Pandora Papers: Breaking Down Offshore Accounts

Here’s a quick guide to understanding offshore accounts.

The explosive data “tsunami” that is the Pandora Papers paused every newsroom in the world as the International Consortium of Investigative Journalists bust down the door of the offshore banking industry. No one was spared from this global investigative report: current and former presidents, prime ministers, politicians, tycoons were name-dropped in what’s being dubbed “the largest investigation in journalism history.” Even a king, Jordan’s King Abdullah, was incriminated. 

In the Philippines, a number of high-profile business leaders and politicians were named, the most famous being Dennis Uy and Transport Secretary Arthur Tugade. But before anyone jumps to a conclusion, it’s important to note: having an offshore account is not illegal and not everyone named in the Pandora Papers is a criminal. Offshore banking is a complicated gray area in the financial industry, one that’s benefited the world’s wealthiest the most. 

Here’s a quick guide to understanding offshore accounts.

Is it legal? 

Yes, having an offshore account is entirely legal. The name itself has a negative connotation, associated with money laundering and tax evasion by the wealthy and corrupt. But for most people, that’s not the case. If you are a Filipino with a bank account in Japan because you visit extended family in Tokyo regularly, then you essentially have an offshore account. Are you a wealthy individual trying to avoid paying taxes? No. For the most part, offshore banking is a convenience for expats and frequent travelers. It’s only when the offshore account is holding billions, if not trillions, of dollars where things get murky.


In this situation, having an offshore account can be compared to burying your treasure. The wealthy transfer their funds to so-called tax havens where their money will be protected by bank secrecy and lack of regulations. Secrecy, investments, and wealth preservation are the typical reasons the ultra-wealthy resort to offshore accounts, but the less honorable naturally utilize this system to hide and smuggle their money.

When is it okay to have an offshore account?

If an account holder plans to do legitimate business or make an investment in another country, then an offshore account can hasten the transfer of capital with little to no fees. If an account holder plans to operate a business in the Philippines but is not happy with corporate taxes, then he/she can opt to incorporate the business in another country, like Singapore, while still operating in the Philippines. Banks that specialize in wealth management can also suggest creating offshore accounts to their clients to protect and grow their assets. For the ultra-famous, such as superstar athletes and movie and TV celebrities, offshore accounts offer privacy as offshore companies are not obligated to disclose information about their clients. Jet-setters who enjoy purchasing items abroad can also set up offshore accounts to accommodate their purchases. 

These are all valid reasons to set up offshore accounts, but offshore banking as an industry is designed to cater to the wealthy. Of course, the system is prone to abuse.  

When is it wrong? 

Today, offshore banking is almost always associated with corruption because of the people who use it to circumvent laws. Opening an offshore account is not wrong, but opening one with the intention of tax evasion is. Unless you are a citizen of a country that does not require you to pay taxes, then you have to pay taxes on your income. Offshore accounts are an easy way for the rich to keep their wealth away from their home governments in an entirely legal way. It’s also an avenue for people to commit fraud, launder and smuggle money across borders. 

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While the system of offshore banking is legal, there are plenty of debates that argue whether it’s right. The offshore banking industry is estimated to be equivalent to 10 percent of the global GDP or even as much as $32 trillion. 

All of this wealth, untaxed, is the greatest indicator of global wealth inequality. And this is the reason why the leak of the Pandora Papers is so important: it raises questions about where the world's wealthiest and most powerful are keeping their money, and why.

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Anri Ichimura
Section Editor, Esquire Philippines
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