Journalists unmask shady deals in probe of internet providers

Hungary's Magyar Telekom figures heavily in the investigation. [ITU Pictures/Flickr]

A group of investigative journalists are calling out internet service providers in a number of EU countries for their shady business connections and lack of transparency.

The journalists analysed who owns ISPs in 11 central and eastern European countries—including EU members Romania, Bulgaria, Hungary, Czech Republic, Slovenia, Croatia and Slovakia—and whether they have connections to politicians or corrupt sources of money.

EURACTIV Romania, in partnership with investigative outlets the RISE Project and the Organised Crime and Corruption Reporting Project, put together the network of journalists that dug into ISP ownership in the 11 countries.

Offshore companies

In Romania, the group found that “the largest internet service providers (ISP) are dominated by offshore companies” based in the Netherlands, Cyprus, Luxembourg, the US, the British Virgin Islands and the Cayman Islands.

The journalists behind the investigation argue that ISPs choose to set up headquarters outside the countries they service for reasons beyond tax benefits alone. With bases abroad, the group alleges that companies can more easily cover up details about their owners.

“When we think of offshores, we mostly think of Cyprus, maybe about Panama or the Cayman Islands. But most European countries offer the same facilities,” said Paul Radu, a Bucharest-based investigative journalist and coordinator of the project.

Under the new EU anti-money laundering directive set to go into effect in June 2017, companies will be required to disclose their “beneficial ownership”. EU member states can share some of those details on request with, for example, journalists. But campaigners criticised the new law because it won’t require national governments to make that information public.

There is no EU telecoms law obligating ISPs to lay out who owns them.

According to Innocenzo Genna, a telecoms consultant and board member of ISP association EuroISPA, existing laws should oversee whether ISPs are involved in criminal activity. But transparency rules specific to the telecoms sector would go too far.

“There are data protection and cybercrime rules applying to operators who may unduly interfere into internet traffic,” Genna said.

>>Read: Czech broadband money caught in political intrigue

A corporate shareholder in AKTA, one of Romania’s largest ISPs, is facing criminal charges of fraud and mismanagement of public funds.

Headquarters in Europe

Several of the ISPs scrutinised by the group are headquartered in other EU member states.

Hungarian journalists detailed how ISP Magyar Telekom leaned heavily on journalists working at, a news website previously owned by the telecom. Magyar Telekom is majority-owned by Germany’s Deutsche Telekom.

Researchers from the project also unearthed several small, regional Bulgarian ISPs’ ties to organised crime.

There are differences between the countries at the centre of the group’s investigation. While the journalists’ report ISPs’ alleged connections to criminals in some countries, others fared better.

“As you go eastwards, problems increase,” Radu said.

Journalists tasked with probing Czech ISPs described the Czech Republic as “one of the more vibrant Wifi communities in the world” with many small community internet networks.

>>Read: Deutsche Telekom chief causes uproar over net neutrality

Slovenia is one of the few EU countries that already has national net neutrality legislation. EU-wide rules on net neutrality were approved last summer.

Net neutrality

During the launch of the investigative project on Friday (29 January) in Brussels, several of the journalists involved called net neutrality legislation a way to keep ISPs in check and prevent companies from interfering in internet traffic.

“The project just focused on internet ownership but that has to do in the end with net neutrality,” Radu said.

Romania and Bulgaria are the only two EU countries monitored under the European Commission’s cooperation and verification mechanism (CVM), used to track their efforts to fight corruption since they joined the EU. In the most recent report published last week (27 January), the Commission listed Romania’s improvements and scolded Bulgaria for failing to safeguard the rule of law.

NGO Transparency International’s 2015 corruption rankings, which were also published last week, listed Hungary at number 50 out of 167 countries. Romania trailed behind at spot 58 and Bulgaria at 69.

>>Read: Romania praised in Commission report but Bulgaria damned

The new anti-money laundering directive was approved in May 2015 and will be implemented in June 2017. At that time, the European Commission will publish its own assessment outlining risks for money laundering in the EU. Member states can request exemptions from the directive for gambling services if they can justify low risk for money laundering.

When Bulgaria and Romania joined the EU on 1 January 2007, shortcomings remained regarding judicial reform and the fight against corruption. In the case of Bulgaria, problems also remained regarding the fight against organised crime.

The Commission reports under the Cooperation and Verification Mechanism every year, on progress with judicial reform, the fight against corruption and, concerning Bulgaria, the fight against organised crime. The last report on Romania was largely seen as positive.

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