Editor’s note: This is less in-depth than our usual explainer primarily because we want you to read the details over at Indian Express—whose journalists have spent 12 months working on the Indian angle. We only offer context and an overview. 

The basic deets

• The investigation was led by the International Consortium of Investigative Journalists (ICIJ)—with more than 650 reporters and a number of partner publications, including the Indian Express in India.
• They had access to nearly 12 million documents and files from 14 financial services companies—which set up about 29,000 off-the-shelf companies and private trusts.
• Unlike the Panama Papers—where the papers were leaked from one law firm—these companies are located around the world, including Belize, Singapore, New Zealand, United States and the UAE. The offshore system is global—not limited to exotic islands.
• Around 35 current and former world leaders and 300-plus public officials are featured in the documents—and more than 130 people listed as billionaires by Forbes magazine.
• The documents include “emails, memos, incorporation records, share certificates, compliance reports and complex diagrams showing labyrinthine corporate structures. Often, they allow the true owners of opaque shell companies to be identified for the first time.”
• The leaked records span two decades (1996-2020)—while the offshore entities were set up between 1971 to 2018.

Quote to note: Gerard Ryle, the director of the ICIJ, said of the investigation: “This is the Panama papers on steroids. It’s broader, richer and has more detail.”

Why this matters: Not all of the activity uncovered here is illegal. But they show how the very wealthy have found new loopholes and business entities to protect their money—after the Panama Papers resulted in a regulatory crackdown. In India, for example, tax authorities found Rs 200 billion (20,000 crore-plus) in undeclared foreign and domestic assets thanks to the Panama leak.

First, tell me about India

There were 300-plus Indian names in the leaked documents—and the Indian Express investigated 60 prominent individuals and companies. It rolled out the first tranche of stories today. 

Trusting in trusts: The biggest reveal is the use of offshore trusts to move money. In a trust, there is typically a ‘settlor’ who sets up the trust. And there’s a ‘trustee ‘who holds the wealth on the behalf of ‘beneficiaries’—named by the ‘settlor’. Here’s what a trust offers:

• It creates a separation between the settlor—i.e. the very rich person—and his money. He no longer “owns” this money—and therefore his creditors cannot come after it if he, say, defaults on massive loans.
• Offshore trusts are governed by strict privacy laws. So it is hard for tax officials to find the money stashed in them. Although the Indian government has treaties that enable exchange of information—they rarely work well in practice.
• Also this: “High-profile people can set up trusts to own shell companies in tax havens, obscuring the true extent of their property from tax authorities, criminal investigators and the public.”
• Trusts also offer a tax-free way to transfer assets to children—who are named as beneficiaries. And as non-resident beneficiaries, they don’t owe any taxes on their income from the trust. 

Big point to note: As the Washington Post underlines:

“One key feature is that assets held in a trust exist in a kind of limbo. The settlor has given them away. The trustee may own them under the law but has no right to use them. And the beneficiary has yet to receive them. If someone owes a debt, each of the three parties can argue that they do not control the assets.”

The NRI card: These trusts are most useful when accompanied by a foreign passport. This works in two ways:

• If the ‘settlor’ is a non-resident, he can transfer a great amount of his wealth abroad: $1 million/year—over and above his income—compared to the $250,000-limit for Indians.
• According to the law, the trustee is the actual owner of the assets of the trust. If that person is an NRI then they don’t owe any taxes on these assets held abroad.

Ok, any big names or companies?

Here’s what Indian Express has revealed so far (spoiler alert: there are no big smoking guns):

John McCallum Marshall Shaw: That’s the husband of Biocon founder Kiran Mazumdar Shaw:

• Mr Shaw owns 99% of a company called Glentec—which also owns 19.76% of Biocon. Glentec set up an offshore trust in New Zealand. The beneficiaries are relatives of the Shaws. 
• The trustee which ‘owns’ its assets is a corporate services company headquartered in Singapore. 
• This trust also has a ‘protector’—appointed to supervise the trustee. The ‘protector’ in this case is Kunal Ashok Kashyap—who has been banned from trading in the Indian stock market for unlawful gains.
• The big question: Why are the Shaws using a disgraced investment banker to ‘protect’ their trust? Indian Express has more on the trust and response from the Shaws—who insist everything is above board.

Sachin Tendulkar: The cricketer, his wife and father-in-law were owners of an offshore company set up in the British Virgin Islands. This company was liquidated in 2016—soon after the Panama Papers exposé—and its shares were bought back by the three of them for around $8.6 million (roughly Rs 60 crore). But the company was in operation during the years when Tendulkar was a Rajya Sabha MP. Tendulkar’s financial representative insists the company was set up with funds on which all Indian taxes were paid—and sent offshore as per foreign remittance rules.

Anil Ambani: This one is more damning. Anil-bhai owes a lot of people a lot of money—but he has been insisting in a London court that he is totally broke. But the Pandora Papers reveal that he and his representatives own at least 18 offshore companies in Jersey, British Virgin Islands and Cyprus. These companies borrowed huge amounts from banks—from ICICI to Barclays—and invested them in various entities linked to Reliance. Indian Express has more on how this convoluted paper trail works. 

Other defaulters: The newspaper hasn’t revealed any names as yet, but claims it has uncovered a number of businessmen who defaulted on massive loans. Some are even in jail, but they continue to hold billions in offshore entities. Coming soon: The big reveal of a set of Mumbai-based real estate tycoons who owe Indian banks more than Rs 880 billion (88,000 crore). We are most intrigued by:

“There is also a Mumbai-based jeweller, whose firm has defaulted to the tune of Rs 500 crore on loan repayments to 19 Indian banks, and, records show, set up a web of offshore firms with cross holdings to route funds along with a billionaire Saudi-businessman linked to a Mexican drug lord.”

What about the rest of the world?

Here are some of the big ones:

One: The ruler of Jordan King Abdullah II used an extensive network of offshore accounts to disguise lavish purchases in real estate. Between 2014 and 2017, he spent nearly $70 million on three adjacent homes in Malibu, California. Overall, he spent more than $106 million on properties held by shell companies registered to him alone.

Two: A woman supposedly in a years-long relationship with Russian President Vladimir Putin suddenly became the owner of a lavish flat in Monaco—soon after she delivered a baby girl. As per the Pandora Papers, she is just one of many Putin loyalists who became fabulously and mysteriously wealthy—with their assets stashed abroad.

Three: Some of PM Imran Khan’s closest advisers—including his finance minister—have been hoarding money abroad. While Khan himself is not implicated, it is highly embarrassing for a politician who ran on an anti-corruption plank. He has promised an investigation.

Four: OTOH, Tony Blair and his wife Cherie are off the hook. Yes, they did acquire a British Virgin Islands offshore company—but everything was done by the book.

The bottomline: Are any of us surprised?

Reading list

Washington Post and The Guardian have the best overview of the global investigation. Washington Post also offers its report on Vladimir Putin and King Abdullah. Read more on Indian Express about Tendulkar, Shaw, Ambani and big defaulters—and a detailed explainer on how Indians use offshore trusts.