If you would like to receive Morning Brief in your inbox every weekday, please sign up here .
Here is today’s Foreign Policy brief: the Pandora Papers implicate dozens of world leaders in a web of financial secrecy, Japan announces its new cabinet, and the world this week .
Here is today’s Foreign Policy brief: the Pandora Papers implicate dozens of world leaders in a web of financial secrecy, Japan announces its new cabinet, and the world this week.
If you would like to receive Morning Brief in your inbox every weekday, please sign up here.
The Pandora Papers Embarrass the Rich and Powerful
A massive leak of secret financial data has revealed the offshore wealth of some of the world’s most powerful people. Those implicated included both U.S. allies like King Abdullah II of Jordan and adversaries like Russian President Vladimir Putin.
The data, dubbed the Pandora Papers by the International Consortium of Investigative Journalists—the group that spearheaded the project—shows how far some world leaders, billionaires, and other oligarchs have gone to hide their wealth. It was first reported in the United States by the Washington Post.
Sunday’s disclosure comes in the wake of other mega leaks: the Panama Papers, the Paradise Papers, and the FinCEN files. But what this leak lays bare is the location of much of this hidden wealth isn’t just housed in well-known Caribbean tax havens but in the United States.
This gives U.S. officials immense power to clamp down if they want to, argues Josh Rudolph, an expert on illicit finance at the German Marshall Fund. “Although this leak is global, the beating heart of the offshore financial system is the United States,” Rudolph told Foreign Policy.
Will Biden crack down? It seems the Biden administration recognizes the value in stopping the flow of dirty money into U.S. assets. As Foreign Policy’s Amy Mackinnon wrote in June, U.S. President Joe Biden issued a new national security memorandum directing government agencies to treat corruption as a national security risk, giving them 200 days to review and report back on ways the agencies could tackle corruption and illicit finance.
Despite what seems like a shoulder shrug from U.S. authorities once these kinds of financial leaks emerge, the United States has moved to cut down on some financial maneuvers. For example, banking regulations put into force following the release of the Panama Papers forced financial institutions to perform “customer due diligence” to verify who actually owns the company they are doing business with. (Despite the rules, banks continue to break them, as the FinCEN Files uncovered.)
Professional enablers. As Rudolph explains, the United States also remains a target for financial offshoring because the strict rules enforced on banks aren’t applied to broader professional industries (think lawyers, public relations firms, and real estate groups) that can be used to circumvent financial rules. Banking regulation “was only half the battle in terms of the two legs American financial secrecy stands on,” Rudolph said. “And so we have to chop off the other leg, which is not corporate: It’s human—it’s the professional enablers.”
If going after big law firms and public relations agencies is too much of a task for Congress, Rudolph suggests an easier target in a Foreign Policy argument published on Sept. 26: Go after real estate agents, luxury vehicle sellers, and cryptocurrency service providers.
Why no Americans? Considering the vast wealth of the United States’ own oligarchs, it’s surprising on first blush to see no U.S. names mentioned. One simple explanation, put forward by the Washington Post, is U.S. millionaires and billionaires have enough tools available within the U.S. tax code to shield most of their wealth already. (For a good example of this practice, see ProPublica’s June report on the exploitation of Roth IRA accounts to create “a Bermuda-style tax haven right here in the U.S.”)
The World This Week
On Monday, Oct. 4, Italy holds local elections.
On Tuesday, Oct. 5, Germany’s Greens party and Christian Democrat alliance (CDU/CSU) hold coalition talks.
The annual Ministerial Council Meeting of the Organisation for Economic Cooperation and Development (OECD) takes place in Paris, with U.S. Secretary of State Antony Blinken expected to attend.
On Wednesday, Oct. 6, U.S. Deputy Secretary of State Wendy Sherman begins a two-day visit to India.
Hong Kong Chief Executive Carrie Lam delivers her annual policy address to the territory’s Legislative Council.
The EU-Western Balkans summit takes place in Kranj, Slovenia. EU leaders are expected to attend alongside those from Albania, Bosnia and Herzegovina, Serbia, Montenegro, the North Macedonia, and Kosovo.
On Thursday, Oct. 7, Blinken pays a two-day visit to Mexico as co-leader of the U.S.-Mexico High-Level Security Dialogue.
Sherman begins a two-day visit to Pakistan.
On Friday, Oct. 8, the Norwegian Nobel Institute announces the winner of the 2021 Nobel Peace Prize.
The Czech Republic holds parliamentary elections.
On Sunday, Oct. 10, Iraq holds parliamentary elections.
What We’re Following Today Japan’s new cabinet. Newly elected Japanese Prime Minister Fumio Kishida is expected to dissolve parliament on Oct. 14, setting the stage for national elections as early as Oct. 31, according to the most recent reports.
Kishida’s new cabinet includes former Olympics minister Shunichi Suzuki as finance minister and Seiko Noda—one of his leadership rivals—as minister for gender equality. Taro Kono, the man Kishida beat in a runoff, has been demoted from his position as vaccines minister—replaced by Noriko Horiuchi—and will now take up a post as the Liberal Democratic Party’s communications chief. Foreign Minister Toshimitsu Motegi and Defense Minister Nobuo Kishi will retain their places from outgoing Japanese Prime Minister Yoshihide Suga’s cabinet.
OPEC+ meets. OPEC+ countries will decide whether to increase oil production levels or keep them steady as oil ministers meet both virtually and in Vienna today. The price of oil hit a three-year high last week and could rise further if OPEC+ fails to agree on a supply increase. The topic has attracted attention at the highest levels of the White House, with National Security Advisor Jake Sullivan reportedly broaching the subject with Saudi Crown Prince Mohammed bin Salman on his visit to the kingdom last week.
Inter-Korean relations. North Korea reopened a hotline with South Korea today, almost two months since it severed the phone connection to protest U.S.-South Korean joint military exercises in August. A statement carried by North Korean state media outlet Korean Central News Agency announced the move, saying South Korean authorities must make “positive efforts to put the north-south ties on a right track.” In the weeks since the communications line was closed, North Korea has test-fired a number of missiles, including a hypersonic missile and a nuclear-capable cruise missile.
Keep an Eye On
Taiwan tensions. A record 39 Chinese military aircraft flew into Taiwan’s air defense zone on Saturday, prompting swift rebukes from Taiwanese leaders and the U.S. State Department. The incursion involved the highest number of planes since Taiwan started publishing figures in 2020, and it beats a record set the day before, when 38 planes made their way into Taiwan’s air defense zone.
On Twitter, Taiwanese Foreign Minister Joseph Wu described the activity as threatening while State Department spokesperson Ned Price said the United States was “very concerned” by China’s “provocative military activity near Taiwan.”
Jordan-Syria ties. Jordanian King Abdullah II took a phone call from Syrian President Bashar al-Assad on Sunday, the first time the two leaders have spoken since the beginning of Syria’s civil war, in a sign of warming ties. The call came two days after Jordan reopened its main border crossing with Syria, which had been shut due to the coronavirus pandemic.
Odds and Ends
There appears to be no honor among thieves in the world of cybercrime after it emerged that REvil, the ransomware group behind the hack of meat producer JBS this summer, has been scamming its affiliates.
The Russian-speaking group has survived in part because of its business model—allowing less talented hackers to operate its software in return for a portion of the ransom proceeds. That model has reportedly blown up, after it emerged the group had inserted a backdoor in its code that allows it to hijack negotiations and funnel ill-gotten gains, leading one user on a Russian forum to complain of “lousy partner programs” used by ransomware groups “you cannot trust.” If REvil doesn’t survive the reputation hit, it may be good news for DarkSide, a similar group responsible for the Colonial Pipeline hack in May.