A minister in Imran Khan’s Pakistan government pulled out of making planned investments through offshore tax havens after he was told his country’s tax authorities would be informed, documents in the Pandora papers suggest.
Chaudhry Moonis Elahi, Khan’s minister for water resources and a member of an influential family in Pakistani business and politics, expressed “concerns” in August 2017 about the investment being reported to his home country, according to the papers, and instead decided to establish a trust structure in the UK.
The leaked documents, reviewed by the Guardian and International Consortium of Investigative Journalists (ICIJ), do not specify why Elahi became concerned. But they show he had presented as his source of funds for the investments a $33.7m (£25m) sale of a family-owned company in Lahore that had been the subject of historical corruption allegations.
The revelations are likely to raise serious concerns in Pakistan, where in 2016 Khan, as an opposition challenger, expressed outrage after offshore interests linked to the country’s political elite were exposed by the Panama papers.
“It is disgusting the way money is plundered in the developing world from people who are already deprived of basic amenities: health, education, justice and employment,” Khan said then. “This money is put into offshore accounts, or even western countries, western banks. The poor get poorer. Poor countries get poorer, and rich countries get richer.”
The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history. They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people. The files were leaked to the International Consortium of Investigative Journalists (ICIJ), which shared access with the Guardian, BBC and other media outlets around the world. In total, the trove consists of 11.9m files leaked from a total of 14 offshore service providers, totalling 2.94 terabytes of information. That makes it larger in volume than both the Panama papers (2016) and Paradise papers (2017), two previous offshore leaks.
Where did the Pandora documents come from?
The ICIJ, a Washington DC-based journalism nonprofit, is not identifying the source of the leaked documents. In order to facilitate a global investigation, the ICIJ gave remote access to the documents to journalists in 117 countries, including reporters at the Washington Post, Le Monde, El País, Süddeutsche Zeitung, PBS Frontline and the Australian Broadcasting Corporation. In the UK, the investigation has been led by the Guardian and BBC Panorama.
What is an offshore service provider?
The 14 offshore service providers in the leak provide corporate services to individuals or companies seeking to do business offshore. Their clients are typically seeking to discreetly set up companies or trusts in lightly regulated tax havens such as the British Virgin Islands (BVI), Panama, the Cook Islands and the US state of South Dakota. Companies registered offshore can be used to hold assets such as property, aircraft, yachts and investments in stocks and shares. By holding those assets in an offshore company, it is possible to hide from the rest of the world the identity of the person they actually belong to, or the “beneficial owner”.
Why do people move money offshore?
Usually for reasons of tax, secrecy or regulation. Offshore jurisdictions tend to have no income or corporation taxes, which makes them potentially attractive to wealthy individuals and companies who don’t want to pay taxes in their home countries. Although morally questionable, this kind of tax avoidance can be legal. Offshore jurisdictions also tend to be highly secretive and publish little or no information about the companies or trusts incorporated there. This can make them useful to criminals, such as tax evaders or money launderers, who need to hide money from tax or law enforcement authorities. It is also true that people in corrupt or unstable countries may use offshore providers to put their assets beyond the reach of repressive governments or criminal adversaries who may try to seize them, or to seek to circumvent hard currency restrictions. Others may go offshore for reasons of inheritance or estate planning.
Has everyone named in the Pandora papers done something wrong?
No. Moving money offshore is not in or of itself illegal, and there are legitimate reasons why some people do it. Not everyone named in the Pandora papers is suspected of wrongdoing. Those who are may stand accused of a wide range of misbehaviour: from the morally questionable through to the potentially criminal. The Guardian is only publishing stories based on leaked documents after considering the public interest. That is a broad concept that may include furthering transparency by revealing the secret offshore owners of UK property, even where those owners have done nothing wrong. Other articles might illuminate issues of important public debate, raise moral questions, shed light on how the offshore industry operates, or help inform voters about politicians or donors in the interests of democratic accountability.
At the time, Moonis Elahi was a member of Punjab’s regional parliament. In June this year, Khan appointed him as a minister.
A spokesperson for the Elahi family rejected any allegations of wrongdoing, and said the family’s assets were all declared as required by law.
According to the Pandora documents, in January 2016, Elahi met officials from the offshore wealth management company Asiaciti Trust to discuss buying a 24% stake in RYK Mills, a large sugar and renewable energy company headquartered in Lahore, the capital of Pakistan’s Punjab province. Elahi told the officials he wanted to set up a trust and fund that would buy the 24% stake and also hold two properties in Britain.
To evidence his source of funds, Elahi showed Asiaciti a contract from his family’s May 2007 sale of their own sugar company, CSK Limited – previously called Phalia Sugar Mills – for which they were paid 2bn Pakistani rupees, equivalent to $33.7m in 2007.
That sale, to another Lahore-based company, Colony Mills, was later subject to intense scrutiny in Pakistan, including allegations made by the Bank of Punjab (BoP) that its own loan to finance the deal had been corrupt.
Due to Elahi’s status as a prominent politician – a “politically exposed person” (PEP), according to compliance rules – Asiaciti commissioned a thorough due diligence report on him by the risk management arm of the global information company Thomson Reuters.
Their report, dated 21 January 2016, based largely on media coverage in Pakistan in both Urdu and English, noted there had been serious allegations surrounding the $33.7m deal, including that the Bank of Punjab itself had filed complaints against the Elahi family to Pakistan’s National Accountability Bureau.
The key complaint at the time was that the bank had made a corrupt loan that enabled the Elahi family to sell the Phalia sugar mill. Moonis’s father, Chaudhry Pervaiz Elahi, still a prominent politician holding the position of speaker in the Punjab assembly, was at the time chief minister of the Punjab authority that owned the bank.
The Asiaciti due diligence report noted: “The BoP through its complaint alleged that [Moonis] Elahi, and the others [including his father], sanctioned an illegal BoP loan to the company of a director of the bank, in a bid to allow him to purchase Phalia Sugar Mills owned by Elahi’s family.”
Pakistan’s Federal Investigation Agency was also reported to have instigated an investigation into the loans.
The Thomson Reuters report to Asiaciti stated that there were risks of corruption, money laundering and fraud relating to Moonis Elahi, but noted he and his family had always denied the allegations. The investigations had not concluded with any findings of wrongdoing against them, according to the report.
Asiaciti agreed to take Moonis Elahi on as a client, and did register a trust structure located in low-tax Singapore and the Pacific tax haven of Samoa, the papers show, in preparation for the investment in RYK Mills and to hold the two properties in the UK.
Asiaciti officials then advised Elahi that if they were to go ahead with the investments, they would need to share his financial information with the relevant tax authorities in Pakistan under the Common Reporting Standard (CRS), a global information-sharing system set up to combat tax evasion.
At that point, Elahi appears to have become concerned and decided not to go ahead.
Asiaciti noted of a telephone call with Elahi: “Moonis has concerns about the CRS reporting requirements of the structures to Pakistan … Moonis advised that he obtained advice from his legal advisers and as a consequence established a structure in the UK, whereby [sic] his wife and children are residents.”
It is not clear what Elahi’s concerns were about CRS reporting to Pakistan or what the legal advice was that led to him establishing a structure in the UK.
A prestigious London property linked to him does appear to have subsequently been transferred, legally, into a trust. The property, an apartment at Riverlight Quay, near the South Bank, had been bought for £5.45m in September 2015 by a company named LO89 Ltd – the same company that paid Asiaciti its £7,000 in fees for the Elahi work. Two years later, LO89 transferred the property, for no payment, to a UK company owned by a family member of Elahi’s.
In November 2018, the family member’s company transferred the apartment, again for no payment, to another British resident, who appears to hold it on trust.
The British resident did not respond to the Guardian’s questions about the property, and whether she does hold it on trust for the Elahi family. Citing confidentiality, the solicitor who worked on the property transfer also declined to answer questions, including whether he had been involved in forming a trust for the Elahi family, and if he carried out due diligence on the family and the source of their funds, particularly due to their probable status as PEPs.
A spokesperson for the Elahi family rejected any allegations of wrongdoing, saying: “In the past due to political victimisation, misleading interpretations and data have been circulated in files for nefarious reasons against the family in the name of so-called accountability.” The family’s assets were all declared as required by law, the spokesperson added.
The Bank of Punjab said it could not answer questions about the allegations or its response at the time due to laws requiring customer confidentiality. Colony did not respond to questions from the Guardian and ICIJ.
