Illicit financial flows of developing countries: insights from Pandora Papers

There are many situations that describe illicit financial flows. For example, economic agents may establish anonymous, usually offshore, shell companies to transfer illegally acquired money. The transfer is often disguised as a foreign direct investment (FDI). In this sense, the recent information and data leakages by the International Consortium of Investigative Journalists (ICIJ), labeled “Pandora Papers”, raises important questions. Pandora Papers is an attempt to, among others, expose firms and individuals allegedly involved in the establishment of secretive companies in external jurisdictions possibly motivated by the need to “shelter” their wealth from regulatory authorities or to launder it. The ICIJ emphasizes that there are legitimate uses of offshore companies and trusts, implying that the naming of firms and individuals involved does not necessarily imply wrongdoing on their part.