Dartmouth faculty explore how elites hide assets in offshore systems

Assistant Professor of Quantitative Social Science (QSS) Herbert Chang, Professor of Sociology Brooke Harrington, and Professor of Mathematics and Computer Science Daniel Rockmore recently published a paper, "Secrecy strategies: Global patterns in elites' quest for confidentiality in offshore finance" in PLOS One.

This paper examines how corruption and the rule of law in elites' home countries influence their strategies for using offshore finance. Professor Chang and his co-authors analyze data from the Offshore Leaks database, which includes millions of documents from major investigations such as the Panama, Paradise, and Pandora Papers. These records reveal how ultra-wealthy individuals conceal ownership of assets. To assess institutional conditions, the study uses the World Justice Project Rule of Law Index, covering 142 countries through surveys and expert assessments. The authors build regression models to explore how local conditions shape secrecy strategies, and they also examine elites' use of blacklisted jurisdictions, using a combined set of international sanctions lists to ensure robust analysis.

Professor Chang graduated from Dartmouth in 2018, having majored in Mathematics and, Quantitative Social Science, and has been a member of the QSS faculty for two years.  His current research covers how political ideology shapes information sharing on social media, the development of methods to measure social influence in networks, and the conceptual foundations of algorithmic discrimination in automated systems.

Since 2007, Professor Harrington has conducted ethnographic research on the offshore financial system. After earning a wealth management credential, she spent six years traveling globally in places like Max Planck Institute from the Study of Societies Germany and Copenhagen Business School in Denmark and engaging with professionals in 18 offshore centers. Her work contributes to the fields of inequality, political economy, and the professions, and has resulted in a book and several articles.

Professor Rockmore is a member of the QSS Steering Committee. He is the directory of the Neukom Institute for Computational Science, and his current research covers machine learning and complex systems.

Abstract:
Scholars and policy-makers know a lot about the ways offshore financial centers compete with one another to offer secrecy to elites, but still know too little about how and why elites take up these offerings to conceal their assets and identities offshore. This paper fills the gap in knowledge by examining the distinct patterns for achieving offshore secrecy among elites in 65 countries. We take a cross-national comparative perspective, showing that the patterns are contingent in part on political conditions in the elites' home countries. Using data from two publicly available sources— the Offshore Leaks Database and the World Justice Project Rule of Law Index—we advance knowledge for scholars and policy-makers with three main results. First, we find that elites from corrupt countries are more likely to spread their assets across multiple offshore financial centers: they diversify across the system, instead of putting all their eggs in one basket. Second, countries where the risk of government confiscation of private assets is high—either due to lack of civil rights or very effective law enforcement—elites make heavy use of identity-concealing offshore strategies such as bearer instruments and nominees to shield their names from discovery in public records. Third, elites from countries where both corruption and confiscation pose significant risks make extensive use of blacklisted offshore financial centers, despite the reputational and practical risks that entails for them. All three patterns achieve secrecy, but through different means; our findings have implications for public policy, as well as for models of inequality, elites, and financial crime.