It no longer rains but pours data

4 Dec 17

The Paradise Papers isn’t just about tax avoidance. It shows how masses of data can be easily leaked nowadays – which has serious implications for governments, says John Thornton.

According to the Paradise Papers, Formula One champion Lewis Hamilton allegedly received a £3.3m VAT refund by importing an executive jet into Europe via the Isle of Man; there is no suggestion he acted illegally. This is just one of thousands of leaked cases that have led to questions being raised in the press about the use of offshore firms by royalty, global companies, politicians, pop stars and even local councils. It also raises questions about how we use and protect data in a digital world.

The Paradise Papers concerns 13.4 million files leaked from Appleby, a law and corporate services firm specialising in offshore business, plus details from the corporate registries of 19 tax havens. It covers 1950 to 2016 and consists of 1.4TB of data, the world’s second biggest data leak. The largest was the Panama Papers, with 2.6TB of data relating to more than 200,000 offshore entities.

Media companies have learnt a lot in recent years, especially from the Panama Papers, about analysing and sharing the vast amounts of data that can come from leaks. There are reported to be 380 journalists in 96 media organisations in 67 countries analysing the Paradise Papers and drip feeding the findings.

When the Watergate scandal broke in the early 1970s, journalists Bob Woodward and Carl Bernstein received snippets of information from their source “Deep Throat” and built a case gradually. Today’s technology would probably have allowed their source to hand over all the files at the outset, as happened with Chelsea Manning and Edward Snowden.

Manning, a US soldier, gave WikiLeaks over 250,000 US diplomatic cables, and masses of classified army reports from the Iraq and Afghanistan wars. About 6% of the files leaked by Manning were classified at the relatively modest level of “secret”; those released by Snowden were in a different league – all “top secret” and above.

As a contractor working for the US National Security Agency, Snowden was able to leak large amounts of very detailed information about the NSA’s worldwide surveillance, including its close collaboration with GCHQ. This included information on intelligence collection and analysis processes, as well as on spying on friendly nations – it emerged that the NSA had been bugging Angela Merkel’s personal phone since 2002. The size of Snowden’s disclosures is unknown, but the costs to the intelligence services have been huge in terms of exposing capabilities that had been developed over years at substantial cost to taxpayers, and affecting their ability to fight terrorism, foreign states and organised crime.

These leaks, justified or not, raise serious questions for governments. The leaks are from highly secretive organisations – if they cannot protect their data, who can? Watergate’s deep throat was a deputy director of the FBI but Manning and Snowden were relatively low level. Is it right that a disgruntled employee or brave whistleblower (depending on your view), is able to have such a massive impact?

Then there is the issue of privacy versus public interest. If Lewis Hamilton acted within the law, is it right to make his affairs public? Technology is developing faster than legal and governance structures – what can we learn from these leaks?

  • John Thornton
    John Thornton

    John Thornton is the director of e-ssential Resources and an independent adviser on business transformation, financial management and innovation.

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