Giving Compass' Take:

• Cassie Freund explains how tax havens allow dark money to flow to projects that hurt biodiversity. 

• How can funders increase financial transparency in business and philanthropy alike? 

• Learn how donor advised funds hide philanthropy's dark money. 

Dark money, a term usually applied to opaque political donations, is also a serious problem for our planet’s biodiversity. The 2016 release of the Panama papers, hailed as “history’s biggest data leak,” was followed less than two years later by an even larger document dump called the Paradise Papers. These events revealed the secrets of how the rich and well-connected exploit legal loopholes and international tax havens to protect their wealth. But an investigation into the data by Victor Galaz and his colleagues from the Stockholm Resilience Center highlights just how the shadowy corners of the global economy extend into the protein on our plates and the air we breathe.

The political and economic ramifications of the papers, and tax havens in general, has been relatively well-studied. But Galaz and his team were most interested in the environmental consequences of our opaque global financial system. They used publicly available data from the International Criminal Police Organization (INTERPOL) and other sources to uncover how secret financial dealings fuel two major conservation threats: overfishing in the world’s oceans and deforestation of the Brazilian Amazon.

Illegal, unreported, and unregulated (IUU) fishing is a serious cause of declining fish populations worldwide. This illicit industry, accounting for up to $23.5 billion per year, is also a substantial contributor to the global economy—making it ripe for corruption. Galaz and his colleagues found that 70 percent of fishing vessels involved in IUU fishing are registered in tax havens, mainly Belize and Panama. By contrast, just 4 percent of all legally registered fishing vessels originate in tax haven nations.

Registering a fishing boat in a tax haven isn’t a crime, per se. The problem is that Belize, Panama, and many other tax haven countries are also “flags of convenience” states. These are countries with lax or nonexistent law enforcement, making them attractive to shipowners who want to use their vessel for illegal fishing. A ship registered in a FOC state can easily escape the regulations that prevent environmentally destructive activities, like surpassing catch quotas or taking endangered species. IUU fishing can also have downstream effects on seabird, turtle, and other wildlife populations.

Read the full article about tax havens by Cassie Freund at Massive Science.