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14 April, 2013  ▪  Bohdan Tsioupine

Offshore Leaks

The biggest ever leak of information about the offshore accounts of global companies reveal the dark side of the global economy. The lists also include Ukraine’s richest oligarchs

Built almost entirely of glass, the seven-storied apartment building on Hyde Park Street in the heart of London, looks like an alien spaceship that has landed between historical, largely brick buildings. Average Earthmen almost never get to see the aliens, just like in Hollywood sci-fi movies, so they take incredible efforts to satisfy their curiosity and find out what creatures live there.

Reportedly, the invisible residents include the richest Ukrainian, Rinat Akhmetov, although the USD 215.9mn paid for the two apartments that were merged into one, did not come from the oligarch’s personal accounts. His official company, System Capital Management (SCM), previously admitted to the purchase of the real estate, reporting it as part of its investment portfolio. According to the British registration acts, the property belongs to Water Property Holdings LTD, an offshore company in the British Virgin Islands. In this, Akhmetov does not differ from most of the other owners of luxurious apartments at 1, Hyde Park.

76 of 80 apartments (86 in the original plan) were sold by January 2013. Only 12 apartments are registered to private individuals. Offshore companies with unfamiliar names own most of the other luxury apartments.

David Leigh, The Guardian’s investigations executive editor, explains that there are at least two reasons why the residents of the most expensive apartments in the world prefer to stay behind the scenes. One is very simple: buying real estate through offshore companies helps foreigners to avoid a slew of British taxes, although people this wealthy should be able to afford to spend a pretty penny on the right cause. The second reason is more serious: buyers in this category prefer to keep their business completely secret.


The Washington-based International Consortium of Investigative Journalists (ICIJ) offers the opportunity to peek into the mystic offshore world that has been revealed to be much bigger than outsiders previously thought. James Henry, former senior economist at McKinsey, believes that nearly USD 32 trillion is hidden in offshore zones. This exceeds the combined total GDPs of the USA and Japan.

This month, the ICIJ leaked another portion of data with the names of thousands of companies and hundreds of people hiding their assets in offshore companies. Ukrainian oligarch Dmytro Firtash, the owner of Group DF Limited registered in the British Virgin Islands, a holding company for his interests in energy, chemical and real estate, has landed on the list.

New Ukrainian names linked to offshore activity may surface in time: so far, over eighty journalists and ICIJ experts have processed only 20% of the 260 GB of data from an anonymous source.

READ ALSO: Investigations Without Borders  

David Leigh and other ICIJ members note that the very fact of a person’s involvement in an offshore company or the ownership of accounts in tax havens “is not necessarily something bad”. In most cases, they do everything according to the law. But the basic rule of offshore business for a certain category of clients is secrecy. The key question to people employing tax havens is why they do it? Why, and from whom do they hide their assets?

ICIJ’s investigation found that the Greeks comprise one of the big groups of clients preferring offshore secrecy. Citizens of the now bankrupt EU member-state own at least 107 companies in the British Virgin Islands, ICIJ journalists claim. A comparison of this data with the records of tax authorities in Athens showed that only four have submitted tax declarations.

The long list of tax haven users disclosed so far includes the family of the Azerbaijani President: Ilham Aliyev and his wife Mehriban were listed as directors of Rosamund International Ltd (2003) registered in the British Virgin Islands; his daughter Arzu Aliyeva as director and stakeholder of Arbor Ivestments (2008) also registered in the BVI; his other daughter, Leyla, is director and stakeholder at LaBelltza Holdings Ltd. (2008) and Harvard Management Ltd. (2008), both in the BVI.

Georgia’s new Prime Minister Bidzina Ivanishvili, the wife of former Russian First Vice Premier Igor Shuvalov – Olga, Deputy Director of the Board of Gazprom and Putin’s close ally Valeriy Golubev, and many others, have also made it onto the list.

READ ALSO: Taming the Oligarchy

The registration of shell companies and the trade in the names of nominal company directors is another massive and even more obscure branch of the offshore industry. An investigation by The Guardian found that 38-year old Sarah Petre-Mears was the head of a global network of over 1,200 firms. Her main responsibility was to sign their official documents from her remote island residence in the Caribbean. Hiding behind her name, anyone can do business – even people with a criminal past who have been banned from conducting any financial activity. Shell companies with virtual offices and nominal directors have also stolen some of the spotlight in Ukraine. One was the obscure public tender to purchase ridiculously overpriced oil rigs known as “Boyko platforms” in 2010.


The function of governments is to make every effort to prevent shams in business and fight against the loopholes used for tax evasion.  Some try to do just that. After the ICIJ disclosed its latest investigation reports, Germany’s Finance Minister Wolfgang Schӓuble said that he was happy to see the report, which will increase pressure on governments to fight tax evasion. At the same time, he admitted that this work is “infinitely difficult”.

Last year, Germany signed an agreement with Switzerland for the return of taxes evaded by German citizens via Swiss banks to the German treasury. Germany expects to receive nearly EUR 10bn of those evaded in 2013. Swiss banks were forced to agree to retain due taxes from the hidden accounts of German citizens and transfer them to Germany. In addition, Merkel’s government pledged a sort of amnesty to the Germans who pay a lump sum tax of 21-41% of the accounts that were not reported earlier.

In recent years, Switzerland has had to reinforce its banking rules to avoid accusations of letting its financial institutions make a fortune on the tax evasion of foreigners in their own countries. In 2011, the US government pressed the Swiss government to transfer data on the undeclared accounts of US citizens – nearly 4,450 in all – to US tax authorities. UBS, a major Swiss bank, was forced to pay a fine of USD 780mn to the US Treasury as a result of an intergovernmental conflict.

But this fine is peanuts compared to the damage done to the reputation of the guaranteed confidentiality of clients’ personal information in Swiss banks. Now, the data disclosed by the journalist consortium proves that the scale of tax evasion in British offshore zones may be greater than that in Switzerland.

READ ALSO:  A Big Bank Scam

Gerard Ryle, Director of the ICIJ’s headquarters staff in Washington, suggested in a recent interview that “…Britain and the US do not want to close offshore zones because a lot of money comes to the UK through them. Most are former British colonies. So, all that money goes to the City; it doesn’t stay in the Virgin Islands or Singapore.”  

Critics of offshore zones like the British Virgin Islands, where business owners, politicians and people with questionable reputations and covert businesses hide their affairs, point out that a real struggle against this can only be successful if it is launched in London.


When Chrystia Freeland, a Canadian-American journalist of Ukrainian origin, presented her new book Plutocrats. The Rise of the New Global Super-Rich in London, she said that many oligarchs think they are unfairly deprived of what they should have. They complain that too many people envy them and do not appreciate the contribution of wealthy people to society. Yet, Freeland points at a difference between those who got rich by “inventing the iPhone” and those who built their business by convincing the government of their country to hand over a quarter of national oil exports to their control.  

Offshore leaks confirm that many big money people rush to exploit the benefits of globalization and shuffle their money around in such a way as to hide from the taxpayers of the countries that made them rich. Politicians and top officials who with their entire families, become filthy rich without lifting a finger, deserve harsher criticism.

READ ALSO: World Without Leaders

A global system, in which deft and sometimes light-fingered fraudsters can hide their money, will always raise suspicion, while governments will be under pressure to fill the loopholes. 

Meanwhile, the building at Hyde Park remains standing like an alien spaceship, or a slice of the distant British Virgin Islands, in the heart of London. The residents clearly take comfort in the fact that their building has bulletproof windows, the best security guards, all mail is X-rayed before delivery and a number of apartments are equipped with cameras, in which residents can hide if the building comes under attack. 

This alien slice has become a reality not only due to oil dollars from Arab countries – Sheikh Hamad bin Khalifa Al Thani from Qatar owns the most luxurious apartments on three floors – but also due to the money earned on asset-grabbing in post-Soviet countries, including Ukraine. 

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