USC study traces money to learn how rich people hide it

Remember the leaked Panama Papers in 2016, which revealed a laundry list of wealthy people stashing money offshore? The bold-font names ranged from heads of state like former U.K. prime minister David Cameron to Simon Cowell, Emma Watson, and Pedro Almodovar. (We should note here that parking money offshore itself is not necessarily illegal.)

University of Southern California computer scientists traced the money networks of the hundreds of thousands of listed entities and officers, and found that it pays to stay out of the loop: The networks were fragmented and disconnected, and thus difficult to trace. This is quite unlike typical social and information networks, in which most branches connect (similar to six degrees of Kevin Bacon).

The researchers undertook the project to understand how money can be quietly moved through networks. They found long, disconnected networks of offshore companies that can quickly change ownership, beneficiaries, and intermediaries–all exhibiting few connections with others in the system.

“It was really unusual. The degree of fragmentation is something I have never seen before,” says lead author Mayank Kejriwal, an assistant professor at USC’s Information Sciences Institute. “I’m not aware of any other network that has this kind of fragmentation.” He found fewer connections than would appear in a random network.

This turns out to be an excellent lesson in carrying out illegal activity. “If you wanted to find the chain between one organization and another, you would not be able to find it, because chances are that there is no chain–it’s completely disconnected,” he says. There can’t be a weak link if there isn’t a link.

The lack of large, dominant organizations protects the network; if a few operators do attract law enforcement, the rest of the network remains safe, beyond the jurisdiction of most countries and bodies. “The system seems unattackable,” says Kejriwal.

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