What the Pandora Papers Teach Banks About AML Risk

The Pandora Papers were not just another high-profile leak. They were a structural x-ray of how power hides money across borders. The International Consortium of Investigative Journalists (ICIJ) coordinated the Pandora Papers leak in October 2021, releasing 11.9 million records from 14 offshore service providers, a dataset larger than the 2016 Panama Papers and spanning decades of activity. 

The disclosures mapped shell companies, trusts, nominees, and secrecy jurisdictions used by heads of state, billionaires, celebrities, and professionals. Most of the coverage focused on politicians.

However, the real lesson for AML teams is that power in all its forms creates risk exposure; political, financial, religious, and social – and those exposures travel through family networks, trusted lieutenants, front companies, property holdings, and funds. 

How High-Risk in AML Extends Beyond Politicians

Politically exposed persons (PEPs) are rightly attached to a specific risk level in AML compliance. The FATF defines PEP as an “individual who is or has been entrusted with a prominent function.” Specifically, Recommendations 12 and 22 of the FATF require a risk-based approach towards business relationships with PEPS, because positions of prominence can be abused for money laundering, bribery and Corruption. 

This scrutiny also extends to family members and close associates of PEPs because even proximity to power can be misused to move or disguise illicit funds.

The sensitive information released by the Pandora Papers investigation confirmed that the potential for financial crime is rarely exclusive to the listed individuals. Media partners documented assets and transactions held via spouses, children, siblings, business partners, and professional associates of the PEP individual in question.

A trend consistent with the “Relatives and Close Associates (RCA)” concept, many regulators use to describe relatives and close associates as high risk for being associated with  Politically Exposed People. 

What did the Pandora Papers investigation reveal about the Clergy and Religious Organizations?

One of the most striking revelations in the Pandora Papers was how it exposed that PEPs were not the only high-risk individuals. 

The Pandora Papers revealed that abuse of power is not limited to politicians alone. Investigations into the religious organization known as the Catholic order Legionaries of Christ led to a network of offshore trusts and companies that at one point moved almost $300 million while the Order was fending off abuse claims and public scrutiny. 

Reporting by ICIJ and media partners highlighted the hidden trusts’ structures and investments, including rental properties in the U.S. 

Marcial Maciel, the founder of the Legionaries of Christ, was not only a powerful cleric. He was reportedly a serial abuser who targeted children over decades while enjoying institutional protection. In 2021, the Catholic Order acknowledged that Marcial had directly abused at least 60 boys, excluding the 170 minors who were abused by other priests in the Order. 

ICIJ has continued to highlight how documents from the Paradise and Pandora Papers illuminate the hidden financial schemes associated with Marcial Maciel, the Legion’s founder. 

For compliance teams, the lesson from the Pandora Papers is that high-risk is not confined to influential people or politicians only. It can be found wherever authority is concentrated and accountability is weak, such as in churches, charities, foundations, educational or cultural institutions. 

Screening against lists such as the Pandora Papers is only the first step. True risk assessment demands linking a name to a PEP or RCA status, highlighting the associate network, and layering multilingual adverse media data to judge the severity and recency of any money laundering activity undertaken by the PEP and RCA.

Key Steps for Effective AML Risk Assessment

Treating the names listed in the Pandora Papers leaks, or the Panama Papers, as static lists is a narrow approach to AML risk assessment. Such datasets should not be seen as standalone lists but as valuable sources that should be included in  AML screening processes. 

Integrating such leaks into a broader screening framework, alongside PEP data, adverse media reports, and ownership information, allows financial institutions to identify individuals with power and influence and determine their risk. 

Compliance teams require a modern approach to risk assessment that attaches evidence-based risk assessments to individual profiles through three steps:

1. PEP status and proximity to power:
Classify individuals by seniority and role, and map their immediate family and close business associates. Align with FATF guidance (Recommendations 12 and 22) on PEPs and RCAs to determine the appropriate level of customer due diligence

2. Adverse media context and sentiment:
Not all mentions are equal. A neutral court filing differs from a corruption conviction; an allegation differs from a regulatory enforcement order. 

Scoring sentiment and context, and reading across languages and local sources, reduces false positives while surfacing material risk early.

3. Offshore link analysis:
Names in leaked datasets often connect to entities, intermediaries, and addresses that repeat across multiple investigations.

 Cross-referencing data is an important measure to prevent offshore financial crimes and to distinguish between legitimate tax planning and criminal acts such as concealment, sanctions evasion, or grand corruption.

Did you know? 

Being named in lists like the Pandora Papers or Panama Papers does not automatically indicate involvement in the financial crime. However, these leaks often reveal offshore financial crimes and hidden networks, increasing the risk exposure for financial institutions. While being on these lists isn’t a crime in itself, it highlights shady financial activity that warrants further investigation to assess potential risks and prevent money laundering. 

How to Handle Pandora Papers Exposure in AML Onboarding.

Consider that your AML systems have flagged an applicant because their name appears in the Pandora Papers as a former director of an XYZ company. An effective risk assessment model would:

• Confirm identity and distinguish through transliteration, and local language sources.
  
• Check for PEP status and determine whether the individual is in a position of power and influence.
  
• Map RCAs who may be signatories, beneficial owners, or officers in related power structures.
  
• Scan adverse media in multiple languages for regulatory enforcement, legal disputes, or credible investigative reporting.
  
• Evaluate sector and geography context, including jurisdictions known for secrecy or weak rule of law.
  
• Assign risk scoring that weights PEP seniority, proximity to power, and the gravity of adverse media reports.

Each of these steps tightens the signal and reduces noise. It is also the difference between treating Pandora Papers as a one-off story and using it as a live risk signal.

Quick Note!

Being listed in the Pandora Papers leaks does not automatically classify an individual as high-risk. It is the additional context, such as adverse media, PEP status, and other credible data, that generates a credible risk score. A comprehensive risk assessment model considers these factors to build an accurate risk profile.

Real Estate Signals and Trust Schemes In Pandora Papers  that Signal AML Risks

Pandora Papers reporting exposed how anonymous offshore vehicles hold significant real estate — especially in markets like London — and how trusts, foundations, and nominees obscure beneficial ownership. These structures are not inherently illegal, but opacity elevates ML/TF risk. Where a property or trust link is detected, AML  should escalate for beneficial ownership verification and source-of-funds analysis.

How Should You Assess Risk Levels of PEPs and RCAs

A practical, defensible framework uses tiering by seniority and influence for PEPs and assigns risk to RCAs, with time-bound downgrades based on role changes and ongoing monitoring. Institutions should:

• Maintain a clear record of domestic, foreign, and international organization PEPs
  
• Record justification for RCA classification and document the link to the primary PEP.
  
• Monitor for trigger events like elections, cabinet changes, resignations, indictments, and sanctions.
  
• Combine structured watchlist data with local-language adverse media for a complete picture of the individual.

These practices align with FATF guidance and supervisory expectations.

Turn Pandora Papers Risk into Action with AML Watcher:

As the Pandora Papers continue to expose hidden financial dealings, the challenge for compliance teams is to identify high-risk individuals while understanding the full scope of their influence and connections. 

Because power and influence are not just restricted to politicians, any position of power that exerts a considerable influence can be high-risk. 

AML Watcher has been designed to offer a holistic risk assessment by configuring signals from multiple sources, including leaks such as the Pandora Papers  

AML Watcher offers seamless screening to, 

• Quickly identify and validate exposure to high-risk individuals and entities tied to Pandora Papers.
• Continuously monitor for changes in PEP status, adverse media, and new linkages.
• Tailor risk scoring based on jurisdiction, criminal typologies, and regulatory factors. 

As documents such as the Pandora Papers continue to unveil hidden financial networks, the real challenge for compliance teams is not simply matching names, but realizing that high-risk is not exclusive to politicians and influential individuals, but where power is concentrated. Being listed as a PEP does not in itself make an individual high-risk; these are the signals from the diverse sources such as adverse media, sanctions screening, and exposure that determines whether a person is high-risk or not and presence of the name in any international leaks can also be that signal.