The Shadow Economy Hides More Than Just Money: Offshore Trusts and Cambodian Relics

By Austin Trummel

Much of Southeast Asia has had its cultural relics raided, as the 20th century saw “one of the most destructive looting sprees in history” in Cambodia.[1] The chaos caused in the region by the Vietnam War preceded the Khmer Rouge, a brutal regime that ruled Cambodia in the 1970s, instigating a domestic genocide.[2] The disarray enabled many looters to steal antiquities with impunity, often under the guise of protecting them from the casualties of war.[3] Only, as conditions in the region stabilized, the artwork was not returned.[4]

The extent of the looting may never be fully revealed, but progress has been made.[5] In October of 2021, the International Consortium of Investigative Journalists (“ICIJ”) published the Pandora Papers, which were millions of leaked documents implicating dozens of the world’s most rich and powerful individuals in money laundering and tax evasion schemes.[6] The leak came five years after the ICIJ’s infamous Panama Papers leak, which exposed the same reality: the global elite abuse offshore finance to hide wealth, evade taxation, and conceal illicit income.[7]

Trusts have increasingly become the vehicle of choice for those seeking to abuse offshore finance, as trust laws have become more protective in more places.[8] A trust is a fiduciary relationship involving a settlor, a trustee, and a beneficiary.[9] The settlor transfers property to the trustee, who acts as a fiduciary and manages the property to the benefit of the beneficiary.[10] One of the key legal aspects of trusts is that when the settlor transfers property to the trustee, legal title is transferred, rendering the trustee the owner of the property despite the fact that it must be managed to the benefit of the beneficiary.[11] The settlor therefore can effectively hedge against virtually any and all forms of creditors via trusts; transferring ownership without really completely giving up the property, for practical purposes.[12] While money is most often the property that is transferred in a trust, any property, including antiques and relics can be used in a trust.[13] Evidently, a trust was the vehicle of choice for managing and concealing at least one prolific looter’s private collection.[14]

Amongst those implicated in the Pandora Papers was prominent British art collector and dealer Douglas Latchford (1931-2020).[15] Latchford was “a cultural accumulator of museum-quality Khmer sculptures and jewels” and coauthored multiple books and Khmer antiquities.[16] Other sources—even before the Pandora Papers leak—characterized Latchford as a smuggler, asserting “no single figure looms as large over a nation’s wholesale pillage.”[17] In late 2019, Latchford was charged with falsifying the provenance of some of the relics, but he died before the case concluded.[18] “As part of the Pandora Papers investigation, the Post and ICIJ traced dozens of Latchford-linked items to museums, galleries, and private collectors, and revealed offshore trusts used by Latchford to hold money and art.”[19]

The secrecy trusts afford often enables wrongdoing, and transparency can lead to justice. Troves of relics from Cambodian temples allegedly trafficked to the United States are headed back to their native land after tech billionaire James Clark (cofounder of Netscape) agreed to return them in early 2022.[20] “The 35 relics from Clark’s private collection include a monumental sandstone sculpture that once adorned an ancient Khmer capital city and bronze sculptures from near Angkor Wat.[21] Clark obtained the items more than a decade ago, according to a complaint filed Tuesday in Manhattan federal court, from the late Douglas Latchford, a British art dealer indicted in 2019 for allegedly trafficking hundreds of antiquities from Southeast Asia.”[22] Clark allegedly paid Latchford approximately $35 million for the Cambodian artwork.[23]

While the seizure of artwork and return to its proper country may seem like a mere moral victory to some, the cultural value of the artwork often far exceeds its price tag on the black market. Cambodia’s minister of culture and fine arts told the New York Times, “These are not just rocks and mud and metal. They are the very blood and sweat and earth of our very nation that was torn away.”[24] According to the legal advisor to the Ministry of Culture and Fine Arts, “For the Cambodian people, these lost treasures are of enormous importance . . . Their return is expected to bring prosperity, serenity, and pride to Cambodia.”[25]

The repatriation of Latchford’s looted relics is just one of the many positive results that have come from shedding light upon the offshore shadow economy, and the trafficking of cultural relics is just one of the many segments of the offshore shadow economy. Cambodia is far from being the only country that abusive offshore finance has harmed. The shadow economy is a global issue that will continue to come to the fore, and is one of the biggest crises confronting modern society.

[1] Spencer Woodman, Tech titan surrenders Cambodian relics sold by indicted dealer amid broader repatriation push, ICIJ (2022), https://www.icij.org/investigations/pandora-papers/tech-titan-surrenders-cambodian-relics-sold-by-indicted-dealer-amid-broader-repatriation-push/.

[2] Chronology of Cambodian Events Since 1950, Genocide Studies Program.

[3] See Max Crosbie-Jones, Property and Theft: A History of Looting in Southeast Asia, ArtReview (2021), https://artreview.com/a-history-of-looting-in-southeast-asia-the-real-cultural-appropriation/.

[4] Id.

[5] Woodman, supra note 1.

[6] Id.

[7] Id.

[8] Will Fitzgibbon, Suspect foreign money flows into booming American tax havens on promise of eternal secrecy, ICIJ (2021), https://www.icij.org/investigations/pandora-papers/us-trusts-offshore-south-dakota-tax-havens/.

[9] See Id.

[10] See Id.

[11] See Id.

[12] See Id.

[13] Woodman, supra note 1.

[14] Id.

[15] Id.

[16] Id.

[17] Crosbie-Jones, supra note 3.

[18] Woodman, supra note 1.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Crosbie-Jones, supra note 3.

[25] Woodman, supra note 1.