Yet we do see forms of accountability being imposed that are effective despite being outside the realm of the law. As my own and other recent research on high-net-worth individuals has shown, reputational costs weigh more heavily on them than the threat of fines or prosecution. The laws are no match for the legal armory that the wealthy individuals in this world can afford. And there is evidence that public opinion is changing quickly, in a way that imposes the reputational costs that matter most.
When Mitt Romney ran for president in 2012, many Americans — even on the left — shrugged at the news that his wealth (estimated at the time at $250 million) increased through offshore investments. But in the wake of the Panama Papers, public opinion has grown significantly more negative toward tax avoidance, which, while often legal, is increasingly regarded as immoral and unpatriotic. This mirrors the rapid change that occurred earlier in the 21st century, in which public neutrality toward corporate tax avoidance turned to public outrage and successful pressure campaigns within a few short years.
The Pandora Papers’s reputational impact may deliver some instant karma to Mr. Babis. The Czech police say they will “act upon” his use of offshore shell corporations, and a much swifter public verdict could arrive this week in parliamentary elections that could dislodge the prime minister from power. “He preaches water and drinks French wine,” the leader of an opposition party said.
Technology also offers more reason for hope. It has made it much easier to impose these costs, by facilitating the dissemination of vast troves of data to journalists and the public. The past five years have revolutionized the possibilities for whistle-blowers to maintain anonymity through the use of tools like PGP encryption, allowing them to deliver huge quantities of data from offshore while protecting themselves from retaliation. Five years on, we still do not know the identity of “John Doe,” who leaked the Panama Papers, nor of the person or persons who leaked the Paradise Papers four years ago.
That’s remarkable in an era of digital surveillance and will encourage more whistle-blowing. As I found in talking with wealth managers all over the world, a significant number understand that their work has contributed to dangerous levels of economic and political inequality; they want to do something, and many understand that one of the most effective uses of their insider position would be to pull back the veil of secrecy that makes so much of offshore corruption possible.
Formerly, these potential whistle-blowers would have been deterred by the fate of figures like Hervé Falciani, who in 2009 brought forward evidence of widespread tax fraud by private individuals facilitated by his employer, HSBC in Switzerland. Mr. Falciani has been hounded by investigators and caught up in legal limbo ever since, including being convicted in absentia and given the longest sentence ever handed down by a Swiss court for violation of the country’s draconian bank secrecy laws.
But it’s now possible for insiders to act on their conscience without ruining their lives and careers, as well as those of their families. We already see momentum building in the form of the enormous size of the Pandora Papers, which is even larger than the Panama Papers — formerly the biggest data leak in history — and involves information from 14 offshore sources instead of one.