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Journalists Expose Trove of Hidden Offshore Bank Accounts Around the World

April 5, 2013 at 12:00 AM EDT
Around the world, government officials and individuals use offshore accounts to hide their wealth and evade heavy taxes. Hari Sreenivasan talks to Gerard Ryle, director of the International Consortium of Investigative Journalists, about the findings of a massive cross-border collaborative investigation.

JEFFREY BROWN: Next: With Tax Day looming for millions of Americans, a new investigation exposes the global use of offshore bank accounts to hide trillions of dollars and evade laws.

Again to Hari, who has the story.

HARI SREENIVASAN: Uncovering the complex workings of offshore tax havens has led to one of the largest cross-border collaborations ever between journalists.

The International Consortium of Investigative Journalists has been combing through more than two million files of financial transaction data for more than a year. It’s taken this long because the digital file size is 160 times larger than the State Department cables published by WikiLeaks in 2010.

A team of 86 investigative journalists from 46 countries has collectively examined more than 120,000 offshore accounts belonging to individuals and companies from more than 170 countries. The records show how government officials and individuals in a number of countries use covert accounts and companies to shield their wealth and how some of the top global banks work within these offshore tax havens as well.

The investigation is already leading to a series of reports, including one spotlighting the transactions of a Canadian senator’s husband, who has hidden money from their equivalent of the IRS, an Australian tied to arms dealing through shell companies, and a Mongolian lawmaker who may resign over the revelations of his finances overseas.

Gerard Ryle directs the International Consortium of Investigative Journalists and joins us to discuss the findings.

Thanks for being with us.

GERARD RYLE, International Consortium of Investigative Journalists: It’s good to be here.

HARI SREENIVASAN: So, first of all, how did you get this trove of information? What is the data?

GERARD RYLE: Well, the data is an enormous amount of sort of very unstructured data. It’s got documents, spreadsheets, financial transactions, e-mails.

And it came about because of a long investigation I did in Australia about a fraud that effectively led me to this world, this secret world that I knew nothing about, which was the world of offshore.

HARI SREENIVASAN: So, in this report, you say that it’s not just the super-rich and the super-powerful, but it’s more pervasive. Explain that.

GERARD RYLE: Well, it was probably the biggest surprise that I found.

I initially thought that the people that you expect to use tax havens are the super-wealthy. But when you look at this world, you find that it’s not just the super-wealthy that are using it. It is the sort of moderately wealthy. And it pervades right down through society to doctors, dentists, you know, small-time developers.

They have all discovered this world. And they’re all using it.

HARI SREENIVASAN: And you said that it contributes to fraud, tax dodging and enables political corruption. Explain that.

GERARD RYLE: Well, the very secrecy of this world allows you to misuse it.

I mean, this world is, for the most part, you imagine — we can’t prove it — legitimate. And there’s nothing illegal with using, buying an offshore company. There is nothing illegal with setting up a secret bank account. It’s only if you don’t report that to the authorities if you need to report it where it becomes illegal.

But because it’s so secret, I mean, rogue nations can use this. We came across a company that was the front for the Iranian shipping line, you know, which has since been outlawed by the European Union, by the U.S. authorities. You know, so, basically, the way that they use it is because they can get away with anything they want.

HARI SREENIVASAN: And so included in this list of names that you have access to is 4,000 American names. Were there any surprises there? Or how are we going to find out about that reporting?

GERARD RYLE: Well, again, it was very difficult for us to work out whether or not any of these people were breaking any laws.

And our first duty as reporters was to, you know, look after the public interest. And where the — a lot of these people are not public figures, so, therefore, it didn’t jump that barrier for us, which was there has to be some there form of public interest. They have to be public figures in some way.

HARI SREENIVASAN: And you also outline that the scope or scale of this, the $21 trillion to $30 trillion dollars that are floating around in this almost second banking network?

GERARD RYLE: Well, the Tax Justice Network, which is an advocacy group, has got the best figures on what they think is the size of this offshore world. And they say that half of all world trade and a third of all world wealth now resides in the offshore world.

And this is the first time that anyone has been able to really see into that world. And I’m not saying that we have got it all comprehensively covered here. We’re only looking at a very small slice of a very large world. But it’s a very deep slice of that world.

HARI SREENIVASAN: So what are people using this for? Just to try to buy art without telling the IRS about it? Or how are they moving money around? What do they do with it?

GERARD RYLE: Well, some people are using it to hide money from their spouses during divorce proceedings, for instance.

You have got some super-wealthy people who like to own yachts, and they like to have companies that own those yachts for privacy reasons, in some cases. You have to assume that some of it isn’t just for privacy reasons, that it’s to try to hide it from authorities, not just the U.S. authorities, of course.

I mean, we’re talking about data from and names from 170 countries-plus.

HARI SREENIVASAN: What do you think some of the consequences are going to be from the release of this information?

When we saw WikiLeaks, initially, we didn’t really know what to make sense of it, and then eventually it had huge political consequences around the world.

GERARD RYLE: It’s hard to know what is going to happen here. But the first, I guess, consequence is that a secret world is no longer secret. And it’s going to send shivers through this world.

We discovered that there is a whole service industry out there of providers who, you know, are used by big banks and other, you know, everyday institutions. And they provide, you know, the means to set up offshore accounts, the means to set up offshore companies, the means to — you know, to basically conduct your business through secrecy.

HARI SREENIVASAN: And I got to ask a question on the journalism side of it. How do you keep 80 different newspapers and everybody together and sort of keep a secret as they are developing this process? This idea of distributed reporting is pretty novel.

GERARD RYLE: Yes, but we were able to convince everybody that if they shared information and if they shared resources, that we would all end up with a better product.

And because this world has no borders, and it doesn’t have any borders, the reporting took people through one country and into another. And they were able to able to share information that helped each other. And that became apparent very quickly.

And, of course, we grew the number of reporters over time. So it was a — by the time it got to 86 reporters, the reporters who started with us were able to tell the others that it was worth their while.

HARI SREENIVASAN: So you would show them a name, a list of names and say, are these people significant or not?

So how are we going to see these reports come out? Is it the next few weeks or the next few months?

GERARD RYLE: Well, our plan is to do probably another two weeks of reporting on it and then to go back in.

We think we have only skimmed about 20 percent of the data, even after 15 months of looking at it, because there is so much in there that it is kind of impenetrable. There are even files that we haven’t yet to look at because we just can’t read them. It took an awful lot of technical know-how to be able to reassemble it all, to use special software to read.

And so we think there are a lot more stories in there. But this is our first attempt, basically, at breaking it open.

HARI SREENIVASAN: All right, Gerard Ryle, thanks so much for joining us.

GERARD RYLE: Thank you.

JEFFREY BROWN: And you can find a link to the reporting by the group of journalists. That’s on our home page.