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Panama Papers- The Introduction


Power tends to corrupt and absolute power corrupts absolutely. – Lord Acton
The world always, was is and will be the playground of the rich and powerful. Rules and laws have always mere suggestions to this closely knit coterie of dark souls.

The Panama Papers expose just laid bare what we have always known and suspected. The revelations haven’t been in the least bit surprising. But what the leak has achieved is that it has laid bare the chinks in the policies of the developed and developing economies which have encouraged this behavior.
President Obama in this video nails it when he is describing the leaks.

So the intent of this series of articles is to explain the real scope of the Panama Papers expose and how weak our policies, systems and politicians are at stopping these tax avoidance and tax evasion instances.

What are the Panama Papers ?

The Panama Papers are a vast trove of documents from Mossack Fonseca- the worlds fourth largest offshore law firm that were leaked to the German newspaper Süddeutsche Zeitung.  The encrypted internal documents were leak by an anonymous source and SZ shared them with the International Consortium of Investigative Journalists (ICIJ) which in turn shared it with its large international media partners including the Guardian, BBC and others.
The person behind the leaks known only as John Doe spoke after the leaks and railed against the systems that have allowed such havens to flourish. This is what he had to say
“I decided to expose Mossack Fonseca because I thought its founders, employees and clients should have to answer for their roles in these crimes, only some of which have come to light thus far. It will take years, possibly decades, for the full extent of the firm’s sordid acts to become known.”
In the end, thousands of prosecutions could stem from the Panama Papers, if only law enforcement could access and evaluate the actual documents. ICIJ and its partner publications have rightly stated that they will not provide them to law enforcement agencies. I, however, would be willing to cooperate with law enforcement to the extent that I am able.
Over 100 news outlets in nearly 80 countries and nearly 400 journalists have dissected the leaked documents over the past year.
Vox’s Matt Yglesias explains:
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.
What is Mossack Fonseca?
Mossack Fonseka was founded in 1986 by partners Jürgen Mossack and Ramón Fonseca Mora. In short the firm specializes in creating tax shelters for the rich and powerful global elites. Mossack Fonseka employs about 600 people in 42 countries with offices located in the world’s favorite hiding spots such as Jersey, Cyprus, Luxembourg etc.
According to Mossack Fonseca’s brochure, the law firm specializes in “trust services, investor advisory, offshore/onshore structures, commercial law and asset protection”.
So if someone wants to setup a firm or trust MF will incorporate the company, take care of the paperwork, setup bank accounts for a fee, plus an annual charge. It will also provide directors to sit on the board so the real holder can be hidden.
The leaks demonstrate that Mossack Fonseka has been complicit in helping criminals, tax evasion, busting sanctions, money laundering and more. It operates with near impunity away from the inept eyes of financial regulators helping the rich and crooked stay rich.
The favorite playgrounds of MF are the British Virgin Islands (BVI), followed by Panama, the Bahamas, and the Seychelles, and the islands of Samoa and Niue near New Zealand. MF has registered over 200,000 companies, trusts and foundations in the above stated locations since its inception. Just like a superhero who wears underwear inside many of these companies exist only on paper with no office and no employees.
“This is always a really good opportunity to launder money. This is, they are doing really huge transactions from one country to another and they are hiding it and masking it in a way, so you really can’t follow the money,” German investigative journalist Bastian Obermayer said.
In December 2014, VICE published a year-long investigation by journalist Ken Silverstein into Mossack Fonseca’s shady dealings. “If shell companies are getaway cars for bank robbers,” Silverstein wrote, “then Mossack Fonseca may be the world’s shadiest car dealership.”
‘Mossack Fonseca is considered one of the world’s five biggest wholesalers of offshore secrecy.’
The leaked documents show MF working with the mafia, druglors, ponzi schemers, ukranian oligarchs, presidents and prime ministers but sitting and retired such as Putin, diamond traders, oligarchs and more.
For more MF profile by The Atlantic and the explainer by ABC au
An interactive slide-show detailing the scope of the leaks.

The size of the leak.
Constituents of the leak ?

What do the documents reveal ?

The leaks illuminate the complex shady deals and practices of the rich and powerful. The leaks have revealed the lengths that people go to avoid paying taxes. The irony is most of these practices are legal and countries thrive by attracting such shady practices on their shores.
So if the practices are legal then what is the uproar about ?
This video brilliantly explains this game of deception
Watch how easy it is to start an anonymous shell company for your cat.
The real cause of concern is the involvement of high profile individuals such as serving prime ministers and other members of the government who have been blatantly swindling public resources. Also the monies from these havens have been fueling conflicts in places such as Syria, Mexico and other poor nations in the African continent.
Shell companies are the preferred tools of regimes that are subject to sanctions. They help torturers, murderers and other unsavory actors to engage in destabilizing actions and fomenting violence, human rights violations in vulnerable places.
The victims of Panama

The Fallout so far

Nearly two months after the leak, the dust is yet to settle down and the leak continues to ensnare the rich, famous and the powerful.
  • Sigmundur Gunnlaugss was forced to resign in April immediately in the aftermath of the leak as the prime minister after massive protests over his failure to disclose interests in a company setup in the British Virgin Islands setup with the help of Mossack Fonseka.  The leaks reveal that Mr. Gunnlauguss and his wife setup a company called Wintris which held interests in failed Icelandic banks whose bankruptcies were overseen by the PM.
Iceland was brutally hit during the crisis of 2008 and had to be bailed out by the IMF. Wintris held position in three banks Landsbanki, Glitnir and Kaupthing which went bankrupt with liabilities nearly 10 times the GDP of Iceland. The allegations of conflict of interest in a issue that has left painful memories among Icelandian’s led to the ouster of Mr. Gunnlaugss
  • José Manuel Soria Spain’s minister for industry, energy and tourism also stepped down in April after the leaks linked his name to offshore investments in Bahamas and a company in the tax haven of New Jersey US.
In trouble
  • Vladimir Putin size of riches has a been a source of much interest for western media, analysts and intellectuals. For over a decade now there have stories that have claimed that the Tiger wrestling, macho presidents riches amount to figures ranging from $20 billion, to $40,$70, even $100 billion.
But in a long running battle to discredit Putin the latest leak wont amount to much. The Panama Leaks do not directly Putin but rather a close friend of his Mr Sergei Roldugin, a concert cellist. The leaks link Mr Roldugin to three offshore companies with cash flows of of up to $2 billion (£1.6 billion). The money was apparently used to by rare and expensive musical instruments including a $12 million, 1732 cello by Stradivarius that once belonged to Frederick the Great.
Unsurprisingly the president has dismissed the latest leaks a western plot. The leaks dont just reference Putin’s inner circle but also Anatoly Karpov, the legendary chess player. The leaks show that he was listed as a director of a Cyprus-based company called Indiforth Ltd. After his retirement Karpov was elected as a state deputy to the Russian Parliament from Putin’s party.
  • David Cameron the Prime Misnister of UK aslo came under fire when the leaks revealed that he profited from late father’s Panama based offshore fund — Blairmore Holdings . After dillydallying around PM Cameron admitted that he sold his shares for around £30,000 and said that they were subject to UK Taxes. More about Blairmore by The Telegraph
  • Nawaz Sharifs name also surfaced in the leaks at a time when the PM of Pakistan is fighting several battles with the army, the opposition party headed by Imran Khan and others.  The leaks show that Mr. Sharif’s children owned several shell companies through which they owned several expensive residential properties in London. for
The source of trouble for PM Sharif comes from the fact that these holdings have not been disclosed in the family’s wealth statement.So far three companies that have been identified are three British Virgin Islands-based companies Nescoll Ltd, Nielsen Enterprises Ltd and Hangon Property Holdings Ltd, incorporated in 1993, 1994 and 2007.
Allegations of corruption have haunted PM since the 90’s and the latest leaks in a way just go to highlight what was widely known.
Here is a preview of some influential people involved.
Starting with the neglected nations because all the major publications have run countless pieces about the impact of Panama Papers on the big nations. But we must closely watch the impact of tax havens, tax dodging and corruption on these smaller nations, whose populations have suffered under the repressive hands of dictators, oligarch and western meddlers for ages.
Ever since  becoming the president in 2003, Ilham Aliyev and his family have amassed huge riches ranging from his family’s majority stake in a gold mines to overseas properties and more.
“The records show that, in mid-2003, months before the October presidential election, Fazil Mammadov, Azerbaijan’s tax minister, began to create AtaHolding, which has since become one of the country’s biggest conglomerates. Mammadov, influential in his own right, subsequently invited President Aliyev’s family to join him, cementing a potentially potent and advantageous business and political partnership.
AtaHolding is a corporation that has significant interests in Azerbaijan’s banking, telecommunications, construction, mining, oil and gas sectors. Its most recent corporate filing in 2014 shows it held over $490 million in assets.” – ICIJ
The president had awarded six gold mines to multiple companies including two offshore companies, those companies belonged ti Arzu and Leyla Aliyev the daughters of the president. The leaks have revealed that the sisters held 11 and 45% of stake in Globex International LLPand Londex Resources S.A. which adds up to 56% of shares in the consortium of the six gold companies.
Syria papers
The Panama Papers also reveal the degree of corruption in Assad’s inner circle. Rami and Hafez Makhlouf cousins of Assad are the central focus of the leaks. Rami the richest man in Syria also has the honorable distinction of being the most hated. US diplomatic cables had described him as “poster boy for corruption”.
Mossack Fonseca continues to service Rami in-spite of him being blacklisted way back in 2008. Rami reportedly had a  fortune of $5 billion and at one point controlled nearly 60% of the Syrian economy with near or complete monopolies in telecommunications, real estate, oil, airline, duty free, construction and import sectors. The Swiss branch of HSBC continued financial for Rami’s firm and In 2010 HSBC had told Mossac Fonseka that Drex Technologies was a company of “good standing” two years after the sanctions.
Rami was so powerful that any foreign individual or entity wishing to do business in Syria had to go through him. Mossack Fonseca severed its ties with Rami Makhlouf in September 2011, nine months after it was first recommended.
Hafez Makhlouf was the former Damascus branch chief of a Syrian intelligence and he was blacklisted by the US in 2007
Frederik Obermaier, co-author of the Panama Papers story and an investigative reporter at the German newspaper Suddeutsche Zeitung, told Democracy Now: “they [Mossack Fonseca] realised that he [Makhlouf] was the cousin, and they realized that he was sanctioned, and they realized that he’s allegedly one of the financiers of the Syrian regime. And they said, ‘Oh, there is this bank who still does business with him, so we should still keep with him, as well’.
The papers show that Mossack Fonseca continue to work with Mahlouf’s even after its compliance team had advised it to cut ties with them in January 2011. The leaks show that the concerned compliance officer had written “I believe if an individual is found 

on a sanction list then this is a serious red flag and we should make every effort to disassociate ourselves from them.”

The documents also show that Hafez Makhlouf was able to keep his swiss bank account open even as the Syrian civil war spiraled during its initial stages thanks to noble lobbying efforts of a crooked bank called HSBC. The Guardian in this article covers more about the Syrian angle
The leaks also show that the Panamanian firm provided services to Pangates International Corporation Limited which was sanctioned in 2014. The US Treasury Department believes that Pangates supplied fuel to the Syrian government that might have been used to fuel the jets which bombed civilian populace. The files reveal that Mossack Fonseca first incorporated the petroleum firm in 1999.

Months after the sanctions on Pangates coming into effect Mossack Fonseka continued to service the firm and it had certified this crooked, shady firm that it was a company in the Seychelles of good standing.

Mossack Fonseca said: “We have never knowingly allowed the use of our companies by individuals having any relationship with North Korea or Syria. We have our own procedures in place to identify such individuals, to the extent it is reasonably possible.”- BBC

Mossack Fonseka only acknowledged that the company was part of the blacklist in August 2015 and reported the company to the regulators.

These are just two egregious and shocking instances of disregard for international rules. In the upcoming article we will continue to cover more about the grand age old robbery.
Image Credits: VectorOpenStock – [1]CC BY-SA 3.0Wiki Commons
Article By: Bhuvanesh Reddy

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