February 26, 2020

Panama Papers: remarkable global media operation holds rich and powerful to account


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Screen Shot 2016-04-03 at 10.57.20 PMAuthor Paul Lashmar Senior Lecturer in Journalism, University of Sussex From The Conversation

Disclosure statement

Paul Lashmar is part of a research group that is funded by ESRC and have been part of a research team that received a grant from Innovate UK (2014) but not on a subject area related to this article.
University of Sussex
University of Sussex provides funding as a member of The Conversation UK.

With the exposé perhaps we can now say the fortress walls of offshore secrecy are finally cracking. Such havens allow corruption and tax avoidance to take place on a massive international scale by some of the richest and most powerful people on Earth. Meanwhile, the poor get poorer.

Western politicians have huffed and puffed about clamping down on offshore havens but in reality their collective breath would not have knocked over a little piggie’s straw house let alone bastions of vested interest. It is thanks to investigative reporters, whistleblowers and unprecedented international media collaboration that the matter is being forced.

The advocacy group Global Financial Integrity reports that illegal channelling of profits offshore cost developing countries nearly US$6 trillion between 2001 and 2010. As Facebook posters like to remind us, 1% of the world’s population owns half the wealth and they like to hoard it.

But finally things may be changing. We are being treated to the third major offshore data leak in as many years. The first was the Cayman Islands tax leak in 2013 that exposed a huge number of major figures worldwide as holding accounts in the tiny island – a British dependency – in secrecy.

Then there was the great leak which revealed that the company’s Swiss private bank had helped wealthy account holders from other nations to dodge huge sums of due tax. Now it is the turn of Panama – an excellent place to park large sums of money.

The Panama investigation has again featured a network of like-minded journalists in a range of countries. The network has been built up over a series of multinational collaborations. Among the organisations involved are The Guardian and BBC TV’s Panorama programme, which have a longstanding relationship with the International Consortium of Investigative Journalists () which is at the heart of this operation. The material is reported to have been leaked to the German newspaper Süddeutsche Zeitung from the database of , the world’s fourth biggest offshore law firm.

How the ICIJ reported the story. ICIJ
As the cracks appear in the once invincible wall of tax haven secrecy, it must be dawning on the rich and powerful that their privacy is no longer guaranteed. The opening reports of the Panama Papers focus on a US$2bn trail to Vladimir Putin, the president of Russia. But we can expect coming days to bring revelations about many more people. The last thing the rich and powerful who have offshore bank accounts want is publicity about them. Their questions must be “where next” and “which havens remain safe”?

Secret banking paradise

1024px-Catedral_Metropolitana_de_Panama_CC_81..0What is important about Panama’s financial services industry? If you tap “Panama offshore” into Google you get a long list of adverts offering to set up a Panama offshore (secret) bank account for you.

For those wanting to establish a really secret tax avoidance scheme it is not good enough just to pick one offshore tax haven – say the British Virgin Islands or the Cayman Islands. You need a series of interlocking offshore accounts in different jurisdictions to guarantee anonymity. British Virgin Islands is good for setting up companies and the Caymans provides extremely discreet bank accounts. Meanwhile Panama is tax exempt and stonewalls requests for company information from investigators in the rest of the world.

Offshore companies incorporated in Panama – and the owners of the companies – are exempt from any corporate taxes, withholding taxes, income tax, capital gains tax, local taxes, and estate or inheritance taxes, including gift taxes.

Panama has more than 350,000 secretive International Business Companies (IBCs) registered: the third largest number in the world after Hong Kong and the British Virgin Islands. Alongside incorporation of IBCs, Panamanian financial services are proactive in forming tax-avoiding foundations and trusts, insurance, and boat and shipping registration. Violation of financial secrecy is punishable by prison.

Panama ranks at 14th position on the 2015 Financial Secrecy Index. But it remains a jurisdiction of particular concern. The Organisation for Economic Co-operation and Development’s Pascal Saint Amans summed up the problem recently: “From the standpoint of reputation, Panama is still the only place where people still believe they can hide their money.”

The Tax Justice Network says that “until now Panama has been fairly indifferent to reputational issues, but the increased attention that Panama receives will inevitably raise concerns among the punters that Panama is no longer able to effectively protect the identity of the crooks and scammers attracted by its dodgy laws and equally dodgy law firms”.

TJN says Panama has long been the recipient of drugs money from Latin America, plus ample other sources of dirty money from the US and elsewhere – it is one of the oldest and best known tax havens in the Americas. In recent years it has adopted a hard-line position as a jurisdiction that refuses to cooperate with international transparency initiatives.

In Jeffrey Robinson’s 2003 examination of tax havens: The Sink: Terror, Crime and Dirty Money in the Offshore World, a US Customs official is quoted as saying:

The country is filled with dishonest lawyers, dishonest bankers, dishonest company formation agents and dishonest companies registered there by those dishonest lawyers so that they can deposit dirty money into their dishonest banks. The Free Trade Zone is the black hole through which Panama has become one of the filthiest money laundering sinks in the world.
The investigators

The emergence of a multinational network of journalists prepared to take on these secret havens has at its heart the investigative journalist Gerald Ryle, who spent 26 years working as a reporter and editor in Australia and Ireland, including many years at The Sydney Morning Herald and The Age newspapers.

Investigative journalist, Gerard Ryle. ICIJ
A quietly spoken man, he uncovered some of the biggest stories in Australian journalism, winning four prestigious Walkley Awards including the Gold Walkley, Australia’s highest award for journalism.

While working for the Sydney Morning Herald in Australia, Ryle was told by a source he would receive an significant package which could be the biggest story of his career.

I still remember the day it arrived, there was just the office manager there, I just hugged her and thanked her and walked back to my office. I pulled the package open and there was a hard drive inside.
At first he did not know what it all meant but it became clear that it was an enormous cache of details of confidential emails, documents and files from the offshore world. From what could be made of the scattered and vastly disorganised material, Ryle later recalled his thoughts.

I know it is a potential goldmine but I don’t actually know what I’m looking at, I’m not sure how valuable it is.

Ryle knew it was information from the secretive offshore world, was authentic and that the next step was to organise extracting the data in some kind of meaningful format. A chance to have access to the resources needed for this type of operation became available when Ryle was offered a job heading the International Consortium of Investigative journalists (ICIJ) in Washington DC.

Founded in 1997, ICIJ was launched as a project of the Centre for Public Integrity to extend the centre’s style of watchdog journalism, focusing on issues that do not stop at national frontiers: cross-border crime, corruption, and the accountability of power.


With the consortium’s resources available to him, Ryle started to organise an international effort to structure the information so that journalists worldwide could analyse and find big names and stories from the data on a safe and secure platform in an efficient and ordered way.

Within 24 hours of publication of details of Cayman Island tax havens in April 2013, the Guardian was filled with stories from a collaboration with the International Consortium of Investigative journalists (ICIJ). The tie-up also included the BBC in the UK, Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other international media partners.

According to the ICIJ, 86 journalists from 46 countries used both hi-tech data crunching and traditional reporting to sift through emails and account ledgers covering nearly 30 years. One of the biggest hits for the ICIJ was on Azerbijan’s president, Ilham Aliyev, after he and members of his family were revealed as shareholders in at least four offshore companies. It is against Azerbaijani law to be involved in business while in power. By September 2013, journalists from 190 countries had produced stories from the database about prominent citizens who had hidden offshore accounts.

HSBC leak

Then in February 2015 a team of journalists from 45 countries opened to public scrutiny secret bank accounts maintained for criminals, traffickers, tax dodgers, politicians and celebrities. Secret documents in the data batch revealed that global banking giant HSBC profited from doing business with arms dealers, the ICIJ reported. The leaked files, based on the inner workings of a Swiss private banking arm of HSBC, related to accounts holding more than $100 billion. They provided a rare glimpse inside the super-secret Swiss banking system.

The documents, obtained by the ICIJ via the French newspaper Le Monde, showed the private banking arm had dealt with clients who were engaged in illegal behaviour.

In February 2015, after being informed of the full extent of the reporting team’s findings, HSBC gave a conciliatory response, telling ICIJ: “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”

Later that year ICIJ was given access to the largest data haul so far – some 11m documents covering accounts held by the rich across the globe. The follow-up stories are now breaking now and will fill news bulletins for months – maybe years. It is proof – if any were needed – of the need for investigative journalists to hold the powerful to account.

Photograph: Lala Rebelo, CC BY-SA

For more on this story go to: http://theconversation.com/panama-papers-remarkable-global-media-operation-holds-rich-and-powerful-to-account-57196

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Panama Papers: a massive document leak reveals a global web of corruption and tax avoidance

By Matthew Yglesias, From VOX

Mossack Fonseca is not a household name, but the Panamanian law firm has long been well known to the global financial and political elite, and thanks to a massive 2.6 terabyte leak of its confidential papers to the International Consortium of Investigative Journalists it’s about to become much better known. A huge team of hundreds of journalists is poring over the documents they are calling the Panama Papers.

The firm’s operations are diverse and international in scope, but they originate in a single specialty — helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. Since its founding in 1977, it’s expanded its interests outside of Panama to include over 40 offices worldwide, helping a global client base to work with shell companies not just in Panama but also the Bahamas, the British Virgin Islands, and other notorious tax havens around the world.

The documents provide details on some shocking acts of corruption in Russia, hint at scandalous goings-on in a range of developing nations, and may prompt a political crisis in Iceland.

But they also offer the most granular look ever at a banal reality that’s long been hiding in plain sight. Even as the world’s wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have willfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens.

If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But political elite of powerful western nations has not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because western economic elites don’t want them to.

What’s a shell company? Why would someone want one?

Sometimes a person or a well-known company or institution wants to buy things or own assets in a way that obscures who the real buyer is.

The typical reason for this is a kind of routine corporate secrecy. Apple, for example, appears to have created a shell company called SixtyEight Research that journalists believe to be a front for its interest in building a car. Since Apple happens to be the most-covered company on the planet, this hasn’t been incredible effective — and when SixtyEight Research staff showed up at an auto industry conference, everybody noticed.

But in general, companies don’t like to tip their hand to what they are doing and the use of shell companies to undertake not-ready-for-public-announcement projects can be a useful tool.

Shell companies are often used for simple privacy reasons. Real estate transactions, for example, are generally a matter of public record. So an athlete, actor, or other celebrity who wants to buy a house without his name and address ending up in the papers might want to pay a lawyer to set up a shell company to do the purchasing.

Okay, but how about the shady stuff?

As is generally the case in life, secrecy can have illegitimate purposes as well. This is particularly true for shell companies set up in international centers of banking secrecy that offer a level of anonymity and obscurity that goes beyond simply making it hard to look up the real owner’s name online.

Your soon-to-be-ex-wife cannot seize half of the money in an account that she and her lawyers don’t know exists and can’t prove that you own, for example. Nor can your creditors seize such an account in a bankruptcy proceeding. Nor can the government levy estate taxes on it when you die and pass it on to your kids. In all those circumstances, a Panamanian company that you secretly control and that holds stocks, bonds, and other financial assets on your behalf could be the ideal vehicle.

By the same token, if you have made a bunch of money illegally (taking bribes, trafficking drugs, etc.) you need to do something with the money that won’t attract the attention of the authorities or the media. A secret offshore shell company is perfect. Not only does it help you avoid scrutiny in real time, but if you are found out its assets can’t be taken from you if you have to flee the jurisdiction or even serve jail time.

HSBC-ChinaBut even though various criminal money-laundering schemes are the sexiest possible use of shell companies, the day-to-day tax dodging is what really pays the bills. As a manager of offshore bank accounts told me years ago, “people think of banking secrecy as all about terrorists and drug smugglers, but the truth is there are a lot of rich people who don’t want to pay taxes.” And the system persists because there are a lot of politicians in the west who don’t particularly want to make them.

What do the Panama Papers show?

As you would imagine, there is quite a lot in the 2.6 terabytes. Here are a few of the highlights that the team found, with links to the full stories where you can read the details:

Vladimir Putin’s inner circle appears to control about $2 billion worth of offshore assets.
The Prime Minister of Iceland secretly owned the debt of failed Icelandic banks while he was involved in political negotiations over their fate.
The family of Pakistan’s prime minister owns millions of dollars worth of real estate via offshore accounts.
Ukrainian President Petro Poroshenko pledged to sell his Ukrainian business interests during his campaign, but appears instead to have transferred them to an offshore company he controls.
The International Consortium of Investigative Journalists has a full profile of political figures and their relatives named in the Panama Papers for your reading pleasure.

But though political corruption is fun and newsy, the document dump also features a leaked memorandum from a Mossack Fonseca partner revealing the more boring truth that “Ninety-five per cent of our work coincidentally consists in selling vehicles to avoid taxes.”

How much money is there in offshore tax havens?

A big part of the idea, of course, is to make it hard for anyone to know for sure.

But Gabriel Zucman, an economics professor at UC Berkley, has made the most detailed study of the question for his book The Hidden Wealth of Nations and estimates that it totals at least $7.6 trillion. That’s upwards of 8 percent of all the world’s financial wealth, and it’s growing fast. Zucman estimates that offshore wealth has surged about 25 percent over the past five years.

Much of that reflects “new money” from China and other developing nations whose citizens to an extent have legitimate fears about political stability and the rule of law.

But some of it is simple avarice. The name of Ian Cameron, the late father of British Prime Minister David Cameron, shows up in the Panama Papers, for example. Mossack Fonseca helped him set up his investment company Blairmore Holdings (named after his family’s ancestral country estate) in the British Virgin Islands where, marketing material assured investors, the company “will not be subject to United Kingdom corporation tax or income tax on its profits.”

This particular kind of move is perfectly legal and doesn’t even involve any secrecy. It is entirely typical for investment companies whose employees all work or reside in New York, London, or Connecticut to be domiciled for tax purposes in someplace like the Cayman Islands. Since these companies don’t own much in the way of physical assets, they can be officially located anywhere in the world and naturally choose to locate in jurisdictions where they won’t need to pay taxes.

Why doesn’t anyone do anything about this?

To an extent, things have been done.

First the war on drugs, and then more recently the war on terror, led to meaningful political pressure on countries around the world to alter their banking practices so as to reduce global money-laundering. More recently, the European Union has successfully pressured Switzerland to change its laws to make it easier for the EU to catch people engaged in criminal tax evasion.

But there’s a big difference between tax evasion — illegally refusing to pay taxes that you owe, and then taking advantage of secret accounts to try to hide the money and get away with it — and tax avoidance, which is hiring clever people to help you find and exploit legal loopholes to minimize your tax bill.

Incorporating your hedge fund in a country with no corporate income tax even though all your fund’s employees and investors live in the United States is perfectly legal. So is, in most cases, setting up a Panamanian shell company to own and manage most of your family’s fortune.

Tax avoidance is an inevitable feature of any tax system, but the reason this particular form of avoidance grows and grows without bounds is that powerful politicians in powerful countries have chosen to let it happen. As the global economy has become more and more deeply integrated, powerful countries have created economic “rules of the road” that foreign countries and multinational corporations must follow in order to gain lucrative market access.

Establishing some kind of minimum global standard of taxation of corporate and investment income hasn’t been done because it hasn’t been a political priority. In the United States, in particular, the Republican Party fights quite hard for the view that high levels of taxation on rich people and investment income are economically ruinous, so there isn’t the kind of institutional mobilization that exists around drug trafficking or possible terrorism financing.

The leak of the Panama Papers is significant in part because of the specific information they contain, but more broadly because they draw attention to what “everyone knows” and may put public pressure on the powers that be to do something about it.

IMAGE: Jjimenez0921

For more on this story go to: http://www.vox.com/2016/4/3/11356326/panama-papers

7e6bd0c706e88aa61baeeae6a0ca0ce2Najib’s son among those named in ‘Panama Papers’

From malaysiakini.com

One of the prime minister’s sons, Mohd Nazifuddin Mohd Najib, is among those named in a massive leak of information from a Panama-based law firm.

According to the documents uncovered in the leak, he had held directorships in two companies based in the British Virgin Islands (BVI), namely Jay Marriot International and PCJ International Venture Limited.

However, this does not imply any wrongdoing on his part.

“There are legitimate uses for offshore companies, foundations and trusts,” said the International Consortium of Investigative Journalists (ICIJ), which led the investigation together with Germany-based newspaper Süddeutsche Zeitung.

“We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Power Players interactive application have broken the law or otherwise acted improperly,” it said.
According to the ICIJ, Nazifuddin became one of two directors of Jay Marriot in 2009.

The other director was reportedly Ch’ng Soon Sen, who was reportedly then the executive director of the property developer Malaysia Pacific Corp and is now its CEO.

The ICIJ report also noted responses to the leaks from Nazifuddin and Ch’ng.

Ch’ng reportedly confirmed acquiring Jay Marriot together with Nazifuddin in 2009, but there had been no business activity “since formation”.

In addition, he said Nazifuddin has transferred his shares in Jay Marriot to Ch’ng’s sister and resigned in 2011.

As for PCJ International, Nazifuddin reportedly set up the company together with developer Megat Daniff Shahriman Zaharudin, but the company was shut down a year later.

The report also notes that Megat Daniff is a financial adviser of the NGO Youth on Unity, which is headed by Nazifuddin.

Nazifuddin reportedly told the ICIJ and Süddeutsche Zeitung that PCJ International was set up for conducting international business, but there had been no business transactions and the company was subsequently shut down.

Both companies had been registered in the BVI by the law firm Mossack Fonseca, where an employee supposedly leaked the documents to Süddeutsche Zeitung.

Largest data leak

It has been described the largest data leak that journalists ever worked with, comprising 2.6 terrabytes of data, 11.5 million documents, that shed light on 214,000 shell companies.

It reportedly took the combined efforts of 370 journalists in 78 countries to sift through the documents, dubbed the ‘Panama Papers’.

Offshore companies such as those in the BVI, Cayman Islands and Delaware, USA, are notoriously secretive due to opaque tax and corporate laws in these jurisdictions. For this reason, its use has been controversial.

Apart from legitimate business transactions, such shell companies had also been used for illegitimate purposes such as money laundering and tax evasion.

The BBC, which is among the news organisations that sifted through the data, had reported that the documents expose a money-laundering ring involving Russian President Vladimir Putin’s associates and Bank Rossiya, the latter of which is the subject of US and EU economic sanctions.
For more on this story go to: https://www.malaysiakini.com/news/336377

British banks at heart of Panama tax-haven leaks

By NICK GOODWAY From Evening Standard

British-owned and London-based banks have emerged among the biggest users of Panamanian legal firm Mossack Fonseca where the leaking of millions of documents have revealed details of 40 years of creating offshore tax havens.

HSBC, Coutts, Rothschild and UBS are among the top 10 banks who asked the law firm to set up hundreds of the near 15,600 paper companies to help clients conceal their finances.

HSBC — which was fined £28 million last year after leaks from its Swiss private bank revealed how it had allowed clients to launder money — along with affiliates asked the Panamanian firm to set up more than 2300 offshore companies according to the International Consortium of Investigative Journalism.

The revelations come as a further embarrassment to the bank and its chief executive, Stuart Gulliver, who himself used a Panamanian company to conceal his pay and tax affairs when he ran the bank’s Hong Kong operations. Gulliver made it clear last year that he had not avoided tax through that but simply to keep his pay from being made public to his colleagues.

HSBC today said: “We work closely with the authorities to fight financial crime and implement sanctions. Our policy is clear that offshore accounts can only remain open either where clients have been thoroughly vetted (including due diligence, ‘Know Your Customer’, source of wealth, and tax-transparency checks), where authorities ask us to maintain an account for the purposes of monitoring activity, or where an account has been frozen based on sanctions obligations.”

Coutts, the private-banking arm of taxpayer-owned Royal Bank of Scotland, asked Mosack Fonseca to set up almost 500 offshore companies through its Jersey offshoot, according to the leaked documents. Coutts was already under investigation for potentially helping clients avoid tax by German authorities.

UBS, the Swiss bank with most of its investment banking operations in the City of London, is revealed to have set up more than 1300 offshore companies through Mossack Fonseca since the 1970s. It did not comment.

One the largest number of offshore-company creation requests — well over 1500 — came from Experta, the corporate and trust services offshoot of Banque Internationale à Luxembourg (BIL).

On its website, the company, which is 100% owned by BIL, states: “At Experta Luxembourg we provide our international private and institutional clientele tailor-made solutions related to the corporate and investment structures via the use of unregulated and regulated Luxembourg vehicles, as well as other international instruments.”

Other British-linked banks asking to set up companies included Credit Suisse Channel Islands and Rothschild Trust Guernsey.

IMAGE: HSBC-China.jpg

For more on this story go to: http://www.standard.co.uk/business/business-news/british-banks-at-heart-of-panama-taxhaven-leaks-a3217496.html

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