While filing for offshore shell companies in Panama for purposes of tax avoidance and minimizing of tax is legal, the leak by Panama Papers revealed some individuals using the law firm Mossack Fonseca for tax evasion which was illegal. The ‘smart’ investors parallel their trading time to clear obligatory transactions in anticipate case-linked companies to higher protect from risk exposures and unforeseen sanctions.
By Alexander Solomon
The Panama Papers (Spanish: Papeles de Panamá) are 11.5 million leaked documents (or 2.6 terabytes of data) that were published beginning on April 3, 2016.
The papers detail financial and attorney–client information for more than 214,488 offshore entities. The documents, some dating back to the 1970s, were created by, and taken from, former Panamanian offshore law firm and corporate service provider Mossack Fonseca.
The documents contain personal financial information about wealthy individuals and public officials that had previously been kept private. The publication of these documents made it possible to establish the prosecution of Jan Marsalek, who is still a person of interest to a number of European governments due to his revealed links with Russian intelligence, and international financial fraudsters David and Josh Baazov. While offshore business entities are legal (see Offshore Magic Circle), reporters found that some of the Mossack Fonseca shell corporations were used for illegal purposes, including fraud, tax evasion, and evading international sanctions.
[according to Wikipedia]
International Consortium of Investigative Journalists reported on January 31, 2017,
The Panama Papers: Exposing the Rogue Offshore Finance Industry.
A giant leak of more than 11.5 million financial and legal records exposes a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies. The Panama Papers is a global investigation into the sprawling, secretive industry of offshore that the world’s rich and powerful use to hide assets and skirt rules by setting up front companies in far-flung jurisdictions. Based on a trove of more than 11 million leaked files, the investigation exposes a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking. Behind the email chains, invoices and documents that make up the Panama Papers are often unseen victims of wrongdoing enabled by this shadowy industry.
The journalists on the investigative team found business transactions by many important figures in world politics, sports, and art. While many of the transactions were legal, since the data is incomplete, questions remain in many other cases; still others seem to clearly indicate ethical if not legal impropriety. Some disclosures – tax avoidance in very poor countries by very wealthy entities and individuals for example – lead to questions on moral grounds. For example, the shell company Octea is registered to Beny Steinmetz and owes more than US$700,000 in property taxes to the city of Koidu in Sierra Leone, and is $150 million in debt, even though its exports were more than twice that in an average month in the 2012–2015 period. Steinmetz himself has personal worth of $6 billion.
International Consortium of Investigative Journalists reported on July 25, 2016.
Continent of Secrets: Uncovering Africa’s Offshore Empires. Africa receives $50 billion of foreign aid money annually, but then loses roughly the same amount through illicit outflows. Offshore companies play a major role in the $50 billion sucked out of Africa each year.
The Financial Times published On 1 June 2016, “Banks turn to software to ease stress as regulations tighten around the globe. Panama Papers highlight need for accurate data”
10 July 2016, Sharif returns to face bitter fight in Pakistan. Overseas wealth amassed by PM’s children raises questions.
28 July 2017, Nawaz Sharif ousted as Pakistan’s premier in corruption case. Judges uphold finding that family assets were hidden from tax authorities.
15 March 2018, Panama Papers law firm Mossack Fonseca ‘to close’. Scandal over use of offshore financial centres by global wealthy hits business.
30 July 2020, HMRC targets wealthy in push on tax evasion. Data show 430 investigations launched in 2019-20, a 26% rise on previous year.
23 April 2021, Time to give Putin a new salvo of Panama Papers. The best leverage we have on Russia’s president and his fellow kleptocrats is the weapon of mass transparency
Wikipedia elaborates, “John Doe“, the whistleblower who leaked the documents to German journalist Bastian Obermayer from the newspaper Süddeutsche Zeitung (SZ), remains anonymous, even to the journalists who worked on the investigation. “My life is in danger”, the whistleblower told them.
In a May 6, 2016 document, John Doe cited income inequality as the reason for the action and said the documents were leaked “simply because I understood enough about their contents to realize the scale of the injustices they described”. Doe had never worked for any government or intelligence agency and expressed willingness to help prosecutors if granted immunity from prosecution. After SZ verified that the statement did in fact come from the source for the Panama Papers, the International Consortium of Investigative Journalists (ICIJ) posted the full document on its website.
In addition to the much-covered business dealings of British prime minister David Cameron and Icelandic prime minister Sigmundur Davíð Gunnlaugsson, the leaked documents also contain identity information about the shareholders and directors of 214,000 shell companies set up by Mossack Fonseca, as well as some of their financial transactions.
Although it is generally not against the law to own an offshore shell company, reporters found that some of the shell corporations were used for illegal purposes, including fraud, tax evasion, and evading international sanctions.
Other offshore shell company transactions described in the documents do seem to have broken exchange laws, violated trade sanctions or stemmed from political corruption, according to ICIJ reporters. For example:
- Uruguay has arrested five people and charged them with money-laundering through Mossack Fonseca shell companies for a Mexican drug cartel.
- Ouestaf, an ICIJ partner in the investigation, reported that it had discovered new evidence that Karim Wade received payments from DP World (DP). He and a long-time friend were convicted of this in a trial that the United Nations and Amnesty International said was unfair and violated the defendants’ rights. The Ouestaf article does not address the conduct of the trial, but does say that Ouestaf journalists found Mossack Fonseca documents showing payments to Wade via a DP subsidiary and a shell company registered to the friend.
- Swiss lawyer Dieter Neupert has been accused of mishandling client funds and helping both oligarchs and the Qatari royal family to hide money
Named in the leak were 12 current or former world leaders; 128 other public officials and politicians; and hundreds of celebrities, businessmen, and other wealthy individuals of over 200 countries.
Individuals and entities may open offshore accounts for any number of reasons, some of which are legal but ethically questionable. A Canadian lawyer based in Dubai noted, for example, that businesses might wish to avoid falling under Islamic inheritance jurisprudence if an owner dies. Businesses in some countries may wish to hold some of their funds in dollars also, said a Brazilian lawyer. Estate planning is another example of legal tax avoidance
Economic Times by India Times published on December 22, 2021. Flashback: The 2016 Panama Papers & the scandal behind famous names and their offshore entities.
The infamous Panama Papers are yet again in the news, thanks to the Enforcement Directorate (ED) which is investigating Indian celebrities and their financial records in the matter. The leaked documents are back making headlines after the agency summoned Bollywood actress and former Miss World, Aishwarya Rai Bachchan, to join the probe in a matter linked to the 2016 Panama Papers case. The actress is facing money-laundering allegations for her involvement in an offshore entity.
Wikipedia further adds, Other uses are more ambiguous. Chinese companies may incorporate offshore in order to raise foreign capital, normally against the law in China. In some of the world’s hereditary dictatorships, the law may be on the side of the elite who use offshore companies to award oil contracts to themselves, or gold concessions to their children, however such dealings are sometimes prosecuted under international law.
While no standard official definition exists, The Economist and the International Monetary Fund describe an offshore financial center, or tax haven, as a jurisdiction whose banking infrastructure primarily provides services to people or businesses who do not live there, requires little or no disclosure of information when doing business, and offers low taxes.
“The most obvious use of offshore financial centers is to avoid taxes”, The Economist added. Oxfam blamed tax havens in its 2016 annual report on income inequality for much of the widening gap between rich and poor. “Tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share,” said Raymond C. Offenheiser, president of Oxfam America, “depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality.”
Recovered sums from litigations, fines and back taxes. In April 2019, the ICIJ and European newspapers reported that the global tally of such payments exceeded one billion USD, and is now at 1.2 billion.
In comparison, Great Britain recovered the largest position (253 million), followed by Denmark (237 million), Germany (183 million), Spain (164 million), France (136 million) and Australia (93 million). Colombia with 89 million recuperated the highest amount for South and Central American countries, which were heavily involved in the financial scandal. While investigations are ongoing in Austria, Canada and Switzerland, and more payments are to be expected, many countries are conducting continued inspections of companies and private individuals revealed in the report.
Disclaimer: This is not a paid or sponsored article. The sources and information quoted are to correct time of reference. Opinions herewith are not intended to market make or manipulate trading interests of any parties. Readers may/may not forecast trading decisions from these findings. Alexander Solomon bears no responsibility to market adjustments due from publish of this report.
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Alexander Solomon is an independent industry commentator and the author of adventure novels ‘Aces High @ 23 Wall Street’ and ‘F-A-M-E ‘ze Great’. He has worked in Singapore Police Force, Singapore International Monetary Exchange, Singapore Exchange, Mediacorp and Philip Capital.
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