The Panama Papers – secretly moving money offshore

Panama papers

In 2016, the world’s largest ever data leak dubbed “The Panama Papers” exposed a scandal, uncovering a vast global network of people–including stars and world leaders, who employed offshore tax havens, anonymous trades through intermediaries and shell corporations to hide their wealth, grow their fortunes and avoid taxation.

Researchers at USC Viterbi School of Engineering have conducted a deep analysis of these entities and their interrelationships which were originally revealed from the 11.5 million records leaked to the International Consortium of Investigative Journalists. The academic scientists have made some discoveries about how this network and transactions operate, uncovering uniquely fragmented network behavior, enormously different from more traditional social or organizational systems, demonstrating why these systems of transactions and institutions are so strong and difficult to infiltrate or take down. This has been printed in Applied Network Science.

Lead author Mayank Kejriwal is an assistant professor working in the Daniel J. Epstein Department of Industrial and Systems Engineering and USC’s Information Sciences Institute who analyzes complicated (typically, societal ) systems such as online trafficking markets employing computational strategies and network science. He said the study team’s goal was to examine the Panama Papers system as a whole, in precisely the exact same manner that you may study a social media like Facebook, to try to understand what the system behavior can tell us about how money can be moved.

“In general, in any social network like LinkedIn or Facebook, there is something called ‘Small World Phenomenon’, which means that you’re only ever around six people away from anyone in the world,” Kejriwal said.

“For instance, if you want get from yourself to Bill Gates, on average you would be around six connections away,” he said.

However the team found the Panama Papers network was about as far removed from this conventional social or organizational system behavior as it could possibly be. Instead of a network of highly integrated relations, the researchers found a series of secretive disconnected fragments, together with entities, intermediaries and people involved in trades and corporations demonstrating quite few connections with other entities within the system.

“It was really unusual. The degree of fragmentation is something I have never seen before,” said Kejriwal. “I’m not aware of any other network that has this kind of fragmentation.”

“So (without any documentation or leak), if you wanted to find the chain between one organization and another organization, you would not be able to find it, because the chances are that that there is no chain – it’s completely disconnected,” Kejriwal said.

Most social, friendship or organizational systems contain a series Of triangular structures in a method known as the ‘friend of a friend occurrence.’

“The simple notion is that a friend of a friend is also a friend,” Kejriwal said. “And we can measure that by counting the number of triangles in the network.”

However, the group discovered that this triangular arrangement was not a characteristic of the Panama Papers network.

“It turns out that not only is it not prevalent, but it’s far less than prevalent than even for a random network,” Kejriwal said. “If you literally randomly connect things, in a haphazard fashion and then you count the triangles in that network, this network is even sparser than that.” He added, “Compared to a random network, in this type of network, links between financial entities are scrambled until they are essentially meaningless (so that anyone can be transacting with anyone else).”

It’s just this disconnectedness Which Makes the system of Secret international financial dealings so robust. Since there wasn’t any way to trace connections between things, the system couldn’t be readily compromised.

“So what this suggests is that secrecy is built into the system and you cannot penetrate it,” Kejriwal said.

“In an interconnected world, we don’t expect anyone to be impenetrable. Everyone has a weak link,” Kejriwal said. “But not in this network. The fact it is so fragmented actually protects them.”

Kejriwal said the network behavior demonstrates that people involved In the Panama Papers system of offshore entities and trades were very sophisticated, understanding precisely how to move money around in a way that it becomes untraceable and they’re not vulnerable by using their connections to others in the system. Because it’s a global community, there are only a few options for federal or global bodies to intervene in order to recover taxes and investigate corruption and money laundering.

“I don’t know how anyone would try to bring this down, and I’m not sure that they would be able to. The system seems unattackable,” Kejriwal said.

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