Panama Papers-The Real Analysis
Recently Mossack Fonseca, a panama based, world’s fourth largest offshore law firm came under the world scanner after leakof their official files. An extraordinary amount of about 11.5m files, nearly 2.6 TB of data. The whole world was jolted to a shock by the leak, since it is the biggest leak in the history. All the leaks happened from an anonymous source of a German newspaper Süddeutsche Zeitung, who termed the leaked files as “Panama Papers”. The newspaper distributed the leaked papers to International Consortium of Investigative Journalists (ICIJ), who later shared them with biggest news channels throughout the world.
What did Mossack Fonseca do?
The law firm Mossack Fonseca, has over 35 branches all over the globe. The firm has emerged as top creator of shell companies worldwide to hide assets. They usually operate in tax haven countries. The leaked files show information of 214,488 offshore entities connected to more than 200 countries.
The Offshore structures are legal, usually individuals do it for estate planning or inheritance. However, money launderers use them to establish anonymous company structures. The UK government has taken great steps where by requiring reveal their offshore companies owners.Offshore system thrives on global bankers, lawyers, accountants who help protect clients’ secrets.
The Law Firm has incorporated companies in offshore tax havens like Cyprus or Switzerland. They also provide Wealth Management Services. The Law Firm has provided its services to more than 300,000 companies worldwide. They are dominant in the UK.
The firm, Mossack Fonseca has also helped in Africa’s diamond trade, international art market, they have serviced many Middle East royalties. Helped Moroccan Kings Mohammed VI and King Salman of Saudi Arabia to buy luxury yachts.The Law firm is known to aid fraudsters protect their money even after they were linked to many public scandals.
The firm has also been regularly deleting electronic as well as hard copies of transactions, also backdating documents to help clients in their financial matters. They have helped clients secretly move money and slash their tax bills.
The authorities in British Virgin Islands imposed a fine of $ 37,500 on Mossack Fonseca for violating the rules of anti-money-laundering law. They helped the son of former Egyptian President Hosni Mubarak establish an offshore company, while they were accused of Money Laundering.
While the firm has declined to discuss in details but they are adamant about their work integrity as they carry out proper due diligence and comply with anti-money laundering laws.
What does the Leak Reveal?
The leak is the biggest since Edward Snowden gave
The documents central theme was to show how the rich and powerful are exploiting the tax regimes and secretly storing away wealth in offshore accounts. The list had names of 143 politician, family and associates as well as 12 national leaders from around the world.
The list had prominent name like Vladimir Putin and his close associate Sergei Roldugin, who hid around $ 2 Billion in offshore accounts. The Russian did transactions as big as $ 2 million to gain influence in Russian Media and Industries. The father of British prime Minister, who also has an offshore investment fund was also found evading taxes by never paying taxes in Britain. The files also include evidence of offshore companies held by Chinese premier Xi Jinping and his close associates.
Other national leaders were Nawaz Sharif of Pakistan, Ayad Allawi of Iraq , Petro Poroshenko of Ukraine; Alaa Mubarak, son of Egypt’s president and Sigmundur Davíð Gunnlaugsson from Iceland.
The papers include solid evidence of how big banks and law firms sell financial knowledge illegally to billionaires, celebrities, sports starts, politicians involved in tax dodging and political corruptions. Also helping them by hiding and manipulating financial records.
The files also has numerous details about the offshore companies controlled by Pakistani prime minister and other 33 companies and individuals who were blacklisted by the U.S. government for doing illegal business drug Lords and terrorist organisations. The files have also revealed how banks have set up more than 15,000 shell companies for clients to keep their finance under the hood. Many of such companies were set up by international giants like UBS who have set up more than 1100 offshore companies and HSBC who have set up more than 2300 companies.
Many economist believe that offshore world is full of mal practices and criminality.
The leaked files have data from past 40 years, from 1977 till 2015. It has provided a glimpse of decade over decade flow of black money through the global financial system, incorporating crime and shedding tax revenues from national treasuries.
The leak also reveal how Prime Minister Sigmundur David Gunnlaugsson of Iceland heldmillions of dollars in the form of bonds.
Even movie starslike Jackie Chan has sixoffshore companies. However he never used it for illegal purposes and having an offshore account is reasonable for international transactions. Even the best soccer player, Lionel Messi, has been found to own an offshore company with his father.
German Tax authorities also bought leaks from a whistle-blower to conduct “Tax Raids” before the big leak.
The firm also helped anunidentified company in the British Virgin IslandsOn Feb. 10, 2011. The company was called Sandalwood Continental Ltd. Which loaned $200 million to another Cyprus based firm called Horwich Trading Ltd. Upon further investigation the trail let to Russian Leader Vladimir Putin. A St. Petersburg-based Bank called Rossiya, owned by Putin’s close associates incorporated Sandalwood Continental to facilitate the money transfer.
The files also revealed how President Ilham Aliyev of Azerbaijan and his family established companies and trusts in Panama to buy stakes in gold mines and London real estate.
ConclusionThe main problems faced by law enforcers is to find and stop the criminal behaviour. However it is very hard to find since most of such shell companies created lead to unknown trail and many of them are buried under layers of secrecy. Usually the leaks by whistle blowers and anonymous sources have provided an in-depth coverage of trick employed by the rich and the powerful to conceal their wealth.
It is very important that such offshore structures should be used for legitimate purpose only, since most of the tax haven lie outside the jurisdiction of many countries hence they are unable to impose proper control.