Suddenly what was previously secret was public. In October, the International Consortium of Investigative Journalists (ICIJ) published together with 600 journalists worldwide, including colleagues from Süddeutsche Zeitungwho have favourited “Pandora Papers”. 35 heads of state and government appeared in the data, plus more than 300 politicians and officials – and countless criminals who parked or wanted to launder their money in tax havens, including gold smugglers, investment fraudsters, drug dealers and organized crime too.
The European police authority Europol is now using the findings from the extensive research as an opportunity for an alarming report. In “Shadow Money – The International Networks of Illicit Finance”, the investigators warn that the European Union has underestimated the issue of money laundering for years, that organized crime has built a financial shadow structure – and that this is causing massive damage to society. The Pandora Papers would have made clear the extent of financial crime that affects the entire EU.
Experts estimate that 7.5 trillion euros are in offshore paradises around the world, 1.5 trillion of this comes from the EU. The loss suffered as a result alone amounted to around 46 billion euros in 2016; there are no more recent figures. While most people usually associate the complex constructs of letterbox companies behind them with tax savings, Europol warns in particular that these offshore jurisdictions help serious criminals. According to Europol, they play a “key role in money laundering systems” which use organized crime to hide the real origin of their income.
This goes so far that professional money laundering has built a “parallel, underground financial system” that is “isolated from all legal financial supervisory mechanisms”, according to Europol. This enables them to hide their money, to push it across national borders and to make untraceable payments for corruption, for example, with which they buy influence in society. According to Europol, this is how a “global crime economy” is emerging.
Gangsters hide in tax havens with their money
The supervisors and the investigators hardly have a chance to stop these machinations as long as there are tax havens, for example. In and behind these, the gangsters hide with their money, because the rules and laws there are lax and often serve to protect the real beneficiaries. The states are trying to freeze the proceeds of crime, but the EU is not really successful, as a figure from 2016 shows. According to this, 98 percent of the proceeds from crime remain in the hands of criminals.
All of this has serious consequences for society as a whole that go far beyond the spread of criminal structures. Almost every legal business in the EU can be affected by the effects. According to Europol, these include “the infiltration of legal transactions, the distortion of competition and the free market environment, the damage to corporate structures, the endangerment of economic sectors and the endangerment of financial institutions in a way that can affect entire financial systems”.
This is also dangerous because the criminal world always affects the daily lives of millions of people. Europol Director Catherine De Bolle, for example, said in an interview with the Belgian weekly magazine Crack On the report: “When criminal groups launder money by buying real estate in certain European cities, this leads to an infiltration – the mixing of the legal upper world with the criminal underworld. And this infiltration weakens society, the economy and the rule of law.”
De Bolle now sees the EU’s turn to oppose this development. Criminals would always look for loopholes and close all loopholes, that will not be possible, she says. “But we have to close as many doors as possible in Europe.”