4 Apr 2016 03:30pm

Panama papers: tax havens of rich and powerful exposed

More than 11.5 million files, dating back nearly 40 years, have been leaked from the database of Panama-based law firm Mossack Fonseca, exposing the offshore tax havens used by some of the world’s most rich and powerful individuals to conceal their wealth

The leak contains details on more than 214,000 offshore entities connected to people in more than 200 countries and territories.

The information, which was first passed to German newspaper Suddeutsche Zeitung before being shared with the International Consortium of Investigative Journalists (ICIJ), includes emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, including Nevada, Hong Kong, Panama, the Bahamas and the British Virgin Islands.

Mossack Fonseca, one of the world’s leading firms in the incorporation of offshore entities and one of the world’s top creators of shell companies – corporate structures that can be used to hide ownership of assets - worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up offshore companies, foundations and trusts for its customers.

Although owning an offshore company is legal, the documents revealed that for the majority of cases, the primary aim in establishing these offshore entities was to conceal the identities of the company owners.

According to ICIJ, the investigation showed how a global industry of law firms and big banks sell financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sport stars.

Lionel Messi, whose offshore dealings are currently under investigation in Spain, has been found in the documents and new details surrounding the FIFA scandal have also been revealed. The football star has since said he intends to sue El Confidencial, the Spanish newspaper which linked him to tax evasion in the Panama papers leak.

More than 500 banks, their subsidiaries and their branches, including HSBC, UBS and Société Générale, created more than 15,000 offshore companies for their customers through Mossack Fonseca.

HSBC and its affiliates created more than 2,300 in total, ICIJ’s analysis revealed.

Over 140 world leaders, politicians and public officials around the world have been linked to the data including the prime ministers of Iceland and Pakistan, the presidents of Argentina, Ukraine and the UAE, the king of Saudi Arabia, and the children of the president of Azerbaijan as well as associates of president Vladimir Putin, who have been connected to a $2bn money laundering scheme.

Ian Cameron, the late father of British prime minister David Cameron was also linked to the data through Blairmore Holdings Inc, an offshore investment fund he helped create and develop. According to the investigation, the fund was managed to avoid taxes. Cameron’s spokesperson said his father’s alleged links with offshore accounts are a “private matter."

The files also revealed details of offshore companies used for real estate development in the Caribbean linked to former Tory MP Michael Mates.

According to analysis by ICIJ, the UK is one of the top ten countries in which intermediaries operate and also features among the countries with the most active intermediaries by number of offshore company incorporations.

Mossack Fonseca responded to the leaked data by insisting it follows “both the letter and the spirit of the law” and in nearly 40 years of operation and has never been charged with criminal wrongdoing.

The firm added, “As a registered agent we merely help incorporate companies, and before we agree to work with a client in any way, we conduct a thorough due-diligence process, one that in every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound.”

HMRC has asked ICIJ to share the leaked data with UK tax authorities for examination.

Jennie Granger, HMRC director general of enforcement and compliance, said, “We have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation. We have asked the ICIJ to share the leaked data that they have obtained with us. We will closely examine this data and will act on it swiftly and appropriately.

“We have brought in more than £2bn from offshore tax evaders since 2010 and the government has repeatedly strengthened our powers and resources with new criminal offences and higher penalties, so we can take even tougher action against the minority who try to cheat the honest majority by hiding their money in offshore tax havens,” she added.

“Our message is clear: there are no safe havens for tax evaders and no-one should be in any doubt that the days of hiding money offshore are gone. The dishonest minority, who can most afford it, must pay their legal share of tax, like the honest majority already does.”

ActionAid tax justice adviser, Anders Dahlbeck, said, “This massive use of tax havens yet again demonstrates that the international tax system is broken. Those with the means to do so are able to break the rules on a massive scale, benefiting at the expense of ordinary citizens.

“And it’s not just individuals who benefit from the global network of tax havens. Big companies can use some of the same offshore methods to reduce their tax bills in the UK, and in some of the poorest countries in the world.”

Dahlbeck urged the UK government to lead on reforming the global tax system to tackle tax avoidance around the world.

“The chancellor’s support for public country-by-country reporting is a good start, but we need a concrete plan as to how this will be implemented to ensure multinational companies start paying their fair share,” he added.

Transparency International EU has called for public registers of all companies’ beneficial owners to make it harder to hide stolen assets in secret companies and trusts.

“The Panama Papers leak reveals how the international finance system is used to allow the rich, powerful and corrupt to launder and hide stolen assets. Nothing short of public transparency about corporate ownership can stop the rot,” said Carl Dolan, director of Transparency International EU.

“There is a narrow window in the next six months for the EU to lead the way. It can then use its authority and experience to keep pressure on secrecy jurisdictions around the world to open up,” he added.

The organisation urged EU member states to legislate for public access to information on corporate ownership.

“Journalists, civil society and citizens should not have to rely on leaks to be able to scrutinise this kind of information,” said Dolan.

Fiona Fernie, head of tax investigations at Pinsent Masons warned, “Any individual with UK tax affairs whose name is involved in the data leak - even those whose affairs are entirely legitimate- should seek professional advice immediately, as HMRC is likely to contact them very soon.”

ICIJ will release the full list of companies and people linked to the files at the beginning of May.

Sinead Moore


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