# Tax havens: the offshore world and grand corruption

The offshore world of secrecy jurisdictions that hides trillions and enables grand corruption, until the great leaks began to crack it open.

*This story parallel: The bankers*
*This story parallel: The Russian oligarchs and the rise of Putin*
*This story parallel: Why Kenya is corrupt: the inherited machine and the politics of the belly*
*This story parallel: The hidden leash: the fine print that keeps economies dependent*
*This story parallel: Swiss neutrality: the vault and the wartime record*
*This story part of: Money and finance*
*Uhuru Kenyatta: dynasty, Jubilee, debt, and the handshake state parallel this story*

## 1899 — Delaware writes a corporation law to attract companies

Delaware passed a lenient General Corporation Law in 1899 to lure businesses away from New York and New Jersey. Cheap fees, light rules, and a friendly court made it the legal home of most large American firms. Today more than a million companies are registered at a single address in Wilmington, and the state does not require owners' names to be made public.

## 1927 — Panama passes its anonymous company law

In 1927 Panama adopted a corporation law modelled on Delaware's, letting people set up companies with hidden owners and no local business. Together with its open ship registry, this made Panama an early offshore centre. The country became a byword for shell companies over the following decades.

## 1929 — Luxembourg exempts holding companies from tax

A 1929 law let holding companies based in Luxembourg pay almost no tax on income from shares and assets held abroad. The rule drew a stream of corporate structures and helped build the country into a major finance hub. Under pressure from the European Union, Luxembourg finally abolished the special regime in 2010.

## 8 November 1934 — Switzerland makes banking secrecy a crime

The Swiss Federal Banking Act of 1934 made it a criminal offence for a bank to reveal a client's identity. The law turned discretion into a legal wall and cemented Switzerland's role as the world's private vault. A popular story that the law was written to shield Jewish savings from the Nazis has been challenged by historians, who trace it to an earlier French tax scandal.

## c. 1957 — The Euromarket grows in the City of London

From the late 1950s banks in the City of London began trading US dollars held outside the United States, a pool of money the Bank of England chose not to regulate. This Euromarket let banks move money beyond the reach of national rules. Nicholas Shaxson and the Tax Justice Network argue this was the birth of the modern offshore world, a deliberate space built to escape oversight.

## c. 1962 — Bermuda pioneers captive insurance

From the early 1960s Bermuda let companies set up their own in-house insurers, called captives, in a place with no corporate income tax. The island grew into a leading home for captive insurance and global reinsurance. It showed how a small territory could carve out a specialised offshore niche.

## 1966 — The Cayman Islands open for offshore banking

A 1966 banking law, in a British territory with no direct taxes, set the Cayman Islands on the path to becoming a top offshore centre. The islands grew into one of the world's largest banking hubs and the leading home for hedge funds. Trillions of dollars are booked there, most of it just passing through on paper.

## c. 1969 — Jersey builds an offshore finance industry

From the late 1960s the Channel Island of Jersey, a self-governing Crown Dependency close to Britain, grew into a centre for trusts and offshore banking. Its low taxes and light regulation drew money from London and beyond. Along with Guernsey and the Isle of Man, it forms part of Britain's ring of nearby havens.

## 1982 — Mauritius becomes the gateway to India

A tax treaty signed between India and Mauritius in 1982 meant profits on Indian investments routed through Mauritius went almost untaxed. For years Mauritius was the single largest source of foreign investment into India, and it became a similar conduit for money flowing into Africa. Critics, including Indian tax authorities, said much of this was "round-tripping", local money disguised as foreign; India revised the treaty in 2016.

## 1984 — The British Virgin Islands mass-produce shell companies

The 1984 International Business Companies Act, drafted with American lawyers, let people set up cheap, anonymous companies in the British Virgin Islands. The territory became the world's busiest maker of offshore shell firms, with hundreds of thousands on its register. A single owner can hide behind nominee directors, stand-ins whose names appear on paper while the real owner stays out of sight.

## c. 1993 — Kenya's Goldenberg scheme drains the treasury

Between 1990 and 1993 the Goldenberg scheme paid out state export subsidies for gold and diamonds that Kenya barely produced or never exported. A later commission of inquiry estimated the loss at more than 600 million dollars, over a tenth of the country's yearly output, with money moved through foreign accounts. It became the defining case of grand corruption in Kenya.

## 1997 — Mobutu's fortune leaves Zaire

Mobutu Sese Seko ruled Zaire from 1965 to 1997 while much of the country sank into poverty. Investigators and scholars have estimated he moved as much as several billion dollars into Swiss accounts and European property, though the exact sum is disputed. After he was overthrown in 1997, Switzerland froze his accounts but found only a few million dollars, showing how hard looted money is to trace.

## 1998 — Abacha's billions surface in foreign banks

After Nigerian military ruler Sani Abacha died in 1998, investigators traced an estimated 2 to 5 billion dollars in stolen state funds into accounts in Switzerland, Britain, Luxembourg, Liechtenstein and Jersey. The exact total remains an estimate, but the trail through named banks is documented. Switzerland and other countries have since returned more than a billion dollars to Nigeria in stages.

## 2003 — The Tax Justice Network is founded

Campaigners and researchers launched the Tax Justice Network in 2003 to study tax havens and push for reform. The group popularised the term "secrecy jurisdiction" to shift focus from low taxes to hidden ownership. It argues the offshore system is not an accident but a structure built to help the wealthy and powerful hide money, a claim it presents as its analysis of the evidence.

## 2009 — The Financial Secrecy Index ranks the havens

The Tax Justice Network published its first Financial Secrecy Index in 2009, scoring jurisdictions by how much secrecy they offer and how large their financial sector is. It was built to challenge the OECD's short blacklists, which the Network said let rich countries off the hook. The ranking is the Network's own method, but the underlying laws it measures are public record.

## 2011 — Treasure Islands maps the British spider's web

Journalist Nicholas Shaxson published Treasure Islands, tracing how the City of London sits at the centre of a network of British-linked havens. He described the Crown Dependencies and Overseas Territories as a "spider's web" that funnels money back to London while keeping its origins hidden. The web of places is documented fact; the reading that it works as one designed system is Shaxson's argument.

## April 2013 — Offshore Leaks opens the vault

In April 2013 the International Consortium of Investigative Journalists published Offshore Leaks, drawn from 2.5 million files exposing owners of companies and trusts in havens like the British Virgin Islands. It was the first of the big offshore data leaks and named politicians, business figures and fraudsters worldwide. The consortium argued the files showed a hidden system serving the wealthy, an interpretation it drew from the records themselves.

## 2014 — Countries agree to share account data

In 2014 the OECD set out the Common Reporting Standard, a system for banks to automatically report foreign account holders to their home tax authorities. Dozens of countries began exchanging data from 2017, ending some of the old banking secrecy. The United States stayed outside the system, and campaigners note that poorer countries often cannot access the data.

## 2015 — The 1MDB fund is looted through shell companies

Malaysia's state investment fund 1MDB became the centre of one of the largest known corruption cases, with US prosecutors alleging that about 4.5 billion dollars was stolen between 2009 and 2015. The money moved through shell companies in the British Virgin Islands, Seychelles and Curacao and banks in several countries. Prime Minister Najib Razak was convicted of corruption in 2020, upheld on appeal in 2022; the financier Jho Low was charged but remains a fugitive who denies wrongdoing.

## 2015 — Zucman estimates the trillions hidden offshore

Economist Gabriel Zucman estimated that around 7.6 trillion dollars, roughly 8 percent of the world's household financial wealth, sits in tax havens beyond the reach of tax authorities. He put the yearly loss to governments at about 200 billion dollars. These are his estimates, drawn from gaps in national accounts, and other scholars debate the exact figures.

## February 2015 — The Mbeki panel counts Africa's losses

A high-level panel led by former South African president Thabo Mbeki reported in 2015 that Africa loses roughly 50 billion dollars a year to illicit financial flows. It said the largest share comes from companies mispricing trade to shift profits into tax havens, not from bribery alone. The figure is a contested estimate, but it framed offshore finance as a drain on the continent's development.

## 2016 — Britain opens a register of company owners

In 2016 Britain launched a public register requiring companies to name the real people who own or control them. The European Union followed with its own rules for public registers. The reform has clear limits, and in 2022 the European Court of Justice struck down mandatory public access on privacy grounds, showing how contested open ownership data remains.

## April 2016 — The Panama Papers name the hidden owners

In April 2016 journalists published the Panama Papers, 11.5 million documents leaked from the law firm Mossack Fonseca. The files linked world leaders, celebrities and criminals to secret offshore companies and forced Iceland's prime minister to resign. It was the largest leak of its kind at the time and made "offshore" a household word.

## November 2017 — The Paradise Papers follow the money

In November 2017 the Paradise Papers, drawn mainly from the offshore law firm Appleby, exposed the tax arrangements of multinational companies, politicians and the very rich. The 13.4 million files showed that much offshore activity was legal, raising questions about the rules rather than just lawbreaking. They widened the debate from hidden crime to the design of the tax system itself.

## 19 January 2020 — The Luanda Leaks expose Isabel dos Santos

The ICIJ and partners reported on more than seven hundred thousand leaked files detailing how Isabel dos Santos, daughter of Angola's former president, built a fortune through deals with state companies. The reporting alleged she moved public money through a web of offshore firms while much of the country stayed poor. Dos Santos denied wrongdoing and called the investigation politically motivated.

## September 2020 — The FinCEN Files reveal flagged transactions

In September 2020 journalists published the FinCEN Files, based on secret US reports that banks had filed on suspicious transactions worth some 2 trillion dollars. The documents showed banks moving money they had themselves flagged as possibly dirty, often for years. They exposed weaknesses in the systems meant to stop money laundering.

## October 2021 — Governments agree a global minimum tax

In October 2021 around 136 countries agreed through the OECD to a minimum corporate tax rate of 15 percent, aimed at limiting the profit-shifting that tax havens enable. It grew out of the OECD's earlier work on base erosion and profit shifting. Supporters called it historic, while critics said the rate was set too low and the deal favoured rich countries.

## October 2021 — The Pandora Papers reach the powerful

In October 2021 the Pandora Papers, nearly 12 million records, linked more than 330 politicians and public officials to secret offshore holdings. The leak drew attention to havens inside the United States, including trusts in South Dakota. It confirmed that the offshore system reached the top of governments around the world.

*Source: As Kenyan president mounted anti-corruption comeback, his family secret fortune expanded offshore*

*Source: Pandora Papers Power Players: Uhuru Kenyatta*

## 2022 — Russian oligarch wealth is exposed by sanctions

After the privatisations of the 1990s, a large part of Russia's elite wealth was moved into offshore havens and Western property. Gabriel Zucman and colleagues estimated that around half of Russian household wealth sits offshore. When Western states imposed sanctions after the 2022 invasion of Ukraine, they froze yachts, mansions and accounts held through shell companies in places like Cyprus and the British Virgin Islands.

## 2022 — The United States tops the secrecy ranking

In its 2022 Financial Secrecy Index the Tax Justice Network ranked the United States as the world's biggest supplier of financial secrecy, ahead of Switzerland. It pointed to anonymous companies in Delaware, Nevada and Wyoming, hard-to-trace trusts in South Dakota, and the American refusal to join the global system for sharing account data. The ranking is the Network's; the American laws and the refusal to share data are on the record.