resignation/">resignation of the prime minister of Iceland</a> and the <a href="https://www.icij.org/investigations/panama-papers/20170728-pakistan-pm-disqualified/">dismissal</a> and <a href="https://www.icij.org/investigations/panama-papers/former-pakistan-pm-sharif-sentenced-to-10-years-over-panama-papers/">conviction</a> of Pakistan’s prime minister.</p>
<p>Similarly, the Green Bay Press Gazette published in-depth reporting conducted by the <a href="https://www.greenbaypressgazette.com/story/news/investigations/2017/10/23/flawed-fbi-hair-fiber-analysis-taint-wisconsin-convictions/773330001/">Wisconsin Center for Investigative Journalism</a> about flawed FBI investigations. </p>
<p>For news nonprofits, sharing coverage with other newsrooms to reach a wider audience helps elevate the quality of the media where people are already going for news: newspapers and newscasts, whether directly or through Facebook and Twitter.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"986076820696109056"}"></div></p>
<h2>Potential drawbacks</h2>
<p>My major concern about the sharing model is that it may limit innovation. That’s because to entice newspapers to publish articles from another news organization, those articles need to at least resemble conventional news coverage.</p>
<p>My preliminary research in Europe suggests a different process is playing out there, with nonprofit news outlets like the <a href="https://www.thebureauinvestigates.com/">Bureau of Investigative Journalism</a> in the United Kingdom and <a href="http://correctiv.org/">Correctiv</a> in Germany <a href="https://www.cjr.org/innovations/google-funded-investigations-unit-helps-local-uk-papers-hold-power-to-account.php">fighting nativism</a> by not just reporting but by engaging their communities in that process.</p>
<p>And when it turned out that their reporting on domestic violence lent itself to a one-woman play about the issue, <a href="https://www.thebureauinvestigates.com/blog/2018-06-14/were-putting-investigative-journalism-on-stage-across-the-uk">they were open to doing that</a>, too.</p>
<p>Some critics, including the media scholar <a href="https://theconversation.com/can-charity-save-journalism-from-market-failure-75833">Victor Pickard</a> and <a href="https://twitter.com/jeffjarvis/status/432693910557958144">Jeff Jarvis</a>, an expert on entrepreneurship in journalism, worry that funding from foundations and wealthy donors will never pay all of journalism’s bills. What’s more, they say that relying on readers to pay the bills can mean that the news media will <a href="http://www.niemanlab.org/2017/09/are-nonprofit-news-sites-just-creating-more-content-for-elites-who-already-read-a-lot-of-news/">focus on wealthy communities</a>.</p>
<p>These critiques are certainly valid and important to keep in mind as the nonprofit news media continues to grow. Still, nonprofit newsrooms are making big strides in filling the gaps left as journalism shrinks. I believe that they’ll remain one important model for public service journalism going forward.</p>
<p><em>The Conversation, a nonprofit media outlet, relies on support from its university partners and grants from more than a dozen foundations.</em></p><img src="https://counter.theconversation.com/content/102293/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Magda Konieczna received a fellowship from the University of Wisconsin-Madison to help with the completion of this project. </span></em></p>Instead of taking pride in how quickly they cover the same stories as everyone else, these organizations make public service journalism their top priority.Magda Konieczna, Assistant Professor of Journalism, Temple UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1007892018-09-05T20:12:35Z2018-09-05T20:12:35ZFarmers in Guatemala are destroying dams to fight ‘dirty’ renewable energy<p>One morning last year, Santiago, a <em>campesino</em> (peasant farmer) who grows corn and mangoes in southwestern Guatemala, left his home with a plan to engage in industrial sabotage.</p>
<p>Santiago (not his real name) was frustrated by the diversion of the Ixpátz River. Formerly a communal water source for drinking, cleaning and subsistence crop irrigation, the Ixpátz and four other rivers in the Champerico area had been re-routed from their natural courses and into large plantations. Joining forces with other small farmers, Santiago set out with pickaxes and sticks to break up dikes by hand. </p>
<p>Known locally as “liberating rivers,” this new social movement tactic has <a href="http://www.albedrio.org/htm/otrosdocs/comunicados/EnfoqueNo.40-Devuelvan%20nuestro%20rio.pdf">spread across the lowlands near Guatemala’s Pacific coast since 2016</a>. A growing number of communities are supporting one another to dismantle the unauthorized dams, wells and irrigation motors installed along many of the <a href="http://www.insivumeh.gob.gt/hidrologia/rios%20de%20guate.htm">18 major rivers and their tributaries</a> that flow into the Pacific Ocean. </p>
<p>With sugarcane and palm plantations expanding in part to meet global demand for biofuel, such a conflict points to a clash between renewable energy and the people affected by its production.</p>
<p>In 2017, after conducting nine years of research on land conflicts in Guatemala, I began to interview the people liberating rivers. The clash over rivers struck me as at once unique and emblematic of broader social and environmental turmoil. </p>
<h2>Bitter sugar</h2>
<p>The world is searching for cleaner sources of energy. Fossil fuel production is finite, environmentally destructive and politically contentious. These concerns have made growth industries out of alternative energies such as hydroelectricity and biofuel, which <a href="https://www.seeker.com/top-10-sources-for-biofuel-1769457447.html">counts sugarcane and African palm among its top sources</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233365/original/file-20180823-149469-1qsdddq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fruit bunches from the African oil palm are transported from a plantation to an extraction plant, in Sayaxche, Guatemala in February 2012.</span>
<span class="attribution"><span class="source">(AP Photo/Rodrigo Abd)</span></span>
</figcaption>
</figure>
<p>In Guatemala, this growth has shaken up patterns of land and water usage. Guatemala is <a href="http://www.azucar.com.gt/azucar-de-guatemala-en-el-mundo/#4to-lugar">the world’s fourth largest exporter of sugar</a>, it <a href="https://doi.org/10.1080/03066150.2018.1499093">follows only Indonesia and Malaysia</a> for palm oil exports and the country is the <a href="http://www.mem.gob.gt/2015/12/guatemala-es-el-mayor-exportador-de-energia-en-c-a/">largest Central American exporter of electricity</a>. </p>
<p>Biofuel production in Guatemala <a href="https://www.sciencedirect.com/science/article/pii/S0961953415300040?via%3Dihub">responds predominantly to European demand</a>. The hydroelectricity the country generates is largely consumed domestically, with around <a href="http://www.mem.gob.gt/2015/12/guatemala-es-el-mayor-exportador-de-energia-en-c-a/">one-third of it sold to the Central American regional market in 2014</a>. </p>
<p><a href="https://obamawhitehouse.archives.gov/the-press-office/2016/05/04/fact-sheet-us-caribbean-and-central-american-energy-summit">The United States</a> and intergovernmental agencies such as the <a href="https://www.iadb.org/en/topics/energy/renewable-energy%2C19008.html">Inter-American Development Bank</a> have heavily promoted both energy sources. </p>
<p>Land dedicated to sugarcane in Guatemala <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/joac.12150">grew by 46 per cent between 2001 and 2012</a>, with expansion concentrated along the Pacific coast. There, and in particular within the department of Suchitepéquez, sugarcane coverage grew <a href="http://idear.congcoop.org.gt/publicaciones/35-la-expansion-de-la-cana-de-azucar-en-suchitepequez-y-su-impacto-en-la-subsitencia-de-la-poblacion-del-altiplano-guatemalteco">primarily through the termination of land rental agreements with <em>campesinos</em></a>. Palm oil plantations expanded even faster, with a <a href="https://doi.org/10.1080/03066150.2018.1499093">270 per cent increase in land used for the crop over 10 years</a>, mostly in Guatemala’s northern lowlands.</p>
<p>Upstream from the Pacific coast, these same rivers are also being dammed to produce electricity. Thirty-seven hydroelectric dams are operating or under construction within the coastal departments of Retalhuleu, Suchitepéquez, Escuintla and Santa Rosa. </p>
<p>Hydro and biofuel are intimately connected through more than the use of the same rivers. Sugarcane producers also <a href="https://www.internationalrivers.org/sites/default/files/attached-files/energia_ingles_072412.pdf">generate electricity onsite</a> by burning the crop’s biomass pulp, and many of the small hydroelectric dams in the Pacific region are financed by sugar companies. In 2016, the Panama Papers leak shined light on <a href="https://cmiguate.org/el-grupo-campollo-y-los-panama-papers/">a consortium including 10 of Guatemala’s 12 sugarcane producers</a>, which exports electricity directly and <a href="https://elfaro.net/es/201704/centroamerica/20091/El-cartel-del-az%C3%BAcar-de-Guatemala.htm">invests in 116 offshore companies</a>.</p>
<p>Many local residents also take issue with the dams due to water usage, land access and pollution.</p>
<h2>Water theft</h2>
<p>All of this has had a negative impact on the lives of rural Guatemalans. </p>
<p>Sugarcane requires <a href="http://www.fao.org/land-water/databases-and-software/crop-information/maize/en/">three times more water than corn</a>, the primary subsistence crop grown by Guatemalan <em>campesinos</em>. African palm, rubber and banana plantations under expansion in the Pacific region have also diverted community water to satisfy irrigation needs. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233368/original/file-20180824-149490-8s7jhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Field worker Jose Contreras, 31, carries sugar cane stalks on a field near Retalhuleu, Guatemala, on Nov. 25, 2011.</span>
<span class="attribution"><span class="source">(AP Photo/Rodrigo Abd)</span></span>
</figcaption>
</figure>
<p>Due to a shortage of water, plantations have begun “stealing” water, in the words of people from surrounding communities: diverting river routes, mechanically extracting river water and drilling deep wells. </p>
<p>This drainage of publicly accessible water is occurring in a region where many communities lack piped water for household use. The strain on such a vital resource explains the discontent of those who choose to destroy industrial property and return river water by force.</p>
<h2>Violence and death</h2>
<p>The social movement that came together around the river water near the Pacific coast did not form in a vacuum. Across Guatemala since at least 2005, communities affected by the expansion of agro-industry, hydroelectric dams and mining have developed innovative tactics in attempts to block these extractive projects.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/233361/original/file-20180823-149490-1q2baqa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">People line up to vote against mining in San Juan Ostuncalco.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jo5h_h/5459477003">My Mom is Wolves/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>One widespread form of opposition has been the <em>consultas</em> votes held by affected communities. Around one million Guatemalans voted overwhelmingly against local extractive projects in <a href="https://www.tandfonline.com/toc/usnr20/27/3">78 instances between 2005 and 2013</a>, setting off a number of legal challenges and leading to the suspension of some licenses. </p>
<p>The <em>consultas</em> are locally organized plebiscites whose validity has been recognized by the Guatemalan constitutional court. The plebiscites draw on the <a href="https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C169">internationally established right of Indigenous peoples</a> — which includes most Guatemalan <em>campesinos</em> — to <a href="http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf">free, prior and informed consent over economic development</a> within their traditional lands. </p>
<p>Where opposition is strong, however, repression has followed. </p>
<p><a href="https://www.amnesty.ca/sites/amnesty/files/mining-in-guatemala-rights-at-risk-eng.pdf">Activists opposed to mining have been killed</a> in relation to all four Canadian-financed mines in operation in Guatemala since 2005. Four lawsuits in Canada are currently <a href="https://doi.org/10.1080/02255189.2013.761954">trying mining companies</a> for violence conducted by their security guards in Guatemala: one charges <a href="https://www.reuters.com/article/guatemala-mining-tahoe-resources-idUSL1N1FG1VN">Tahoe Resources</a> for the shooting of seven protesters in 2013, and three charge <a href="https://www.thestar.com/news/world/2016/06/20/the-mayans-vs-the-mine.html">Hudbay Minerals</a> for the murder of one man and shooting of another in 2009, and the gang-rape of eleven women in 2007.</p>
<p>Of the 134 human rights defenders killed between 2007 and 2017 in Guatemala, my research has found that at least 61 were active in the resistance to resource extraction, including mining, dams, agro-industry and more. These figures align with an international trend: the NGO Global Witness reported the <a href="https://www.globalwitness.org/en/campaigns/environmental-activists/defenders-annual-report/">murder of 207 land and environmental defenders in 2017 alone</a>. </p>
<h2>Dirty renewables</h2>
<p>Violence against those engaged in water battles on the Pacific coast has not been as extreme as that seen around Canadian mines, but the movement has experienced repression. </p>
<p>I spoke with one man who faced this violence personally, when private security guards from a sugar company allegedly ambushed the river liberation action he participated in. “In that moment, well, I had bad luck, and they hit me with a pellet from a shotgun. But we did manage to liberate that river, at least for now.”</p>
<p>Even though many rivers have been freed by communities across the Pacific coastal region, the struggle is far from over. Santiago, who helped free the Ixpátz River, now takes part in foot patrols to prevent further theft from any of the five waterways near his community in Champerico. </p>
<p>At another community in Suchitepéquez, a river was freed and now runs deeply, but residents note that the returned water is polluted. “There is a rubber plantation upstream and they throw all their waste into the Icán River,” said Julio. “So the water comes this way and you can’t drink it. The animals do, but we can’t drink that water.”</p>
<p>The social movement tactics referred to as river liberation have opened a new front in an ongoing struggle over land and water usage Guatemala. Consumers in North America and Europe are right to encourage a transition to renewable forms of energy, but we must also look deeper into alternative industries, and ensure that no harm is done in our name. </p>
<p><em>All names in this article have been changed</em>.</p><img src="https://counter.theconversation.com/content/100789/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Granovsky-Larsen conducts research and solidarity work with the Comité Campesino del Altiplano (CCDA), a Guatemalan peasant social movement organization that has supported the river liberation movement. He has received funding from the Social Sciences and Humanities Research Council. He is a member of the board of directors of the Canadian Association for Latin American and Caribbean Studies.</span></em></p>Increased use of renewable energies could help curb climate change, but the water required for their production has dispossessed rural Guatemalans.Simon Granovsky-Larsen, Assistant Professor of Politics and International Studies, University of ReginaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/865092017-11-17T01:33:38Z2017-11-17T01:33:38ZMillions, billions, trillions: How to make sense of numbers in the news<figure><img src="https://images.theconversation.com/files/194864/original/file-20171115-19829-q98wr6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Breaking down the big numbers.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/100-us-dollar-cents-abstract-background-741348124?src=7ABuTcHgqkKIzqBIby6dPg-1-2">helen_g/Shutterstock.com</a></span></figcaption></figure><p>National discussions of crucial importance to ordinary citizens – such as funding for scientific and medical research, bailouts of financial institutions and the current Republican tax proposals – inevitably involve dollar figures in the millions, billions and trillions. </p>
<p>Unfortunately, <a href="https://dx.doi.org/10.3389/fpsyg.2016.00508">math anxiety is widespread</a> even among intelligent, highly educated people.</p>
<p>Complicating the issue further, citizens emotionally undeterred by billions and trillions are nonetheless likely to be ill-equipped for meaningful analysis because <a href="https://dx.doi.org/10.1111/cogs.12028">most people don’t correctly intuit large numbers</a>.</p>
<p>Happily, anyone who can understand tens, hundreds and thousands can develop habits and skills to accurately navigate millions, billions and trillions. Stay with me, especially if you’re math-averse: I’ll show you how to use school arithmetic, common knowledge and a little imagination to train your emotional sense for the large numbers shaping our daily lives.</p>
<h2>Estimates and analogies</h2>
<p>Unlike Star Trek’s Mr. Spock, scientists and mathematicians are not exacting mental calculators, but habitual estimators and analogy-makers. We use “back of the envelope” calculations to orient our intuition. </p>
<p>The bailout of AIG after the mortgage-backed securities crisis cost <a href="http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html">more than US$125 billion</a>. The <a href="https://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers">Panama Papers</a> document <a href="http://www.newsweek.com/panama-papers-top-ten-tax-havens-where-money-hidden-444512">upward of $20 trillion</a> hidden in a dark labyrinth of shell companies and other tax shelters over the past 40 years. (The recently published <a href="https://www.theguardian.com/news/2017/nov/05/paradise-papers-leak-reveals-secrets-of-world-elites-hidden-wealth">Paradise Papers</a> paint an even more extensive picture.) On the bright side, we recovered $165 million in bonuses from AIG executives. That’s something, right?</p>
<p>Let’s find out: On a scale where a million dollars is one penny, the AIG bailout cost taxpayers $1,250. The Panama Papers document at least $200,000 missing from the world economy. On the bright side, we recovered $1.65 in executive bonuses.</p>
<p>In an innumerate world, this is what passes for fiscal justice.</p>
<p>Let’s run through that again: If one penny represents a million, then one thousand pennies, or $10, represents a billion. On the same scale, one million pennies, or $10,000, represents a trillion. When assessing a trillion-dollar expenditure, debating a billion dollars is quibbling over $10 on a $10,000 purchase.</p>
<p>Here, we’ve scaled monetary amounts so that “1,000,000” comprises one unit, then equated that unit to a familiar – and paltry – quantity, one penny. Scaling numbers to the realm of the familiar harnesses our intuition toward understanding relative sizes. </p>
<p>In a sound bite, a savings of $200 million might sound comparable to a $20 trillion cost. Scaling reveals the truth: One is a $2 (200-cent) beverage, the other the $200,000 price of an American home.</p>
<h2>If time were money</h2>
<p>Suppose you landed a job paying $1 per second, or $3,600 per hour. (I assume your actual pay, like mine, is a tiny fraction of this. Indulge the fantasy!) For simplicity, assume you’re paid 24/7. </p>
<p>At this rate, it would take one million seconds to acquire $1 million. How long is that in familiar terms? In round numbers, a million seconds is 17,000 minutes. That’s 280 hours, or 11.6 days. At $1 per second, chances are you can retire comfortably at the end of a month or few.</p>
<p>At the same job, it takes 11,600 days, or about 31.7 years, to accumulate $1 billion: Doable, but you’d better start young. </p>
<p>To acquire $1 trillion takes 31,700 years. This crummy job doesn’t pay enough!</p>
<p>This analogy gives a taste for the absolute size of a billion, and perhaps of a trillion. It also shows the utter impossibility of an ordinary worker earning $1 billion. No job pays a round-the-clock hourly wage of $3,600.</p>
<h2>Nice work if you can get it</h2>
<p>Let’s examine the wealth of actual multi-billionaires. Our calculations prove that they acquired more than $1 per second over long intervals. How much more?</p>
<p>Testifying to the Senate Judiciary Committee on July 27, William Browder, an American-born businessman with extensive Russian dealings, <a href="https://www.judiciary.senate.gov/imo/media/doc/07-26-17%20Browder%20Testimony.pdf">estimated</a> that Vladmir Putin controls assets of $200 billion. Let’s assume this figure is substantially correct and that Putin’s meteoric rise began 17 years ago, when he first became president of Russia. What is Putin’s average income?</p>
<p>Seventeen years is about 540 million seconds; $200 billion divided by this is … wow, $370 per second. $1,340,000 per hour. Yet even at this colossal rate, acquiring $1 trillion takes 85 years.</p>
<p>The Panama Papers document some $20 trillion – the combined fortunes of one hundred Vladimir Putins – sequestered in shell companies, untaxed and untraceable. Though the rate of leakage has surely increased over time, for simplicity let’s assume this wealth has bled steadily from the global economy, an annual loss around $500 billion. </p>
<p>How much is this in familiar terms? To find out, divide $500 billion by 31.6 million seconds. Conservatively speaking, the Panama Papers document an ongoing loss averaging $16,000 per second, around the clock, for 40 years.</p>
<h2>Fighting over scraps</h2>
<p>American cities are now vying for a <a href="https://www.amazon.com/b?ie=UTF8&node=17044620011">$5 billion Amazon headquarters</a>, a windfall to transform the local economy lucky enough to win the contract. At the same time, the world economy hemorrhages that amount into a fiscal black hole every few days. Merely stemming this Niagara (not recovering the money already lost) would amount to one hundred new Amazon headquarters per year.</p>
<p>The root cause of our economic plight looms in plain sight when we know the proper scale on which to look. By overcoming math phobia, wielding simple arithmetic, refusing to be muddled by “gazillions,” we become better citizens, avoiding squabbling over pennies when tens of thousands of dollars are missing.</p><img src="https://counter.theconversation.com/content/86509/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew D. Hwang does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Today’s news can often involve mind-bogglingly large numbers. A math professor shares some tricks for understanding it all.Andrew D. Hwang, Associate Professor of Mathematics, College of the Holy CrossLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/873762017-11-14T15:22:55Z2017-11-14T15:22:55ZParadise Papers yet another example of the power of collaboration in investigative journalism<figure><img src="https://images.theconversation.com/files/194319/original/file-20171113-27635-k8o3vu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Jat306 via Shutterstock</span> </figcaption></figure><p>The recent publication of the <a href="https://theconversation.com/uk/topics/paradise-papers-45854">Paradise Papers</a> is another strong indication of the rising importance of <a href="https://theconversation.com/panama-papers-the-nuts-and-bolts-of-a-massive-international-investigation-57197">global collaboration</a> for investigative journalism. </p>
<p>In April 2016, a consortium of news organisations published <a href="https://theconversation.com/uk/topics/panama-papers-26281">the Panama Papers</a> – the first major leak revealing the scale of tax avoidance by companies and high-profile individuals. It was a huge logistical operation, co-ordinated by the <a href="https://www.icij.org/">International Consortium for Investigative Journalism</a> (ICIJ), which has <a href="https://www.icij.org/investigations/paradise-papers/about/">played the same role</a> with the Paradise Papers, revealing further offshore dealings, although from a different source and involving different locations.</p>
<p>The Paradise Papers was coordinated by the ICIJ with 95 international partners comprising more than 380 journalists working on six continents in 30 languages. The team scoured more than 13.4m files obtained by the German newspaper Süddeutsche Zeitung over more than a year using online platforms to communicate and to share documents. As the ICIJ website declares: “Journalists tracked down court records, obtained financial disclosures of politicians in Africa, Europe, and Latin and North America, filed freedom of information requests and conducted hundreds of interviews with tax experts, policymakers and industry insiders.”</p>
<p>The ICIJ is not the only organisation involved in this sort of large-scale investigation. The <a href="https://wikileaks.org/irq/">Wikileaks Iraq war logs</a>, <a href="https://www.theguardian.com/us-news/the-nsa-files">Edwards Snowden’s NSA files</a> and many other recent whistleblower–led investigations have been managed as collaborations across countries and organisations. It’s an emerging trend that is becoming increasingly vital as these global investigations become ever more difficult for news organisations to tackle on their own.</p>
<p>Last December, in the wake of the Panama Papers, the <a href="https://reutersinstitute.politics.ox.ac.uk/">Reuters Institute for the Study of Journalism</a> at Oxford University held a one day workshop with a number of journalists who had been involved in such collaborative investigations. The aim was to discuss the advantages – and problems – of these big logistical operations with the hope of distilling some best practise for others to follow.</p>
<p>Because, at a time when serious accountability journalism is under pressure around the world, such collaborations are a way of managing risk and bringing greater attention to public issues than any newsroom on its own could manage. The full reflections of the workshop and others involved in collaborations will be published in the new year. But there were some clear conclusions.</p>
<h2>Tools of collaboration</h2>
<p>Trust building between different organisations, usually from a newsroom level upwards, is essential. There are now several groups of journalists who regularly collaborate having built both trust and a joint working practise which is understood. Collaborative initiatives often begin at newsroom level, where staff find the benefits of collaboration easier to identify than senior executives who may be overly focused on exclusivity or other competitive factors. Each organisation has to take responsibility and legal advice within its own territories but sometimes complex coordination on stories and embargoes has to be agreed.</p>
<p>Confidentiality is crucial and needs to be supported by a high level of “<a href="https://medium.com/@terryjohnlee/communication-hygiene-9dcdd6ddd7db">communication hygiene</a>” – for example, encryption. By the time a whistleblower has contacted a news organisation, their identity may already be compromised. Secure channels of communication – such as “dropboxes” need to be set up and publicised.</p>
<p>If non-profit organisations are involved, or third party funders, objectives and success measures need to be agreed in advance together with principles of editorial independence. There are individuals and foundations prepared to fund investigative journalism, but agendas need to be understood and managed in the interests of transparency.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"927234309429383170"}"></div></p>
<p>Technology – and the ability to develop and modify software or other technology to suit the needs of a particular project – is crucial. Developers and journalists need to work in an integrated way. It is noticeable that the ICIJ now has a <a href="https://www.icij.org/blog/2017/347/data-tech-team-icij/">significant number of technology developers and coders</a> involved in its work.</p>
<p>A neutral partner – such as a non-profit news organisation or jointly owned joint venture – can play a valuable role in managing tensions and potential conflicts of interest between partners. In the end, one trusted party has to make decisions and hold other partners to account. This editorial coordinating calls on the traditional strengths of news editing and management – but with additional responsibilities and skills required to manage across organisations and geographies.</p>
<h2>New realities in journalism</h2>
<p>The rise in multinational collaboration reveals something about the state of the news industry. With business models disrupted by digital platforms, many organisations – once regarded as mighty news institutions – are <a href="http://www.pewresearch.org/topics/state-of-the-news-media/">struggling to get</a> by or to <a href="https://www.huffingtonpost.com/glenn-c-altschuler/investigating-investigati_b_12537054.html">field the scale or resources</a> required for long and complex investigations. At the same time, there has been a rise in <a href="http://www.niemanlab.org/2017/10/with-its-new-reporting-network-propublica-wants-to-fund-investigative-reporters-around-the-u-s/">small start-up organisations</a> – some commercial, some non-profit – seeking to establish and differentiate themselves in a crowded market.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194321/original/file-20171113-27579-1go02c8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Investigative journalism: shedding light in areas that authorities would rather keep secret.</span>
<span class="attribution"><span class="source">Olaf Speier via Shutterstock</span></span>
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</figure>
<p>These two groups are often perceived as being in conflict with one another – the start-up insurgency seeking to undermine big legacy media. But, in truth, they often need each other in the new communication environment. Major organisations still have an institutional weight and broad audience reach which newcomers lack. Equally, new players often have technical skills, market nimbleness and may attract a younger audience in ways the major players struggle to achieve.</p>
<p>Where they come together – in pursuing global accountability – they can complement and learn from each other. Big media can provide scale, reach and institutional strength while smaller organisations can provide new perspectives, new skills and new audiences.</p>
<p>As politics, business, trade, and indeed, crime all develop into transnational activities, it is essential that journalism and those concerned with public accountability similarly respond. The need for news organisations to raise their sights beyond national boundaries and to raise their skills to engage with the highly developed systems of financial technology, or internet enabled crime is now acute. </p>
<p>The overall concept of public accountability – and, in particular, the important journalism about it – increasingly cannot and should not be narrowly confined by mere geographic boundaries.</p><img src="https://counter.theconversation.com/content/87376/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Sambrook does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Established media organisations are collaborating across borders and with new media to break big stories such as global tax avoidance by the rich and powerful.Richard Sambrook, Professor of Journalism, Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/870022017-11-08T01:39:42Z2017-11-08T01:39:42ZThree strategies to fight the tax avoidance revealed by the Paradise Papers<figure><img src="https://images.theconversation.com/files/193693/original/file-20171108-6758-ptnatb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The first strategy is to require the public disclosure of country by country reporting of company tax affairs.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The release of more than 13 million financial and tax documents known as the “<a href="https://www.icij.org/investigations/paradise-papers/">Paradise Papers</a>” show that the <a href="https://panamapapers.icij.org/">Panama Papers</a> last year and <a href="https://www.icij.org/investigations/luxembourg-leaks/">LuxLeaks</a> in 2014 were just the tip of the tax avoidance iceberg. It also shows that governments have not learnt their lesson and taken action.</p>
<p>Both the <a href="http://www.oecd.org/tax/beps/">OECD</a> and <a href="https://www.ag.gov.au/CrimeAndCorruption/AntiCorruption/Documents/G20High-LevelPrinciplesOnBeneficialOwnershipTransparency.pdf">G20</a> made recommendations several years ago that would have increased transparency of corporate taxes, and <a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12101/abstract">extensive research</a> shows that this is effective in limiting corporate tax avoidance. Recently, we also <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th/Public_Hearings">recommended to a Senate committee</a> that the government limit the use of some financial products that can be re-purposed for tax avoidance.</p>
<p>The Paradise Papers detail the complex offshore financial and tax activities of celebrities, politicians, world leaders, and more than 100 multinational entities. Here are three things that could help curb the problem.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/explainer-the-difference-between-tax-avoidance-and-evasion-39777">Explainer: the difference between tax avoidance and evasion</a>
</strong>
</em>
</p>
<hr>
<h2>1) Require public disclosure of tax affairs</h2>
<p>The first strategy is to require the public disclosure of country by country reporting of company tax affairs (CbCR). This idea comes out of the OECD’s <a href="https://www.oecd.org/ctp/BEPSActionPlan.pdf">action plan</a> on Base Erosion and Profit Shifting (BEPS). It would increase tax transparency by requiring corporations to make specific disclosures on the tax paid in different countries, by project and region. </p>
<p>Doing so would allow any interested party to observe and understand how corporations transfer profits from high to low tax jurisdictions. With such specific information it would more difficult for companies to hide their tax affairs and provide impetus and justification for the public to pressure tax avoiders.</p>
<p>This idea <a href="http://www.internationaltaxreview.com/Article/3059190/The-tide-turns-towards-country-by-country-reporting.html">was strongly opposed by the majority of multinational entities’ in most countries</a> on the basis of commercial sensitivity of the information, the compliance burden, and that it might distort the view of a company’s true contribution to an economy. However, such argument is spurious as large corporations already have sophisticated systems in place that are capable of producing this information. </p>
<p>Nevertheless, <a href="http://www.bakermckenzie.com/en/insight/publications/2017/04/country-by-country-reporting-in-the-uk/">some European countries</a> (notably the United Kingdom and France) do require that large multinational companies publicly disclose their tax affairs, country by country. </p>
<p>The laws in the United Kingdom fostered a <a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12101/abstract">2010 campaign</a> that named and shamed companies who were not disclosing subsidiaries in tax havens. That campaign made the UK authorities tighten disclosure requirements, and after companies started disclosing their tax haven subsidiaries they became less tax aggressive. </p>
<p>Unfortunately, there is no similar mechanism in Australia for the provision of information to the public to pressure corporations that avoid taxes.</p>
<h2>2) Create a register of who benefits</h2>
<p>The next idea <a href="https://www.ag.gov.au/CrimeAndCorruption/AntiCorruption/Documents/G20High-LevelPrinciplesOnBeneficialOwnershipTransparency.pdf">comes from the G20</a>, and is to set up a public register of beneficial ownership (in other words, who owns the companies). </p>
<p>Earlier this year the Australian Treasury released a <a href="https://treasury.gov.au/consultation/increasing-transparency-of-the-beneficial-ownership-of-companies/">consultation paper</a> looking at this idea. At the time, Minister for Revenue and Financial Services Kelly O'Dwyer noted that: </p>
<blockquote>
<p>Improving transparency around who owns, controls, and benefits from companies will assist with preventing the misuse of companies for illicit activities including tax evasion, money laundering, bribery, corruption, and terrorism financing. </p>
</blockquote>
<p>However, the policy is still at the consultation stage. </p>
<p>Interestingly, a <a href="https://www.theguardian.com/australia-news/2017/may/31/beneficial-ownership-register-may-be-waste-of-time-tax-chief-tells-mps">recent comment</a> by ATO Commissioner Chris Jordan seems to both support and dismiss a public register. </p>
<blockquote>
<p>A register of beneficial ownership is just, you know, what someone says someone else owns so, you know, it could be good but it could be just a lot of ‘stuff’ that doesn’t really help us. </p>
</blockquote>
<p>The United Kingdom has <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/606611/beneficial-ownership-register-call-evidence.pdf">set up</a> a beneficial ownership register, but it is too early to know what the impact has been.</p>
<h2>3) Limit some financial products</h2>
<p>A third strategy is one we <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th/Public_Hearings">presented to a Senate committee</a> and might have tackled some of what the multinational conglomerate Glencore was alleged to have been doing in the Paradise Papers. </p>
<p><a href="https://www.icij.org/investigations/paradise-papers/room-of-secrets-reveals-mysteries-of-glencore/">Glencore</a> is alleged to <a href="https://www.theguardian.com/news/2017/nov/05/glencore-australian-arm-moved-billions-through-bermuda">have used cross currency interest rate swaps</a> and is <a href="http://www.smh.com.au/business/the-economy/glencore-reveals-its-being-audited-by-ato-over-taxes-20150513-gh0g51.html">under investigation</a> by the Australian Tax Office. These are financial instruments that may be legitimately used by companies to manage foreign currency risk, for instance when borrowing debt denominated in foreign currencies.</p>
<p>However, these instruments may also be used by multinationals to avoid tax, by shifting profits between subsidiaries in different countries. Unfortunately, it is very difficult to determine whether these instruments are being used for legitimate purposes or for avoiding tax. <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th/Public_Hearings">Our proposal</a> is to prohibit or limit their use, as has been done in Hong Kong. </p>
<p>Hong Kong is a special case, as it has a very low tax rate, but some form of this policy might be adopted in Australia and elsewhere. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-things-the-paradise-papers-tell-us-about-global-business-and-political-elites-86946">Four things the Paradise Papers tell us about global business and political elites</a>
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</em>
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<p>With three large leaks, spanning a number of years, Australians have a right to ask why the problem of tax avoidance seems to be stagnating, if not getting worse.</p>
<p>Perhaps the hackers who leak these documents are getting better. But the likely answer is that it is the result of inaction by governments around the world, and Australia in particular. </p>
<p>Recommendations from the OECD, G20, and even our submission to a Senate inquiry show there are ideas out there to solve some of these issues. And countries such as the United Kingdom, Hong Kong and France have made efforts to increase public transparency of corporate tax affairs and limit the use of certain financial instruments. </p>
<p><a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12101/abstract">The research</a> from these countries show that these proposals can be successful if enacted. </p>
<p>In the end, failure to cut down on tax avoidance is not due to a lack of proposals. The failure to enact these proposals feeds into the distrust of all governments as they don’t appear to be doing a very good job at limiting tax avoidance.</p><img src="https://counter.theconversation.com/content/87002/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The ideas are already out there to tackle some of the tax avoidance highlighted by the Paradise Papers.Roman Lanis, Associate Professor, Accounting, University of Technology SydneyBrett Govendir, Lecturer, Accounting Discipline Group, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/817742017-07-28T20:59:27Z2017-07-28T20:59:27ZNawaz Sharif ousted in Pakistan: celebrate, but remember the bigger picture<p>In a landmark judgement, a five-member bench of the Supreme Court of Pakistan <a href="http://www.bbc.co.uk/news/world-asia-40750671">disqualified</a> Nawaz Sharif, the prime minister, from holding public office for life. Sharif duly resigned. The development comes in the wake of allegations of corruption against the now ex-prime minister and his family originally made in the so-called “<a href="https://theconversation.com/uk/topics/panama-papers-26281">Panama Papers</a>”.</p>
<p>Predictably, the reaction on social media has been largely celebratory, with various analysts declaring this a <a href="http://www.bbc.co.uk/news/world-asia-40750671">historic</a> day in Pakistan’s political history. Justice is seen to have prevailed – and the verdict hailed as the beginning of a new era of accountability in the topsy-turvy world of Pakistani politics. <a href="http://economictimes.indiatimes.com/news/international/world-news/nawaz-sharifs-disqualification-just-a-beginning-imran-khan/articleshow/59810297.cms">Imran Khan</a>, whose party led the campaign and the court case against Sharif, is being cheered, as is the “independent” and “fearless” judiciary.</p>
<p>But the celebrations are overshadowed by uncertainty, and Pakistan is abuzz with questions about what comes next. Who will replace Sharif now – his younger brother, <a href="http://economictimes.indiatimes.com/news/international/world-news/shehbaz-sharif-likely-to-succeed-nawaz-sharif-as-pakistan-pm-report/articleshow/59811317.cms">Shehbaz</a>? Will there be early elections? And, if so, will the public sentiment turn against his party, PML-N – perhaps installing Khan in the top job?</p>
<p>Such questions are pressing, but ultimately superficial. To fixate on them is to risk missing the wood for the trees. Sharif’s downfall, however historic in itself, needs to be seen in a wider political and economic context. Take corruption, for instance. As delighted as many international onlookers are to see a developing country’s prime minister brought down amid corruption claims in a courtroom, corruption <em>per se</em> holds little meaning in Pakistani politics. </p>
<p>Last year, I helped organise a debate at a premier Pakistani university on whether Sharif should resign in the wake of the <a href="http://www.bbc.co.uk/news/world-asia-40750671">Panama Papers</a> revelations. Nationally known politicians, analysts and lawyers spoke for and against the motion. Given that the audience members were mostly students at one of Pakistan’s elite institutions, most of us expected them to back the PM’s resignation by a landslide. They did vote for it – but by a majority of one.</p>
<p>Pakistan’s political landscape is littered with corrupt politicians, bureaucrats and army generals. Simply declaring them corrupt does nothing to dent their chances in a system based on patronage. </p>
<p>Historically speaking, the correlation between legal transgression and political success is demonstrably weak even at the highest levels. The country’s first elected prime minister, Zulfiqar Ali Bhutto, was taken to the gallows based on a charge of abetting murder, but his execution only strengthened his voter base. Similarly, his daughter Benazir Bhutto was <a href="https://www.theguardian.com/world/1999/apr/21/benazirbhutto">dismissed as prime minister</a> in 1996, also on charges of corruption, but her chances of re-election barely suffered; long after her <a href="http://www.bbc.co.uk/news/world-asia-22394552">assassination</a> in 2007 she looms large in the political imagination, all allegations of corruption seemingly forgotten. Sharif may now have been banned from the top job for life, but there’s no reason to expect his influence to suddenly wither away. </p>
<p>Sharif’s ousting comes just as China starts to fully invest in the <a href="http://www.dailyo.in/politics/pakistan-china-port-economic-corridor-gwadar-cpec/story/1/14489.html">China-Pakistan Economic Corridor</a>. This massive initiative deeply worries both the US and India – both are especially concerned about the port of Gawadar on the strait of Hormuz, a narrow channel connecting the Persian Gulf to the open seas. Its traffic includes almost 35% of all oil traded by sea, making it a hugely sensitive choke point. Many Pakistanis are likely to see Sharif’s dismissal as the price he had to pay for developing ties with China.</p>
<p>Sharif also made positive <a href="http://economictimes.indiatimes.com/news/politics-and-nation/optimism-over-nawaz-sharifs-overtures-towards-india-misplaced-stephen-p-cohen/articleshow/26695596.cms">overtures</a> towards Delhi during each of his spells in office – these irked the army, which likes to justify its size and influence by portraying India as a perpetual threat. That Sharif was dismissed based on evidence collected by a <a href="https://www.reuters.com/article/us-pakistan-politics-idUSKBN19W0EJ">joint investigation team</a> that included a representative of the powerful Interservices Intelligence (ISI) will leave many Pakistanis convinced that disgruntled military top brass played an outsized role in the matter.</p>
<h2>Good reality TV</h2>
<p>Equally, many are also likely to see this affair as a piece of political theatre intended to divert attention from the economic and political fallout of successive governments’ policies. </p>
<p>On the economic front, the naked neoliberalism of Sharif’s government (and others) has decimated the economy. Chinese products have <a href="https://www.dawn.com/news/1341555">flooded the markets</a>, while energy shortages and tariff hikes are <a href="https://www.dawn.com/news/1120432">choking</a> Pakistan’s own industrial base. Corruption is not the main reason for this decline; these are the effects of concrete government policies, all implemented within a electoral system that only allows the population to choose among different factions of the same rapacious elite once every five years.</p>
<p>This prime ministerial scandal also obscures terrible political violence. At home, the military is waging ruthless and murky campaigns in <a href="http://www.reuters.com/article/us-pakistan-militants-idUSKBN1A10NH?il=0">tribal areas</a>, while a brutal crackdown on resistance in Baluchistan has involved <a href="http://unpo.org/article/18818">hundreds of disappearances</a>. In foreign policy terms, Pakistan remains silent in face of its ally Saudi Arabia’s merciless military assault on Yemen. The Saudi-led “coalition” fighting that war is now being led by <a href="https://www.theguardian.com/world/2017/jan/08/former-pakistan-army-chief-raheel-sharif-lead-muslim-nato">Raheel Sharif</a>, who was until recently chief of Pakistan’s armed forces. </p>
<p>Yes, there is much to celebrate here. That a sitting prime minister was dismissed via a rigorous legal process sets a healthy precedent and Khan deserves to be congratulated for his perseverance and tenacity since the Panama Papers emerged. But while the ups and downs of the ruling elite make for good reality TV, they have little bearing on Pakistan’s wider political struggles. </p>
<p>The real questions are not who is caught up in the latest scandal, but what policies are likely to be implemented by any new government – and whether Pakistan’s pride in being a “democracy” is still warranted.</p><img src="https://counter.theconversation.com/content/81774/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kamal A Munir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Economic trouble and political violence are much more pressing concerns for Pakistanis than the political fate of their prime minister.Kamal A Munir, Associate Professor of Strategy and Policy, Cambridge Judge Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/758332017-04-28T01:50:19Z2017-04-28T01:50:19ZCan charity save journalism from market failure?<figure><img src="https://images.theconversation.com/files/166139/original/file-20170420-20050-lxl1ge.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As journalism loses its financial footing, it may need more support from foundations.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/93049658@N00/31647086073/in/datetaken/">Tim Karr/Free Press</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>A foundation created by eBay founder Pierre Omidyar and his wife Pam recently announced it’s <a href="https://www.omidyar.com/news/%E2%80%98panama-papers%E2%80%99-group-among-initiatives-benefit-omidyar-network%E2%80%99s-100m-commitment-address-trust">giving US$100 million</a> to investigative news outlets and other initiatives, a rare boon for media institutions under duress. Even a fraction of this gift could help bolster impoverished U.S.-based journalism. </p>
<p>Yet, while foundation-backed nonprofit outlets have clear advantages over their commercial counterparts, they may never compensate for the market failure that’s afflicting journalism.</p>
<p>As I argue in my book “<a href="http://www.cambridge.org/gb/academic/subjects/politics-international-relations/american-government-politics-and-policy/americas-battle-media-democracy-triumph-corporate-libertarianism-and-future-media-reform?format=PB">America’s Battle for Media Democracy</a>,” commercial journalism’s deeply systemic problems call for structural alternatives, especially public models that don’t depend on market forces. While journalism needs all the cash it can get these days, its long-term survival requires steady support. </p>
<h2>Three drawbacks</h2>
<p>That’s because there are drawbacks to relying on foundations for news operations. First, there are often at least implicit expectations about what kind of news foundation grants should support. Even well-meaning donors typically focus on <a href="http://www.politico.com/states/new-york/city-hall/story/2016/05/journalisms-nonprofit-surge-047701">specific issues</a> while neglecting others.</p>
<p>Second, this kind of support often isn’t guaranteed for the long term as many foundations periodically change their priorities. Journalism, which rarely pays for itself, requires sustained economic and institutional support. </p>
<p>And third, there’s simply <a href="http://www.inaglobal.fr/en/advertising-communication/article/most-media-are-still-quite-profitable-8888">not enough charitable giving</a> to support the news media at a systemic level. The Pew Research Center, a nonpartisan think tank, reported in 2014 that annual giving to U.S. media organizations totaled <a href="http://www.journalism.org/2014/03/26/the-revenue-picture-for-american-journalism-and-how-it-is-changing/">only $150 million</a>. That covers <a href="http://www.perc.org.uk/project_posts/perc-paper-17-the-new-american-media-landscape/">less than 1 percent of overall news funding</a>.</p>
<h2>Some advantages</h2>
<p>On the other hand, liberation from profit-maximizing imperatives gives nonprofit media outfits advantages over their commercial counterparts. Nonprofits tend to devote <a href="https://knightfoundation.org/reports/finding-foothold">considerably more resources to news operations</a> than the profit-driven media. Ideally, they can focus more on neglected regions and issues, including local reporting, statehouse coverage and hard-hitting, labor-intensive investigative news – the kind of journalism <a href="https://www.poynter.org/2016/across-america-corporate-ownership-and-closures-are-leading-to-vast-news-deserts/434915/">that’s increasingly scarce</a>.</p>
<p>Omidyar has put hundreds of millions of dollars into journalism projects like <a href="https://www.recode.net/2016/6/27/12041710/pierre-omidyar-first-look-slate-podcast-w-kamau-bell">First Look Media</a>, the nonprofit news organization that supports The Intercept and its team of investigative reporters like Glenn Greenwald. The Omidyar Network’s latest donation includes $4.5 million for the International Consortium of Investigative Journalists (ICIJ), the small group that led the <a href="https://www.washingtonpost.com/posteverything/wp/2016/04/04/nothing-to-see-here-just-the-biggest-global-corruption-scandal-in-history/?tid=a_inl&utm_term=.6f0f8adb6184">explosive Panama Papers investigation</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/165649/original/image-20170418-32713-1e0uec3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Big nonprofit media gifts help make investigative efforts like the Panama Papers possible.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/w/index.php?curid=48354965">Sollok29</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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</figure>
<p>But even generous gifts like these probably won’t reach the most news-starved Americans. Sustaining public service journalism over the long term would require vastly more money.</p>
<h2>Systemic market failure</h2>
<p>This is especially true as U.S. journalism suffers from what I call “<a href="https://www.academia.edu/7240584/The_Great_Evasion_Confronting_Market_Failure_in_American_Media_Policy">systemic market failure</a>.” Market failure is essentially <a href="http://www.cambridge.org/gb/academic/subjects/politics-international-relations/american-government-politics-and-policy/americas-battle-media-democracy-triumph-corporate-libertarianism-and-future-media-reform?format=PB">baked into a commercial news model</a> in which direct market transactions have rarely supported public service media, especially in the U.S. where print journalism has <a href="https://www.jacobinmag.com/2016/11/media-advertising-news-radio-trump-tv/">long relied mostly on ad sales</a>. In many ways, news is a <a href="https://www.academia.edu/31777606/Confronting_Market_Failure_Past_lessons_toward_public_policy_interventions">byproduct</a> of the main exchange between publishers – who deliver access to audiences – and advertisers.</p>
<p>This fraught relationship has often <a href="https://www.jacobinmag.com/2016/11/media-advertising-news-radio-trump-tv/">skewed coverage</a> toward entertainment and sensationalism and privileged the demographic groups advertisers covet. Historically, U.S news outlets have relied more on advertising than their international peers.</p>
<p>But advertisers now find better deals online, where the consumers have gone and the ads are cheap – or even free, as it is for Craigslist. Digital ads cost a fraction of what traditional print ads run, and <a href="https://www.nytimes.com/2016/04/18/business/media-websites-battle-falteringad-revenue-and-traffic.html">Facebook and Google</a> get most of that revenue. U.S. print journalism’s core business model has collapsed, even as many news organizations double down on <a href="https://theconversation.com/think-youre-reading-the-news-for-free-new-research-shows-youre-likely-paying-with-your-privacy-49694">invasive</a> and <a href="http://archives.cjr.org/behind_the_news/qa_victor_pickard.php">deceptive</a> forms of advertising. </p>
<p>Less revenue means fewer jobs. Newspaper employment, for example, has fallen <a href="http://www.journalism.org/2016/06/15/newspapers-fact-sheet/">40 percent since 2006</a>. </p>
<p>Despite a “Trump bump” and a newfound appreciation for the Fourth Estate following the 2016 election, which caused a sudden spike in subscriptions for <a href="https://www.thestreet.com/story/14024114/1/trump-bump-grows-into-subscription-surge.html">many publications</a>, most print news outlets are growing less profitable due to declining ad sales. </p>
<p>Responses to this market failure range from <a href="https://theconversation.com/newspapers-ongoing-search-for-subscription-revenue-from-paywalls-to-micropayments-40726">paywalls</a> to <a href="http://niemanreports.org/articles/crowdfunding-the-news/">crowdfunding</a>. There’s little evidence that any commercial model will adequately support the journalism democracy requires. </p>
<h2>Foundations and nonprofit news</h2>
<p>Can philanthropy succeed where the market has failed?</p>
<p>Although few precedents for donations on the scale of Omidyar’s gifts exist, foundation grants and other nonmarket support for journalism are longstanding. Prime examples include the <a href="https://www.theguardian.com/gmg/2015/jul/23/faqs">Scott Trust</a>, which owns The Guardian, a leading British newspaper, and the Poynter Institute, a nonprofit journalism education and training center that owns the Tampa Bay Times and supports the <a href="https://www.poynter.org/2017/politifact-raised-105000-in-20-days-through-its-newly-launched-membership-program/447559/">PolitiFact fact-checking service</a>. </p>
<p>Further, the Ford Foundation and other large grant-makers played a key role in creating American public broadcasting. Educational broadcasting initiatives were initially incubated by private philanthropies, universities and other backers until Congress passed the <a href="http://www.cpb.org/aboutpb/act">Public Broadcasting Act of 1967</a> to allow the government subsidies that now face an <a href="http://thehill.com/policy/finance/314991-trump-team-prepares-dramatic-cuts">existential threat</a> from the Trump administration. And while the <a href="http://ijoc.org/index.php/ijoc/article/view/4779">U.S. pales in comparison</a> to other leading democracies in its funding of public media, this <a href="http://current.org/2016/03/a-look-back-at-a-pivotal-moment-for-public-broadcasting/">history shows</a> that it’s capable of at least minimally subsidizing noncommercial media.</p>
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<p>More recently, foundation-funded organizations like ProPublica and The Marshall Project have flourished, <a href="https://www.insidephilanthropy.com/home/2017/2/20/journalism-and-philanthropy-grants">winning Pulitzer Prizes and other prestigious journalism awards</a>. In another high-profile experiment, last year the owner of Philadelphia’s newspapers transitioned them into a “<a href="http://current.org/2016/04/as-philadelphia-newspapers-turn-to-nonprofits-who-is-public-media/">public benefit corporation</a>.” (This legal designation allows publishers to emphasize making a beneficial impact on society, while still being for-profit.) </p>
<p>Smaller ventures like the Voice of San Diego and MinnPost, which <a href="http://www.niemanlab.org/2016/12/voice-of-san-diego-is-spearheading-a-team-to-help-other-smaller-news-outlets-build-membership-programs/">often rely on membership support</a>, and older initiatives like the <a href="http://investigativereportingworkshop.org/investigations/new-newsrooms/story/journalists-create-nonprofits/">Center for Public Integrity and the Center for Investigative Reporting</a> suggest what viable nonprofit news models might look like. </p>
<h2>A public media trust fund</h2>
<p>Private charitable donations can make a difference, but market failure still demands <a href="https://www.thenation.com/article/the-problem-with-our-media-is-extreme-commercialism/">strong public options</a> to provide a safety net while pressuring commercial news organizations to be more socially responsible. A well-funded nationwide public media system could help ensure that all Americans have access to quality news by stepping in where journalism is retreating. </p>
<p>For example, the BBC is aiding the U.K.’s struggling news media by <a href="https://www.theguardian.com/media/2016/may/11/bbc-to-fund-150-local-news-journalists">funding 150 local reporters</a> at British news organizations. While expanded U.S. public media subsidies are unlikely during the Trump administration, reformers could set the stage now for political opportunities in the future. </p>
<p>Ultimately, an ideal model would rely on a large public media trust shielded from powerful interests. Foundations could help seed this trust, which would operate independently from any single funder or government entity.</p>
<p>A “public service tax” paid by <a href="https://www.theguardian.com/media/greenslade/2016/nov/08/make-google-and-facebook-pay-for-public-service-reporting">commercial media companies</a>, <a href="http://current.org/2016/12/how-the-spectrum-auction-could-save-journalism/">the proceeds from spectrum auctions</a> and other fees could also help finance this public trust. </p>
<p>The goal is to fund reporting that a healthy democracy needs but the market has no motive to support. With ads for clothes, cars and banks no longer paying the news media’s bills, sustaining public service journalism in a time of market failure requires creative ideas. Big donations can help tide things over until a new model is established. But we still need a systemic fix.</p>
<p><em>Editor’s note: The Conversation, a nonprofit media platform, relies in part on funding from <a href="https://theconversation.com/us/partners">several foundations</a>.</em></p><img src="https://counter.theconversation.com/content/75833/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Victor Pickard is a board member of the media reform organization, Free Press. </span></em></p>Big cash infusions can give nonprofit journalism a much-needed boost. But the ailing news industry needs more consistent funding.Victor Pickard, Associate Professor, University of PennsylvaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/663932016-10-17T19:20:01Z2016-10-17T19:20:01ZHow investigative journalists are using social media to uncover the truth<figure><img src="https://images.theconversation.com/files/141924/original/image-20161017-14873-r1wn24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The film Spotlight showed how investigative reporters uncovered abuse in the Catholic Church.</span> <span class="attribution"><span class="source">Participant Media</span></span></figcaption></figure><p><em>Social media has revolutionised how we communicate. In <a href="https://theconversation.com/au/topics/the-social-media-revolution-31890">this series</a>, we look at how it has changed the media, politics, health, education and the law.</em></p>
<hr>
<p>Borrowing Malcolm Turnbull’s election slogan, optimists would say there has never been a more exciting time to be a journalist. Why? Part of the answer lies with social media and the digital age. </p>
<p>A recent trip to Nepal for the second <a href="http://2016.uncoveringasia.org/">Asian investigative journalism conference</a> revealed something exciting is changing journalism. In a digital era that promotes sharing through tweets, likes and follows, reporters are sharing too – not just their own stories, but also their skills.</p>
<p>They no longer view each other as simply rivals competing for a scoop, but collaborators who can share knowledge to expose wrongdoing for the public good. </p>
<p>Take, for example, the <a href="https://panamapapers.icij.org/">Panama Papers</a> that broke in April this year. It involved almost 400 journalists together trawling through 11.5 million leaked documents from law firm Mossack Fonseca to expose the shady global industry of secret tax havens.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/141912/original/image-20161017-30272-1sn61zy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Wealthy individuals were exposed of corruption and wrongdoing.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Panama_papers_sz_chat.jpg">Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Another version of this type of collaboration occurred in Kathmandu last month. Eighty of the world’s best investigative journalists from The New York Times, The Guardian and other quality outlets met to train hundreds of reporters from across the globe in digital journalism. Classes included data reporting, mapping and visualisations, online searching, tracking dirty money, co-ordinating cross-border reporting teams and effective use of social media.</p>
<p><a href="http://gijn.org/">The Global Investigative Journalism Network</a> (GIJN) chose Nepal as the host country so that journalists from less-developed economies – many with limited political and civil freedoms – could attend to learn how to strengthen watchdog reporting in their home countries. </p>
<p>Reporting in these nations can be difficult, and some stories told were horrific. <a href="https://www.icij.org/journalists/umar-cheema">Umar Cheema</a>, a Panama Papers reporter and investigative journalist for Pakistan’s The News International, described how he was abducted by unknown assailants in 2010, stripped, shaved and beaten. His “crime” was to report critically on the Pakistani government, intelligence services and military. </p>
<p>His captors have not been caught. But rather than remain silent, he shared his story with the world and was awarded the Daniel Pearl Fellowship to work at The New York Times in 2008.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/141918/original/image-20161017-30236-h8wedm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Umar Cheema established the Center for Investigative Reporting in Pakistan.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/eastwestcenter/13392285425/in/photolist-mpqXSR">East-West Center/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Despite diverse backgrounds with varying levels of press freedom, journalists came to Kathmandu with the same motive: to give voice to the powerless against those who abuse power; whether it be corrupt governments, corporations or individuals.</p>
<p>Unique to the digital age, this can be achieved with tools as simple as a mobile phone and internet connection. Social media platforms are useful too, to distribute stories beyond the territories that oppress them.</p>
<p>Among the watchdog journalism educators were Pulitzer Prize winners, including <a href="http://www.bostonglobe.com/staff/robinson">Walter “Robbie” Robinson</a>. Now editor-at-large at the Boston Globe, Robinson is the reporter played by Michael Keaton in this year’s Oscar winner for Best Picture, <a href="https://www.youtube.com/watch?v=EwdCIpbTN5g">Spotlight</a>. </p>
<p>The film tells how Robinson in 2001 led the Spotlight team’s investigation that uncovered widespread sexual abuse in the Catholic Church. That investigation inspired other journalists around the world to probe and eventually expose the church’s widespread abuses of power. Robinson’s message was simple: </p>
<blockquote>
<p>To me you are all Spotlight reporters. For the great journalism you have done and will do. For your energy, for your passion, for your courage, for your tenacity, for your commitment to righting wrong and for knowing with a certainty, that there is no injustice however grave that cannot be eradicated by those who unearth the truth.</p>
</blockquote>
<p>To unearth truths, trainers profiled free digital search tools like <a href="https://www.picodash.com/">Picodash</a> for trawling Instagram, and Amnesty International’s <a href="http://www.amnestyusa.org/citizenevidence/">YouTube DataViewer</a>, as well as reverse image searching programs like <a href="https://www.tineye.com/">TinEye</a>. </p>
<p>Thomson Reuters’ Data editor Irene Liu showed reporters how to search for people using <a href="https://pipl.com/">Pipl,</a> ways to navigate blog content using <a href="https://kinja.com/">Kinja,</a> and creative techniques to search social media. Sites like Twitter, Facebook and LinkedIn can be trawled using <a href="https://rapportive.com/">Rapportive</a> and Chrome extension <a href="https://chrome.google.com/webstore/detail/storyful-multisearch/hkglibabhninbjmaccpajiakojeacnaf?hl=en">Storyful Multisearch</a> to find public interest information quickly and cheaply. </p>
<p>Here are five ways that social media is changing journalism in the digital age:</p>
<ol>
<li><p>Reach: social media offers journalism a potential global playing field. It is used for sharing stories but also crowdsourcing information and enabling local stories of significance to spread beyond geographical boundaries. Whether it is the Arab Spring uprising or the recent hurricane in Haiti, journalists can source contacts and share stories with the rest of the world. </p></li>
<li><p>Participation: social media provides a many-to-many network that allows for audience participation and interaction. It provides for audience comment, and these interactions can take the story forward. </p></li>
<li><p>Hyperlocal reporting: social media is filling a gap in hyperlocal reporting. In a recent study <a href="http://mia.sagepub.com/content/early/2016/05/18/1329878X16648390.abstract">we found</a> community groups, including the local police at Broadmeadows, used social media to provide local news. This helped fill a reporting hole left by the shrinking newsrooms of local newspapers.</p></li>
<li><p>Low cost: social media is a fast and cheap way to find, produce and share news. It lowers the barriers to entry for start-up news outlets and freelance journalists. </p></li>
<li><p>Independence: journalists can bypass state-controlled media and other limits on publishing their stories. They can report independently without editorial interference, and broadcast their own movements, using publicity for self-protection.</p></li>
</ol>
<p>The benefits social media can offer journalism, particularly in developing economies, is not to deny the challenges established media outlets face in developed countries in the digital age. </p>
<p>Certainly, the rise of digital media technologies has fractured the business model of traditional media as advertising has migrated online, causing revenue losses. In turn, these have sparked masses of newsroom job losses cutbacks, and masthead closures. </p>
<p>But for all the pervasive pessimism about the future of established news outlets, and the negative aspects of social media such as trolling, the Nepal conference demonstrated the positives as well. </p>
<p>Digital tools are changing the ways in which journalists find, tell and share their stories with audiences beyond the control of state borders. Yet, at the same time, new technologies enable journalists to do what they have always done: to uncover stories in the public interest. </p>
<p>Giuseppe Tomasi di Lampedusa wrote in The Leopard:</p>
<blockquote>
<p>If we want things to stay as they are, things will have to change. </p>
</blockquote>
<p>So it is with journalism in the digital age.</p><img src="https://counter.theconversation.com/content/66393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrea Carson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite its negative aspects, investigative journalists globally are using social media to collaborate and uncover important stories.Andrea Carson, Lecturer, Media and Politics, School of Social and Political Sciences; Honorary Research Fellow, Centre for Advancing Journalism, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/661192016-10-10T19:02:00Z2016-10-10T19:02:00ZHas social media really shifted the line between personal and private forever?<figure><img src="https://images.theconversation.com/files/140447/original/image-20161005-15903-1jz0hdk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The death of privacy and the erosion of the personal sphere is an internet meme, often attributed to social media.</span> <span class="attribution"><span class="source">shutterstock</span></span></figcaption></figure><p><em>Social media has revolutionised how we communicate. In this series, we look at how it has changed the media, politics, health, education and the law.</em></p>
<hr>
<p>In the past, so the story goes, we had privacy and dignity – but we kissed it goodbye with a few keystrokes on social media. Life is a bit more complicated than that.</p>
<p>The death of privacy and the erosion of the personal sphere is an internet meme. It is often attributed to social media – <a href="https://www.propublica.org/article/breaking-the-black-box-what-facebook-knows-about-you">Facebook</a>, Pinterest, Flickr, Growlr, Twitter. These are digital communication tools that allow everyone to be an author and connect for free. It is authorship without the burdens of reflection or responsibility, alongside unaccountable surveillance of those authors, friends and readers.</p>
<p>If we step back from our Twitter feeds, we can see that reality is more complicated. Social media does not eradicate the line between public and private. Instead, along with other technologies, it shifts the line in ways that require thought rather than unreflexive condemnation or celebration.</p>
<h2>Don’t rush to judge</h2>
<p>Few people throughout history have enjoyed much privacy. They were subject to surveillance by family and peers. </p>
<p>The village gossip or neighbourhood busybody spread the news – true or otherwise – as quickly as the people at Instagram or the Daily Telegraph. </p>
<p>The thin red line between personal and public was often a matter of shutting the door or trusting that governments simply lacked the administrative capacity to watch most people.</p>
<p>Social media provides opportunities for awareness about the powerful – governments, corporations and individuals who traditionally sheltered behind hedges, guard dogs and barristers. One example is the information – accurate or otherwise – the <a href="https://panamapapers.icij.org/the_power_players/">Panama Papers</a> on tax evasion provided.</p>
<h2>Resetting the line</h2>
<p>The world of social media is also one in which scandal, lies and defamation can sprint around the world overnight, with truth – like the law – limping in the rear. It is a world where a “public” sphere for many people is smaller, given they can choose to engage exclusively with the <a href="http://policyreview.info/articles/analysis/should-we-worry-about-filter-bubbles">like-minded</a> in a digital <a href="http://www.npr.org/sections/alltechconsidered/2016/07/24/486941582/the-reason-your-feed-became-an-echo-chamber-and-what-to-do-about-it">echo chamber</a>.</p>
<p>It is a world where we need personal responsibility, digital literacy and law reform. </p>
<p>We do not, for example, need to gift our attention to the purveyors of disinformation or abusers of someone else’s privacy. We need to be conscious that information shared through social media leaves our control, and the consequences now or in future may be serious.</p>
<p>We need to critique what we see rather than naively assuming it must be true because it comes from <a href="https://www.wired.com/2016/07/wikileaks-officially-lost-moral-high-ground/">Julian Assange</a> or <a href="http://www.nytimes.com/2016/10/01/us/politics/donald-trump-alicia-machado.html">Donald Trump</a> or is about a Kardashian. But we also need law reform and meaningful enforcement. </p>
<p>It is puzzling that Attorney-General George Brandis <a href="https://www.attorneygeneral.gov.au/Mediareleases/Pages/2016/ThirdQuarter/Amendment-to-the-Privacy-Act-to-further-protect-de-identified-data.aspx">proclaims</a> “the privacy of citizens is of paramount importance” but resolutely ignores a succession of practical recommendations from the <a href="http://www.alrc.gov.au/publications/serious-invasions-privacy-digital-era-alrc-report-123">Australian Law Reform Commission</a> and other bodies. </p>
<p>If you are a victim of <a href="https://theconversation.com/ending-revenge-porn-how-can-we-stop-sexual-images-being-used-to-abuse-54733">revenge porn</a> you should not have to pray that you live in a state that <a href="http://www.abc.net.au/news/2016-09-05/criminalising-%27revenge-porn%27-in-nsw-a-step-closer/7813446">does</a> have relevant law. You should demand remedies if your <a href="http://www.cso.com.au/article/607712/telstra-defensive-reverse-engineering-medicare-data-highlights-healthcare-security-risks/">health</a>, financial, <a href="https://theconversation.com/a-tale-of-vigilante-justice-adulterers-hackers-and-the-ashley-madison-affair-46511">dating</a> or <a href="http://www.cnbc.com/2016/09/22/yahoo-data-breach-is-among-the-biggest-in-history.html">other</a> data goes AWOL. </p>
<p>In the absence of such remedies your private sphere is not going to be adequately protected, particularly by an egregiously under-resourced and timid <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2657959">Information Commissioner</a>.</p>
<p>Responsibility as citizens also means thinking hard about where we draw the line. Does the threat of terror mean we should all be suspects, all subject to undisclosed official access to our <a href="https://theconversation.com/crossed-wires-isps-are-already-struggling-to-retain-our-metadata-49043">metadata</a>?</p>
<p>If we have a life online using social media should we be restricting what the operators of each service can do with our data and when they can share, particularly if the sharing is not disclosed? </p>
<p>Should we have an opportunity to live down past embarrassments or even offences, through a <a href="https://groningenjil.files.wordpress.com/2015/04/grojil_vol2-issue2_rengel.pdf">right to obscurity</a>?</p>
<h2>Looking after yourself and others</h2>
<p>We know that marketers, employers and intelligence agencies mine data about our presence online, for example, profiling our friends by their affinity with us. We know that stalkers and other criminals on occasion misuse social media to track or harass.</p>
<p>One response has been <a href="http://firstmonday.org/article/view/5615/4346">pseudonymity</a>. People use spoof names and other identifiers. There are lots of 99-year-old residents of Antarctica with names such as Goldie Locks. People use multiple email addresses, assuming that some will be <a href="http://www.abc.net.au/news/2016-10-05/yahoo-secretly-scanned-customer-emails-for-us-intelligence-sour/7904074">mined</a> and some can be used as filters to quarantine spam. </p>
<p>Governments have responded by encouraging truth in social media profiles, for example, to criminalise adult predators who are pretending to be minors in grooming children.</p>
<p>Another response has been old-fashioned common sense. Some people don’t publish images of themselves or their children. They don’t “tag” people on Facebook. They publish trivial rather than sensitive information. They don’t disclose information about misdemeanours that might be sighted by a current or future employer.</p>
<p>A third response has been despair, encapsulated in the meme that “your privacy has gone, so get over it”. That defeatism is fostered by digital activists like Assange, whose response to the powerful’s lack of accountability is to be accountable only to themselves. </p>
<p>It is also fostered by theorists who <a href="http://www.theage.com.au/news/opinion/privacy-is-the-last-thing-we-need/2007/04/21/1176697146936.html">dismiss</a> privacy as something that only matters to the guilty and woolly minded. In practice, <a href="http://www.pewresearch.org/fact-tank/2016/09/21/the-state-of-privacy-in-america/">most people seem confused</a> rather than indifferent.</p>
<p>A more effective response is that we should both act responsibly and require others – businesses, individuals and governments – to act with respect. That requires law reform, for example mandatory reporting about <a href="https://www.ag.gov.au/consultations/pages/serious-data-breach-notification.aspx">data breaches</a>, <a href="http://www.smh.com.au/federal-politics/political-opinion/privacy-the-fix-should-not-be-left-to-judges-20130325-2gq4l.html">establishment</a> of the privacy tort, higher standards regarding corporate negligence, and a less permissive approach by underfed watchdogs such as the Information Commissioner. </p>
<p>A tort will allow people whose privacy has been disregarded to gain compensation and an apology, and deter further harm. It is a commonsense response that will not prevent police investigations, cripple e-commerce and employee vetting, or chill free speech.</p>
<p>There is a line between public and private online. It is one we shape through our practice and our law, not something best left to Mark Zuckerberg or George Brandis.</p><img src="https://counter.theconversation.com/content/66119/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Baer Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Social media does not eradicate the line between personal or private. Instead, it shifts the line in ways that require thought rather than unreflexive condemnation or celebration.Bruce Baer Arnold, Assistant Professor, School of Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/649692016-09-11T20:09:47Z2016-09-11T20:09:47ZTo really tackle corporate tax evasion we need a public register<p>The Australian government shouldn’t rely on leaks like that of <a href="https://theconversation.com/au/topics/panama-papers-26281">the Panama Papers</a> to pick up on tax evasion, it should consider stronger action.</p>
<p>The federal government showed some leadership earlier this year <a href="http://www.theguardian.com/australia-news/2016/apr/22/coalition-to-create-public-register-to-reveal-true-owners-of-shell-companies">by announcing</a> the establishment of a public register of beneficial ownership of companies, with the aim of improving transparency. </p>
<p>A register would allow both the public transparency and law enforcement scrutiny of all corporate entities in Australia, showing who are the beneficial owners and in particular those involved in illegal and corrupt activities and tax avoidance. At the moment it is difficult, if not almost impossible, to ascertain the beneficial owners of any Australian company. </p>
<p>Setting up such a register would be a great leap forward in restricting financial fraud, corruption and tax avoidance. It’s also consistent with the aims of the G20 and the OECD. </p>
<p>However, during the Anti-Corruption Summit 2016 in London, the government’s position formally softened. Effectively, the commitment to establish a register <a href="http://www.smh.com.au/business/the-economy/panama-papers-offshore-tax-link-not-a-good-look-for-pm-20160513-gou9gl.html">has changed to just an idea</a> and there is now no mention at all of public access. In many respects this can be viewed as a significant back down by the government. </p>
<p>Perhaps the government sees <a href="http://kmo.ministers.treasury.gov.au/media-release/081-2016/?utm_source=wysija&utm_medium=email&utm_campaign=Media+Release+%E2%80%93+No+one+hides+outside+the+tax+system">its existing measures</a> as effective enough. The Serious Financial Crime Taskforce just acted on information contained within the Panama papers.</p>
<p>The taskforce, built profiles in relation to more than 1,000 Australians, with links to A$2.5 billion dollars in funds flows, named in the Panama papers. Specific taxpayers and their advisers were linked to potential criminal financial activity resulting in 12 criminal investigations. </p>
<p>Minister for Revenue and Financial Services Kelly O’Dwyer stated that:</p>
<blockquote>
<p>“People who avoid paying the right amount of tax must understand there is no place to hide. The information in the Panama Papers is just one element that we use to piece together a full picture of the true extent of a person’s tax affairs.” </p>
</blockquote>
<p>However there are still plenty of offshore entities and trusts being used to evade tax. Although, this latest investigation is a positive step, that alone is not the solution to many of the problems of tax evasion. </p>
<p>This then raises the question; has there been pressure on the government to water down transparency and avoid public scrutiny and if so, by who? We all need to be treated equally with unfiltered transparency being as important as any other public interest. For example, Prime Minister Malcolm Turnbull was named in the Panama Papers, but has been cleared of any malfeasance. </p>
<p>On the other hand, the government has claimed its first major scalp of the new parliament resulting from full public disclosure, Senator Sam Dastyari. He resigned from the front bench of the opposition as a result of making known that he asked Top Education to pay a A$1670 travel debt he owed to the Federal Finance Department. He did this, as required, on the parliamentary register of disclosures, and these are publicly accessible. </p>
<p>When the government pushes for more disclosure to government agencies, it often takes the “if you’ve done nothing wrong then you have nothing you fear” approach. So taking a soft stance on the public register of beneficial ownership of companies makes hypocrites of government leaders. </p>
<p>In contrast the UK government is already operating a beneficial ownership register. It has been running since June this year and most of the information contained in it is publicly available. Perhaps it’s time we caught up.</p><img src="https://counter.theconversation.com/content/64969/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government should follow through on setting up a register of beneficial ownership of companies if it wants to get serious about tax evasion.Roman Lanis, Associate Professor, Accounting, University of Technology SydneyBrett Govendir, Lecturer, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/611202016-06-19T14:54:27Z2016-06-19T14:54:27ZNigeria: a corrupt culture or the result of a particular history?<figure><img src="https://images.theconversation.com/files/126936/original/image-20160616-15113-qvxt5q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A boy holds a placard during a rally in support of President Muhammadu Buhari's anti-corruption campaign.
</span> <span class="attribution"><span class="source">Reuters/Afolabi Sotunde</span></span></figcaption></figure><p>Just before the <a href="https://www.gov.uk/government/topical-events/anti-corruption-summit-london-2016/about">anti-corruption summit in London</a>, British Prime Minister David Cameron made his now infamous public gaffe in a rather a silly, schoolboyish way. He boasted to the Queen:</p>
<blockquote>
<p>We’ve got some leaders of some fantastically corrupt countries coming to Britain. Nigeria and Afghanistan, <a href="http://www.telegraph.co.uk/news/2016/05/10/david-cameron-caught-on-camera-boasting-to-queen-about-fantastic/">possibly the two most corrupt countries in the world</a>. </p>
</blockquote>
<p>The rudeness and stupidity of the remark apart, it was also inaccurate. Nigeria justifiably has a reputation for corruption and criminal networks. But it is by no means one of the two most corrupt countries in the world. Somalia and North Korea hold that distinction,<a href="https://www.transparency.org/cpi2015/#results-table">according to Transparency International</a>. Nigeria also ranks as less corrupt than Kenya which is ranked 139 out of 167 countries. Nigeria is ranked 136.</p>
<p>Nigeria has long had a reputation for corruption in politics, business and its military establishment. It also has reputation for being heavily involved in the infamous international 419 financial scams, in drug and sex worker trafficking. </p>
<h2>Return assets stolen from Nigeria</h2>
<p>The reaction of President Muhammadu Buhari of Nigeria was one of <a href="http://www.africanews.com/2016/05/10/buhari-shocked-by-cameron-s-fantastically-corrupt-remark-about-nigeria/">shock</a> – rather a faux shock for the media. After all, Buhari is involved in cranking up an anti-corruption drive that has seen the arrest of major politicians and army officers. An investigation is ongoing into the <a href="http://www.vanguardngr.com/2015/12/alleged-2bn-arms-deal-fraud-efcc-uncovers-another-n600m-scam/">corrupt diversion of funds</a> that were to have purchased weapons to fight Boko Haram but ended up in the pockets of political, military and business insiders connected with the previous administration of Goodluck Jonathan. </p>
<p>Buhari said he didn’t want an apology from Cameron over the remarks but instead the return of assets stolen from Nigeria and banked in or via Britain. The latter is in reference to off-shore banks in British territories like Guernsey, Jersey and the Cayman Islands. These are the very offshore banking network revealed, to Cameron’s embarrassment, in the <a href="http://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers">Panama Papers</a>. The leaked papers detailed the vast international network of tax avoidance, money laundering and investment of stolen or criminally-obtained assets. </p>
<h2>London as a corrupt financial capital</h2>
<p>And Buhari has a point. The British are in no position to preach, according to the world famous expert on the mafia and other forms of organised crime, Roberto Saviano. The journalist and author told his audience at the Hay-on-Wye <a href="https://www.hayfestival.com/wales/index.aspx?skinid=2&currencysetting=GBP&localesetting=en-GB&resetfilters=true">literary festival</a> that British financial institutions enabled what he called “criminal capitalism” to operate through the network of offshore banks, investment funds and other holdings in British territories. </p>
<p>Saviano said his research showed that the City of London operated in a way that made possible the working of financial systems that eluded investigation, let alone taxation, and effectively made <a href="http://www.telegraph.co.uk/science/2016/05/29/britain-is-most-corrupt-country-on-earth-says-mafia-expert-rober/">Britain the most corrupt country</a>. He was quoted by the Guardian and Telegraph as saying:</p>
<blockquote>
<p>If I asked what the most corrupt place on Earth is, you might say it’s Afghanistan, maybe Greece, Nigeria, the south of Italy. I would say it is the UK. It’s not UK bureaucracy, police, or politics, but what is corrupt is the financial capital. Ninety per cent of the owners of capital in London have their headquarters offshore.</p>
</blockquote>
<h2>The gap between law and reality</h2>
<p>It is no coincidence that the late journalist, academic and expert on crime and corruption in West Africa, Professor Stephen Ellis, devoted an important part of his posthumously published book, <a href="http://www.hurstpublishers.com/book/this-present-darkness/">This Present Darkness</a>, to the role of British, American and Swedish companies among others in bribery, avoidance of the payment of royalties, false accounting and illegal capital flight in Nigeria and in aiding and abetting domestic corruption. </p>
<p>His superbly researched and incisive study details how British bankers saw the end of empire as both a threat and an opportunity and developed existing offshore banking networks. They used the “archaic jurisdictions” of British dependencies in the Channel Islands and the Caribbean to exploit “the disconnection between the physical location of a transaction and the legal space where it is recorded”. This enabled the cunning or corrupt to “exploit the gap between law and reality”. </p>
<p>British and other foreign companies took advantage of this in their looting of resources. They also used this in trading relationships with countries like Nigeria by concealing the real earnings from exports or inflating the costs of imports. So too did wealthy Nigerians, often through deals with foreign companies, who got their corruptly obtained riches out to offshore banks.</p>
<h2>A tradition of gift-giving</h2>
<p>But corruption in Nigeria is not something that can be blamed solely on multinationals. As Ellis painstakingly explains, it is much, much more complex. One major factor is the tradition of gift-giving to holders of public office. And then also the expectation that holders of office would use their position to distribute largesse to their followers. </p>
<p>These traditional systems of mutual benefit and patronage were not swept away by colonial rule but often distorted and developed by it. New classes of politicians, public servants and businessmen retained the exchange of gifts or distribution of wealth through social and political networks. These include the ubiquitous secret societies in some parts of Nigeria. </p>
<p>Old networks persisted in new contexts, creating informal or hidden patronage-client systems that were still important to the exercise of political power and formal state institutions. The weakness of Nigerian legal and formal political institutions – as evidenced by the repeated coups – meant that these informal networks became more rather than less powerful. This situation was reinforced by the very diverse and fragmented nature of Nigeria and the importance of local power bases for politicians.</p>
<p>The oil industry and sudden influx of substantial royalties also created opportunities for corruption, the expansion of networks of corruption and misuse of state funds or natural resources. Oil fuelled the rise of a new class of local middlemen, who acted as agents for the oil companies. Contracts for state-funded projects connected with the oil industry became a new form of patronage. At first this was through the military – whose officers benefited hugely from the political power that flowed from the barrel of a gun as well as from barrels of oil.</p>
<h2>Is Nigeria innately corrupt?</h2>
<p>What Ellis’s book amply demonstrates is the extent of corruption in Nigeria. It uncovers the networks of wealth accumulation and patronage that dominate politics, business and the oil industry. It traces the inextricable link with international financial networks used to launder or invest corrupt money. Finally, it exposes the plundering activities of multinational companies that avoid tax, under-report export volumes and inflate contracts. </p>
<p>Nigeria is part of a fantastically corrupt international network. But is Nigeria innately corrupt or has corruption developed and burgeoned there for specific reasons related to its complex past? I concur with Ellis when he concludes: “Nigerian organised crime is not created by culture, but it does arise from a particular history.”</p>
<p><em>* A longer version of this <a href="http://commonwealth-opinion.blogs.sas.ac.uk/2016/nigerian-corruption-and-crime-a-fantastically-corrupt-culture-or-the-result-of-a-particular-history/">article</a> was first published on the Commonwealth Opinion blog of the Institute of Commonwealth Studies.</em></p><img src="https://counter.theconversation.com/content/61120/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Keith Somerville does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Corruption in Nigeria is not something that can be blamed solely on multinationals. It is much, much more complex.Keith Somerville, Visiting professor, University of KentLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/588922016-05-10T04:28:40Z2016-05-10T04:28:40ZAfrica needs to develop new ways of stemming illicit financial flows<figure><img src="https://images.theconversation.com/files/121719/original/image-20160509-20584-12a59fk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Activists outside the European Commission show their disdain for existing measures against tax evasion and money laundering.</span> <span class="attribution"><span class="source">REUTERS/Yves Herman</span></span></figcaption></figure><p>Over the last 50 years African countries have lost about <a href="http://www.gfintegrity.org/wp-content/uploads/2015/12/IFF-Update_2015-Final.pdf">$1 trillion</a> to illicit financial flows. This equates to around $50 billion a year and is equivalent to all the official development assistance received by the continent over the <a href="http://www.uneca.org/iff">same period</a>. It is enough to wipe out Africa’s total external debt of around $250 billion and still leave $600 billion for poverty alleviation and <a href="http://www1.uneca.org/Portals/cgpp/2013/CGPP-3_Illicit-Financial-Flow-English_Final.pdf">economic growth</a>. </p>
<p>Illicit financial flows involve money that is illegally earned, transferred, or <a href="http://www.gfintegrity.org/storage/gfip/economist%20-%20final%20version%201-2-09.pdf">utilised</a>. The direct effects of illicit financial flows include lost investment in poverty reducing programmes such as health, education and job creation. The indirect effects include lower per capita investment and <a href="http://concernedafricascholars.org/wp-content/uploads/2012/11/caploss03-nkuru-14th.pdf">income</a>. These effects are so detrimental that in July 2015 African nations offered to forego international aid in exchange for western countries agreeing to close tax loopholes and <a href="http://www.dailymaverick.co.za/article/2016-04-05-analysis-the-panama-papers-are-the-tip-of-a-very-dirty-african-iceberg/#.VynXnfl97IV">shut down tax havens</a>. </p>
<p>But as significant as these statistics are, they do not capture the changing nature of Africa’s illicit flows. Over the course of the last 50 years these have gradually evolved. They have become more complex. </p>
<p>Centralised public sector corruption has transformed into decentralised private sector corruption. This change reflects Africa’s developmental progress away from donor reliance to trade-led economic growth. African officials no longer primarily siphon off aid into foreign accounts. Instead they act as intermediaries and gatekeepers between access to resources and markets on the one side, and mostly private sector companies on the other.</p>
<p>The changing nature of illicit flows was well illustrated in the leaked <a href="https://theconversation.com/panama-papers-remarkable-global-media-operation-holds-rich-and-powerful-to-account-57196">Panama Papers</a>. The documents offer a window into the activities of 128 current and former political leaders and officials, as well as criminals, terrorist organisations, corporations, billionaires and celebrities. The papers show that <a href="http://www.mossfon.com/">Mossack Fonseca</a>, the law firm from which the 11 million documents were leaked, helped clients launder money‚ dodge sanctions and evade tax using an array of mechanisms.</p>
<h2>The main sources</h2>
<p>Illicit financial flows typically arise from corruption, illegal exploitation, and <a href="http://www.cmi.no/publications/file/4248-extractive-sectors-and-illicit-financial-flows.pdf">tax evasion</a>. Thus they are primarily a <a href="http://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf">governance problem</a> arising from weak institutions and inadequate regulatory infrastructure. These include limited access to legal and financial expertise and misaligned domestic tax and trade reporting policies with global requirements. They also include outdated information gathering and sharing mechanisms, and a lack of political will. </p>
<p>Calculating the proportion of illicit financial flows that comprise corruption is difficult. But they have been estimated at around 5% of such global illicit flows. Some believe the figure for Africa may be much higher as the 5% does not include the role of <a href="http://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf">corrupt practises</a> in facilitating the trade and tax-related forms of illicit flows.</p>
<p>The Panama Papers also show that Mossack Fonseca facilitated the abusive system of transfer pricing. This entails the use of shell companies to move profits to low-tax or no-tax countries without leaving a paper trail. It also enabled trade misinvoicing. This involves under or overstating the price, quality or quantity of traded goods and services. Over the last 10 years African countries have lost between $242 billion and $407 billion from trade misinvoicing alone. This practice accounts for around 60% of illicit financial flows. About 35% arises from <a href="http://eu.wiley.com/WileyCDA/WileyTitle/productCd-0471644889.html">criminal activity</a>. </p>
<p>This shows that commercial activities are the largest component of illicit flows from the continent. It is followed by organised crime and then public sector corruption.</p>
<h2>Efforts to stop flows</h2>
<p>The regulatory implications of the Panama Papers are still gaining traction. But Oxfam’s Tatu Ilunga and Transparency International’s Craig Fagan argue that the leaked documents highlight the need for an overhaul of the <a href="http://allafrica.com/stories/201604130141.html">global tax system</a>. Africa has two significant endeavours aimed at curbing illicit flows and recovering the money stolen from the continent. </p>
<ul>
<li><p>the United Nations Economic Commission for Africa’s <a href="http://www.uneca.org/publications/illicit-financial-flows">High Level Panel on Illicit Financial Flows</a>, led by Thabo Mbeki, and</p></li>
<li><p>the <a href="http://www.africaprogresspanel.org/">Africa Progress Panel</a>, chaired by former UN general secretary Kofi Annan. </p></li>
</ul>
<p>Both initiatives are still at the policy formulation phase.</p>
<p>But much more needs to be done. Closing tax havens and loopholes will significantly benefit Africa’s economies. For example, South Africa was able to recover <a href="https://www.fic.gov.za/DownloadContent/NEWS/PRESSRELEASE/FIC_Annual_Report_2014-2015_lores.pdf">$2 billion</a> in taxes after tax authorities uncovered a multinational company engaged in abusive transfer pricing. </p>
<p>But there is also a need to deepen the anti-corruption and regulatory institutions. This will limit the capability of corrupt leaders and officials. Examples include the US Kleptocracy Asset Recovery <a href="https://globalanticorruptionblog.com/tag/kleptocracy-asset-recovery-initiative/">Initiative</a> and the World Bank’s Stolen Assets Recovery <a href="http://www1.worldbank.org/finance/star_site/about-us.html">Initiative </a> and the United Nations Office on Drugs and Crime. </p>
<p>Africa’s democracies can be strengthened by entrenching transparency and accountability. As noted by the United Nations Economic Commission for <a href="http://www.uneca.org/">Africa</a>, measures could include strengthening Article 22 of the African Union Convention on Preventing and Combating Corruption. It could also include a governance mechanism in the African Peer Review Mechanism. Combating Africa’s illicit financial flows will require a much closer and more active continental and global partnership than has historically been the case.</p><img src="https://counter.theconversation.com/content/58892/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sean Gossel receives funding from the University of Cape Town Graduate School of Business.</span></em></p>In Africa, commercial activities are the largest component of illicit financial flows. This is followed by organised crime and then public sector corruption.Sean Gossel, Senior Lecturer, UCT Graduate School of Business, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/577482016-05-04T13:47:43Z2016-05-04T13:47:43ZWhy British law doesn’t necessarily apply in overseas territories<figure><img src="https://images.theconversation.com/files/118559/original/image-20160413-22075-pwhs7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">a db afe o</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/undercrimson/8087534143/in/photolist-djEJ8R-7HGgcW-7ha772-4Hw1JU-7c8Dv-6UCeC8-7RPcgk-bRHyJ6-7c8zq-7ha7PF-9ubk7V-4Ps3ut-9Wt75C-9btPi4-4XDSyg-8dnJXu-LTgDg-5F3uuR-5HRbfL-gvCfLk-59s2Uq-4XJeuq-8djsVK-LT8kM-LT8za-bhFxCg-59nNWD-2xXihS-LTiHF-btZZx9-48tFf1-LT86K-LSZu7-4Pf5UQ-4Pf6hq-4Pfmkw-5prEK-6AHBMH-8B4pDP-6H7FXo-7wSptn-bKco3a-4AfYSu-diMQhy-4AbFo6-8iKhTU-4Abh2P-4AgTP2-7he4Bj-4Q9pfy">Patrick Shyu</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Until the <a href="https://theconversation.com/uk/topics/panama-papers">Panama Papers</a> scandal broke, it would have been easy to think that the widest possible definition of the United Kingdom is England, Wales, Scotland and Northern Ireland. But the territory is much wider than that – which has caused confusion in political debates and journalism about the Panama Papers. </p>
<p>There are 14 British Overseas Territories (BOTs)– including the British Virgin Islands (BVI), the centre of much of the discussion – and three Crown Dependencies (CDs). </p>
<p>Following the revelations that the different laws in some overseas territories have been exploited by the unscrupulous, a debate has ensued about whether the United Kingdom government can do anything about what goes on in the British territories perceived as tax havens.</p>
<p>Labour leader, Jeremy Corbyn, and former business secretary <a href="http://www.theguardian.com/politics/2016/apr/08/vince-cable-david-cameron-cold-feet-tax-avoidance-crackdown">Vince Cable</a> have said these “UK tax havens” could be brought under direct rule.</p>
<p>But does Britain actually have the power to “clamp down on tax evasion” in these territories? It is technically possible for some of the small territories under discussion, the British Overseas Territories, but for the Crown Dependencies it would be an act of war to attempt to do so. </p>
<p>To assist in understanding why the labels matter, here is a basic guide to the differences between British Overseas Territories and Crown Dependencies, their diversity and their constitutional positions. </p>
<p>When politicians such as Corbyn and Cable talk of bringing overseas territories and Crown Dependencies into line, it implies that they are breaking UK laws. In fact the extent to which they comply with UK laws varies significantly in the first place. Many have large amounts of their own law. Most BOTs (and all CDs) are free to choose whether to adopt their own versions of English statutes. </p>
<h2>Constitutional questions</h2>
<p>BOTs and CDs are not the same legally, historically, or politically. There are some similarities between the two groupings, but also important differences. </p>
<p>There are 14 British Overseas Territories, all of which were once colonies in some sense and remain British by choice. Each has a governor to represent the UK. Some are military bases with no permanent population at all, others are thriving international commercial centres. Their laws vary significantly.</p>
<p>Gibraltar, for example, is geographically close to the European Union, so its laws have been heavily influenced by the UK’s need to comply with EU rules on tax transparency and whistleblowing. The vast area of Antarctica which is British does not have any law of its own since it has no permanent inhabitants, and Pitcairn has only about 50 people – so determining its laws has been a <a href="http://www3.paclii.org/journals/fJSPL/vol11no2/pdf/farran.pdf">major academic and judicial exercise</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118564/original/image-20160413-22064-1f2kz9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gibraltar has a distinctly European flavour.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/emilstefanov/11734801115/in/photolist-iSXVxa-8JJYc2-orYwvp-8wK45e-5ofYLY-oq4MzW-2B7b3T-BrhLp-oBgWgM-BggsM7-4V98xs-dsZgMJ-B9Tr1R-d5fyj3-eL7kTH-AHP8qH-AHHnEh-Bggq65-8whWh7-dCbp9m-BF6w63-eiB1vT-hsukCS-hstVsh-hstDD5-hsu7sJ-hsty7J-hstttz-hstjVH-hstjX7-hstHPP-hstpVJ-hstoBF-hstGGj-hsuG2M-hstmD3-hstBSi-5vJEzE-8t8PFV-8t8QgX-e2yTLm-gfYbGj-8t8PLv-oCERw4-oBgFCQ-fyoRAZ-bUjR4H-9YJgpk-hsudAf-hstLhf">whereisemil</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>While all BOTs follow English common law to some extent, they do so to differing degrees – depending on local circumstances – and many have detailed codified criminal laws of their own. English law was adopted by each territory at different dates, so some BOTs’ laws have become something of a snapshot of English laws from times past. </p>
<p>Some follow English law more closely because producing your own legislation can be an expensive business. The larger territories have their own codified laws, which may be based on English law or that of another country altogether, or may be unique. Most have their own courts and legislatures.</p>
<p>When drafting their criminal codes, BOTs looked beyond English law and adopted rules from a range of other sources. Anguilla, BVI and Montserrat, for example, have been influenced by their membership of the <a href="https://www.eccourts.org/">Eastern Caribbean Supreme Court</a>.</p>
<p>Crown Dependencies have a misleading name, since they are the more independent category. The Bailiwicks of Jersey and Guernsey, and the Isle of Man, are part of the <a href="https://www.ordnancesurvey.co.uk/blog/2011/08/whats-the-difference-between-uk-britain-and-british-isles/">British Isles</a>, but not Great Britain and each has a population of between 60,000 and 100,000 people.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118561/original/image-20160413-22060-14eclxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Who’s the Queen of the Castle in Jersey? Not the Queen.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mcdoodle/524663642/in/photolist-Nn3dS-NnpLX-NnqNz-4y1C9D-4y5UB5-4y5Qgh-4y5TWb-Nn2kN-Nn4DL-NnnYv-Nnppi-NmZxq-Nnpf8-NnoZP-Nn1Jd-Nn4Ho-NnoWM-NnoSi-Nn1TS-6DhKxy-Nnopk-Nn4oY-Nn3uU-NnoPH-Nnrnx-Nn2dw-Nn4zA-Nn18o-4y1G4g-4y5Uiu-4y5SNs-4y1Bfg-4y5VhL-4y5WtU-4y5X9b-4y1BJp-4y1FFK-4y5TiJ-4y5R9s-4y5WNY-4y5UX1-2dsfE-2ipcfE-Nnqnz-Nn3rW-NnrAn-Nn1qG-Nn3yq-Nn4k3-NnodP">Andi Tamplin</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>The Queen is head of state of CDs and each has a lieutenant-governor to represent her. However they are not part of the UK nor of the EU. They are relics of the Norman, Norwegian and Scottish Duchies – not ex-colonies of the British Empire – so are self-governing and have their own legal systems, tax systems, courts, legislatures and elections.</p>
<p>Laws require Royal Assent once passed, but Royal Assent can only be denied under very specific circumstances. Very few Acts of the Westminster parliament now extend to them – and the Crown Dependencies would dispute any idea that the UK could still legislate directly for them without their consent. The islands are active in the international legal and political fields and negotiate their own treaties, including many bilateral treaties about tax liability. Thus the UK has no direct control over tax laws in the Crown Dependencies.</p>
<p>Although the CDs have autonomy in relation to tax, they have committed to sharing more information about the businesses registered in their territories. In fact, in proposing that facilitating tax evasion be made a criminal offence, the UK is behind the times. It has been a crime in Jersey for several years already.</p>
<p>Imposing direct rule on CDs is not constitutionally possible, so the solution to any dispute between a CD and the UK, including one about financial transparency, would have to come about through co-operation and partnership. Direct rule for a BOT is technically possible, but would be an extreme measure of last resort. Turks and Caicos was taken under direct rule by the UK from 2009-12 due to a political corruption scandal; direct rule is still a technical possibility for the British Virgin Islands, but an unlikely one. For meaningful discussions about solutions to tax evasion, it is important to get the labels and distinctions right.</p><img src="https://counter.theconversation.com/content/57748/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Claire de Than is affiliated with the Institute of Law Jersey, an educational charity. She is also a member of the Jersey Law Commission.</span></em></p>The Panama Papers revealed the extent to which loopholes can be exploited.Claire de Than, Co-Director, Centre for Law, Justice and Journalism, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/574642016-05-04T10:11:05Z2016-05-04T10:11:05ZPanama Papers revelation: we must rethink data security systems<figure><img src="https://images.theconversation.com/files/120571/original/image-20160428-20160-vk1tyb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The attacker may already be inside.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-311055986/stock-photo-high-angle-view-of-hacker-stealing-information-from-computers-at-desk.html?src=FokqItq2wHW6ZY7OvqrBKg-1-4">Computer user image via shutterstock.com</a></span></figcaption></figure><p>The surge of information leaks from highly confidential sources in recent years demonstrates the futility of current cyber defenses. </p>
<p>The leaks of <a href="https://wikileaks.org/plusd/?qproject%5B%5D=cg&q=#result">U.S. diplomatic cables</a>, <a href="https://www.opm.gov/cybersecurity/cybersecurity-incidents/">Office of Personnel Management data</a>, <a href="https://wikileaks.org/cia-emails/">CIA operational documents</a> and most recently <a href="http://panamapapers.sueddeutsche.de/en/">client files from the Panamanian law firm of Mossack Fonseca</a> have created political turmoil on an international level. These dramatic breaches are confirmation that we need to fundamentally rethink our approach to data security. </p>
<p>Businesses and government agencies have spent much of the last two decades attempting to integrate disparate databases and information systems, seeking to improve efficiency. But that sort of consolidation is disastrous from a security point of view. It exposes vast swaths of organizational data to every intrusion, and to every insider with a password. It puts all the data on a big open field. Yes, the company builds a big wall around it all, but anyone who gets over the wall or is allowed in the door has access to everything.</p>
<p>Worse, the wall itself is useless. Beyond malicious insiders with broad access, other vulnerabilities render all defenses worthless. For example, “<a href="http://www.wired.com/2014/11/what-is-a-zero-day/">zero-day</a>” attacks exploit previously unknown software vulnerabilities that have not yet been fixed and are not yet guarded against by security software. (The name comes from the fact that the software’s authors have had zero days to address the problem.)</p>
<p><a href="http://lifehacker.com/why-social-engineering-should-be-your-biggest-security-1630321227">Social engineering</a> attacks, on the other hand, target weaknesses in humans rather than technical tools. They use carefully crafted phone conversations or email messages to trick authorized users into clicking on malicious links or voluntarily disclosing information that bypasses security defenses.</p>
<p>Given all of these vulnerabilities, breaches of confidential information are inevitable. But we can limit their size and scope, and therefore their damage. Rather than building useless walls around open spaces we imagine to be secure, we must understand that the interior cannot be fully protected. Instead, we must tighten control from within, particularly by tracking all data access and usage. The goal should not be preventing the unpreventable, but rather detecting incidents quickly, and minimizing the resulting harm.</p>
<h2>Seeking to limit damage</h2>
<p>In the specific case of the Panama Papers, 11.5 million customer documents were copied from Mossack Fonseca and revealed to a German newspaper, Suddeutsche Zeitung, which then shared them with other news outlets as well as the International Consortium of Investigative Journalists. <a href="http://wcfcourier.com/news/opinion/editorial/panama-papers-show-need-for-transparency/article_6f706f49-7da6-5a28-b9ac-c25fe10db9d0.html">These revelations</a> – 2.6 terabytes of stolen data – are a Rosetta Stone of the tax haven world. They focus on more than 3,500 people who owned shares in shell corporations that were created by Mossack Fonesca, including people with ties to 12 current or former world leaders, 143 politicians, as well as sports stars and drug lords.</p>
<p>While the leaker or leakers are still not identified, they may eventually be unmasked by electronic forensic work. Their points of entry, <a href="http://www.wired.co.uk/news/archive/2016-04/06/panama-papers-mossack-fonseca-website-security-problems">from what we know</a>, were remarkably basic: unencrypted emails on a version of Microsoft Outlook not updated since 2009, server vulnerabilities including a WordPress plugin known to be buggy and a customer portal running on a <a href="http://fortune.com/2016/04/09/bad-security-panama-papers/">long-outdated version of Drupal</a>. </p>
<p>Simple security protocols, such as ensuring that software updates were installed regularly, would have closed these doors. While a determined attacker could have found other ways in, the treasure trove of documents now known as the Panama Papers was apparently left virtually unprotected.</p>
<p>Organizations should take advantage of the fact that the entire process of data extraction takes time: a hacker first creates an intrusion (or an insider first gets motivated to undertake malicious activity), then conducts reconnaissance for data access and security, and finally copies data. There is sufficient time in this process to take action that could limit damage. </p>
<h2>Guarding from the inside</h2>
<p>By understanding and accepting that it is impossible to create a perfectly secure computing and data environment, companies can take significant steps to increase the likelihood of timely detection, and to prevent (or at least limit) the compromise of data. They must:</p>
<ol>
<li>Restrict information access based on immediate need. The push to increase productivity by integrating databases and improving data accessibility to employees has come with a security cost. Smartly controlling access to data should improve both productivity and security.</li>
<li>Log and monitor access to data and downloads, not only to enforce basic protections, but also to understand who is accessing data and why – and to record patterns of normal behavior for each user. Departures from those norms could trigger security alerts. Companies are starting to do this, but without protections that are strong enough to be really effective.</li>
<li>Divide information intelligently into separate blocks based on what data sets are really related to each other. This can prevent a single intrusion from compromising the entirety of an organization’s data. For instance, people’s contact information should be stored separately from records of their financial transactions.</li>
<li>Manage data archiving to regularly delete obsolete records.</li>
<li>Begin a program of active insider probes, in which security staff surreptitiously offer employees opportunities to violate access protocols, and record and analyze the responses. This can reveal malicious intentions or behavior ahead of time, and help make judgments about staff members’ potential threat to become data thieves. </li>
</ol>
<p>As individuals, we also need to conduct a personal risk analysis of the likelihood that our personal information could be leaked from companies that manage our data. </p>
<p>It is likely that most of the information exposed in the Panama Papers is not from criminals attempting to launder money, but rather from rich people attempting to shelter their wealth from taxes. Whether these shell corporations were designed for legitimate purposes or not, the breach has shown more than their holder’s identity. It has revealed how the rich and famous hide their wealth and evade taxes. And it has redoubled suspicions about business transactions that need this cloak of secrecy. </p>
<p>This incident also confirms the antiquated basis of security – the overarching approach and specific programs and tools – being used in corporations today. The Panama Papers will have ongoing political, tax and business implications on an international level. With luck, they might also lead to greater scrutiny and fundamental redesigns of corporate security structures.</p><img src="https://counter.theconversation.com/content/57464/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sanjay Goel does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Breaches of confidential information are inevitable. But we can limit their size and scope, and therefore their damage.Sanjay Goel, Associate Professor of Information Technology Management, University at Albany, State University of New YorkLicensed as Creative Commons – attribution, no derivatives.