24 Nov 2017
By Amos Wittenberg
Earlier this month the International Consortium of Investigative Journalists released the Paradise Papers, the latest in a roughly annual series of leaks pertaining to the world of offshore finance.
At the core of the data were 13.4 million documents from Appleby, a law firm with offices in Bermuda, BVI, Jersey, Guernsey and elsewhere. A top-tier firm with a nearly 120-year history, Appleby has an elite client base and takes pride in its august reputation (it was named offshore firm of the year by Legal 500 UK in 2015).
In 2014 the British Virgin Islands Financial Services Commission raised concerns about Appleby’s client due diligence; a year later, the Bermuda Monetary Authority hand-delivered a fifteen-page letter to the company’s board setting out failings in anti-money laundering and anti-terror financing procedures.
The firm had previously lobbied publically against David Cameron’s proposals for a UK Public Register of beneficial ownership, arguing that the compliance precautions taken by firms were stringent enough to render the move unnecessary.
So far no senior Chinese Communist Party official has been named in the leaks.
Addresses in Hong Kong and mainland China make up a significant proportion of the data, but the only Chinese name of note is billionaire Jack Ma, founder of Alibaba. Ma apparently had a previously unreported stake in a Thai agribusiness conglomerate—along with Che Fung, son-in-law of China’s former central banker.
Also named were actress Zhao Wei and her husband Huang Youlong, who were recently banned from China’s securities markets for unrelated violations.
In contrast, numerous officials and heads of state from the US, UK and elsewhere were revealed to be past or current clients of Appleby, including Prince Charles, Queen Elizabeth’s private estate and a senior official in the Trump Administration.
In most cases, there is nothing to suggest that those named broke the law. But if any Chinese names of note had emerged the legality of the transactions would hardly matter: the private wealth of senior officials, legitimate or otherwise, is a highly sensitive topic.
In 2012, the Chinese government blocked the websites of first the New York Times and then Bloomberg, following their reports into the private wealth of the families of premier Wen Jiabao and Xi Jinping respectively.
In 2016, the Panama Papers contained revelations about the daughter of former premier Li Peng, the grandchild of former Politburo Standing Committee member Jia Qinglin, and the brother in law of Xi Jinping (previously named in the Bloomberg investigation).
Reports about the Papers were quickly censored in national media and discussion on Chinese social media was blocked.
The topic is sensitive for two reasons. First, the government is keen to avoid any suggestion of hypocrisy in the face of its far-reaching anti-corruption campaign. Corruption, the official line runs, is the primary threat to the Party’s legitimacy; the campaign to date has sanctioned over a million Party members.
Government salaries are fairly meagre and signs that officials are richer than they ought to be are obviously suspect.
One famous case involved the head of the Shaanxi province Work Safety Administration Yang Dacai, who was jailed after internet users noticed him wearing a different luxury watch in every public photo.
Second, Xi Jinping has been keen to portray himself and the rest of the party leadership as men of the people.
In 2013, for example, Xi was photographed ordering a humble meal of 包子, stuffed steamed buns, at a local Beijing eatery (the eatery became so popular as a result that by 2015 it was talking of plans to IPO).
Anything implying that he and other senior officials are, in fact, part of a moneyed global elite plays dangerously against this image.
While things look good so far, the CCP cannot be certain that it is in the clear. The Paradise leaks were dominated by American clients, with a total of over 31,000 US addresses.
Next were UK clients, totalling 14,000. Hong Kong and China had 7,000 and 6,000 addresses respectively.
Hong Kong is where Chinese businesses go to bring money into and out of the country, raising capital and making acquisitions abroad, so the two figures might as well be combined—which puts China at number three in terms of total client numbers.
Unlike Mossack Fonseca, the firm behind the Panama Papers, Appleby caters primarily to elites, and leaked documents reveal that Appleby carried out enhanced due diligence, reserved for higher risk PEPs and their families, on Chinese as well as Russian and Greek clients.
With information dating from 2016 back to the 1950s, then, there’s still the chance some uncomfortable information about the Communist leadership might be unearthed.
Amos Wittenberg is a freelance writer and former editor of KYC360. He is currently studying in Beijing.
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