Identification of Financial Risks with Offshore Leaks Database 

Quite often, it is seen that major elites in politics and power are those who veal their financial assets in offshore companies established in low-tax-based countries. Moreover, numerous low-tax countries assist approximately 113,648 offshore companies on a regular basis. The ultimate objective of these companies is to aid imposters in concealing assets to avoid taxes. For this reason, the international consortium of investigative journalists has prepared a report from ICIJ, which underlined the offshore leaks database. The report exposed all those entities that used offshore companies to hide the source of their assets in order to avoid tax investigation. The following section provides a detailed analysis of the database leaks, along with critical events that happened after the revelation of the report.

Understanding Offshore Leaks Networks: A Quick Overview

The offshore leaks database is the compilation of all those people who have created an offshore company in low-tax countries. This report aimed to expose the unlawful people who try to avoid taxes by keeping their money in countries where tax rates are found to be less. Moreover, offshore financing leads to serious fiscal offenses like money laundering and tax avoidance.

This report exposed critical information with respect to political elites and public figures using these offshore companies in an effort to undertake corrupt financial activities such as laundering money.

Therefore, the offshore leaks database serves as a critical starting point for financial institutions in order to identify and minimize the illicit practices of high-profile individuals.        

Events After Offshore Leaks Database Revelation – A Historical Analysis    

The offshore leaks database was revealed in 2013, and ever since, various reports have been leaked with the purpose of exposing the illicit entities. Some of the most critical financial leaks are briefly examined below:

• A Swiss offshore leak was released in 2015, in which the major banks were exposed for facilitating illicit activities, mainly money laundering and drug dealing. In this report, critical financial details covering the volume of 3.3 gigabytes were revealed. Additionally, it was observed that the Swiss banks allegedly violated the anti-money laundering laws and were involved in illicit transactional activities in the past. 
• The Paradise paper leaks were released in 2017 that exposed the list of political elites and celebrities who have benefitted from hiding their assets in offshore companies.
• In 2016, Panama paper leaks were released, which blew the world up by storm, disclosing the list of wealthy and politically exposed individuals who have been involved in corrupt activities through various tax-heaven territories.
• The most recent offshore leaks were released in 2021 by the name of Pandora paper leaks. This report highlighted how the elite political class hired lawyers to help them conduct money laundering practices. Moreover, approximately millions of files were revealed through this offshore leak.

Significance of Offshore Leaks Investigation in Regulating the Financial Framework  

The offshore leaks database contains information about all the entities that were revealed in the above-mentioned reports. The screening of customers against this database helps the country’s financial institutions identify illicit entities instantly. Therefore, this offshore leaks database is crucial for the following reasons:

• While onboarding new clients and customers, it is critical for businesses to examine their risk profiles against the offshore leaks database. This stimulates the identification of the red flags regarding the involvement of potential customers in illicit financial activities.
• The offshore leaks database stores extensive information about the individual’s involvement in illicit activities through the shell and offshore companies. A detailed due diligence process against this database helps the institutions identify the illegal entities instantly. 
• Additionally, this database allows businesses to screen and monitor the customer’s current and past financial activities and involvement in criminal financial patterns effectively.   

Role of ICIJ Offshore Leaks Database in Ensuring AML Compliance 

ICIJ’s revelation of the offshore leaks database helps an economy’s legal structure comply with the AML guidelines. A thorough screening of customers against this database ensures the identification of tax evasion and criminal activities. Additionally, the examiners are effectively assisted through this database in conducting risk-based identity analysis of the customers. 

The financial database of offshore leaks intensifies an economy’s integrity as it ensures transparency in the customer’s financial practices and transactional behaviors. An extensive analysis of these databases allows businesses to combat financial discrepancies and protect the financial framework from unnecessary money laundering and human trafficking activities.    

Concluding Remarks  

The revelation of the offshore leaks database created a storm in the financial world due to their practice of disclosing the illegal entity’s identities. This database exposed the individuals who were using offshore companies to facilitate their ill financial practices. Additionally, these databases play an important role in helping businesses identify the customer’s profiles during the onboarding procedures. These practices ensure that only legitimate individuals who are not involved in illegal financial activities and are not using offshore companies to hide their assets.