Paradise Papers: can the Channel Islands beat the headlines?

Written by: Kirsten Morel Posted: 05/03/2018

Paradise PapersThe Paradise Papers led to Jersey and Guernsey being branded in the media, once again, as dubious tax havens. So has the time come to stop fighting skewed press representation?

If you’d wanted to avoid media coverage of the Paradise Papers in November last year, you’d have been best off borrowing Elon Musk’s Falcon Heavy rocket and heading off to Mars.

Global media coordination ensured the whole world knew about documents that were stolen from law firm Appleby and corporate service providers Estera and Asiaciti Trust, well in advance of their actual publication. 

Once the light had been shone on the cache of 13.4 million documents that contained the names of 120,000 people and companies, it didn’t stop shining for weeks.

The media circus that surrounded the Paradise Papers was partly due to the revelations in the Panama Papers that were published in April 2016. That initial dump of 11.5 million documents from law firm Mossack Fonseca caused a worldwide furore and led to the toppling of the Icelandic Prime Minister.

It also highlighted the use of offshore financial centres by the likes of Marine Le Pen, David Cameron’s father and several people linked to Vladimir Putin, among many thousands of other individuals.

Like the Panama Papers before them, the justification for publishing so many confidential documents in the Paradise Papers was supposedly ‘public interest’. Yet there have been few allegations of criminality and very few penalties paid by those named, except for the Chairman of Angola’s Sovereign Wealth Fund, who was fired after his name appeared in the cache. 

Despite this, the fact that names such as Queen Elizabeth II, Prince Charles, US Commerce Secretary Wilbur Ross, Apple, Glencore and Nike have all appeared, has led to accusations of hypocrisy from the media and public, who maintain they’re tired of the wealthy avoiding payment of their fair share of taxation.

Appleby, it must be said, isn’t taking the matter lying down and has launched legal actions against both the BBC and the Guardian, claiming that publication of the papers wasn’t in the public interest. “In terms of those mentioned in the papers, there haven’t been any further developments because nothing actionable has been exposed,” says Dominic Wheatley, CEO of Guernsey Finance.

“The only action has been Appleby’s against the BBC and the Guardian, which is important because it’s about the balance between public interest and confidentiality.”

Above reproach

The lack of actionable information has extended to the Channel Islands, where it’s likely that sighs of relief were heard once the papers had been published. Even though a link to US tech giant Apple was found, it turned out to be something of a damp squib.

“In respect of Jersey, the confidential data that was published had little relevance to the island,” says Geoff Cook, CEO of Jersey Finance. “The one issue to generate media interest was the claim that Apple had redirected some of its profits through Jersey, although there was no suggestion that anything improper had occurred. 

“Our regulator, the Jersey Financial Services Commission, was able to confirm that the two Apple subsidiaries weren’t Jersey-registered companies. And their understanding was that Apple funds relating to these entities haven’t been remitted or held in the island.

“To make clear our position, Jersey doesn’t condone abusive tax avoidance schemes, and we would fully expect that, should the government or regulator find any evidence of this sort of activity, action would be taken.”

Given the lack of criminality contained within the Paradise Papers and the action taken by Appleby, it’s clear that such disclosures do damage the Channel Islands’ reputations, even when they’re not directly involved. This leads some to conclude that a new approach to communication is needed. 

“There’s always going to be interest in wealth and money, and that’s the price we pay for working with successful people. But there’s a conflict,” says Tim Morgan, Partner in Mourant Ozannes’ funds team. “Not all disclosures are necessarily useful, and there’s a need to protect individual privacy, but you can understand the hunger for greater transparency. 

There’s a legitimate expectation that because of the history of financial services, we have to continue to lead on the way we communicate our work.”

Lost amid the crowd

The need to clearly communicate the nature of the islands’ financial services industries and the differences between them and other jurisdictions is well understood. The islands make a considerable effort to encourage this differentiation and to concentrate minds on the positives they bring to international finance, trade and commerce. 

Yet Appleby’s own experience when engaging with journalists and publishers before the publication of the Paradise Papers suggests that the perceived strength of a story will always be placed above consideration for the islands’ reputations.

“We thoroughly and vigorously investigated the allegations and we were satisfied that there was no evidence of any wrongdoing, either on the part of ourselves or our clients,” explains Mike O’Connell, Global Managing Partner at Appleby.

“Despite this and a willingness to engage with journalists, it was disappointing that numerous media outlets chose to use confidential and often privileged information to publish stories.

“It’s grossly unacceptable that these journalists have been so cavalier when it comes to plundering documentation with total disregard to issues of confidentiality, privacy and privilege.”

The Channel Islands may not have been named a great deal within the Paradise Papers, but there’s still a feeling that Jersey and Guernsey are seen as guilty by association – after all, in most people’s minds there’s very little difference between one international finance centre and another. This quandary has led Dominic Wheatley to suggest that it’s time for the islands to position themselves differently.

“The Channel Islands are unusual in that we have an environment that’s quality driven and at the forefront of global standards,” he says. “If we did have the capability of rebranding ourselves away from finance and towards professional services, it would be a positive move to make, but we’re at the mercy of others’ perceptions.”

Lack of balance

Those ‘others’ include larger jurisdictions that have an interest in seeing the spotlight continue to shine on the small islands. “There’s a lot of self-interest from jurisdictions that may want to use these stories for their own benefit,” says Tim Morgan. “There’s an interest in the EU to move business from London to other EU centres, and that’s clearly continuing.”

The recent publication of the EU blacklist of uncooperative jurisdictions also had a grey list that included Jersey and Guernsey. But tellingly, the EU focused only on third countries and so avoided the inclusion of EU member states. As a result, Ireland, Luxembourg, the Netherlands and Malta all avoided the reputational damage that comes with such publication, lending credibility to Morgan’s opinion of the EU’s self-interest.

Clearly, size matters and small jurisdictions will always find it difficult to have their voices heard in the public domain, but that doesn’t mean the Channel Islands should change tack, says Mike O’Connell. “The only way we can educate people on the work undertaken in the Channel Islands is by continuing to lead by example by being cooperative and tax-transparent jurisdictions. 

“We have a huge number of people working in the finance industries in Jersey and Guernsey who can talk proudly to their family and friends about the work they are undertaking, but media reports will continue to circle with a degree of negativity around the word ‘offshore’. We need to continue to do what’s right and lawful. We also need to continue to communicate what sets us apart from other IFCs.”

From Jersey Finance’s perspective, this means talking about the benefits the islands bring to international trade and finance.

“Around £160bn of pension fund assets from all over the world are housed in Jersey, benefiting more than 60 million people by helping to generate better returns for their retirement pot,” says Geoff Cook. “Jersey also helps facilitate £500bn of foreign investment into the UK and almost €200bn in the rest of the EU each year, supporting hundreds of thousands of jobs that otherwise wouldn’t exist. 

“These are statistics that people, especially politicians and other key influencers, can appreciate. But we want to build on that. So our strategy this year is to extend our message as widely as we can to the general public, and to show that by working with partners in business and wider global communities, together everyone benefits.”

Whether another set of revelations will follow the Panama and Paradise Papers is uncertain, but the finance sector – or whatever new name can be created for it – is too important to the Channel Islands to be ground down by media sensationalism.

Guernsey and Jersey’s financial services sectors have changed enormously over the past 30 years and both will continue to communicate positive messages about their role in the global financial system. It’s hard to tell whether these will be heard by the general public, but by ensuring they reach the ears of politicians, the islands hope to limit the damage done by the Panama, Paradise or any other papers in the future. 

The Paradise Papers – as it happened

20 October:
First mention of the Paradise Papers appears on internet forum platform Reddit.

24 October: Appleby announces that it is being investigated by the International Consortium of Investigative Journalists (ICIJ) and invites concerned clients to contact the firm.

5 November: Paradise Papers are published for the first time in a globally coordinated media effort that includes the BBC and the Guardian in the UK, Germany’s Süddeutsche Zeitung (the original receiving publication that shared the stolen documents with the ICIJ) and the New York Times. In total, 381 journalists from 96 media organisations in 67 countries took part in the analysis and publication of the documents.

5 November: News of Queen Elizabeth II’s investments in a Cayman Islands fund is revealed as one of the lead stories.

8 November: A story about Guernsey-based private equity firm Terra Firma emerges, accusing the company of forcing a care home operator that it owns to take a $220 million loan on unfavourable terms.

19 December: Appleby launches legal action against the BBC and the Guardian, claiming that the leaks are a breach of confidence and demanding a halt to further publication and the return of stolen documents.

19 December: Labour Party leader Jeremy Corbyn criticises Appleby’s legal action.

21 December: A human rights group in Switzerland lodges an official criminal complaint against resources conglomerate Glencore with the Swiss Attorney General. The complaint requires the AG to investigate Glencore’s acquisition of a copper mine in the Democratic Republic of Congo.

11 January:
José Filomeno Dos Santos, head of Angola’s sovereign wealth fund is sacked by the country’s president after he is shown, via the Paradise Papers, to have appointed a friend to manage the fund.

15 January: Australia’s tax office says that the Paradise Papers reveal the ‘commoditisation’ of tax avoidance.

23 January: The Guardian publishes a story claiming the Paradise Papers show that Appleby ‘provided offshore services to a bank [FBME Bank] accused of facilitating terrorist financing, transnational organised crime and the Syrian government’s chemical weapons programme’. The story claims that services were provided ‘for at least a year after the US Treasury published an extraordinary roster of allegations against the bank, and acted as its agent for more than a decade beforehand’.

28 January: It’s revealed that Dan Gertler, the intermediary linked with the Glencore acquisition of a Congolese mining company, is under investigation by the US Department of Justice for alleged bribery of ‘high ranking’ Congolese government officials.

8 February: EU Parliament votes to launch an enquiry into the use of offshore jurisdictions to avoid payment of VAT by multinational corporations. The enquiry is expected to focus on jurisdictions linked to the UK.


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