This article is written by Suman Yadav student in 5th year B.L.S.L.L.B from Lords Universal College of Law. This article reviews the book name the Panama Papers
The Panama Papers is the title of a book written by Bastian Obermayer and Frederik Obermaier. This book talks about the biggest leak in the history of data journalism. The authors of this book are journalists from Germany. Basically, they talk about the biggest financial scandals all over the world by politicians, celebrities, and business leaders using offshore companies to hide their wealth and evade taxes. In this mission, ICIJ was also involved which is an international platform where journalists from all over the world can come together and work on one mission. In this project, there were 400 international colleagues.
The journalists got to know about this scandal when a whistle-blower shared data from a company Mossack Fonseca in Panama country and this happened to be the biggest leak. Mossack Fonseca is a law firm that is also known as the largest provider of anonymous shell companies. It is owned by Jurgen Mossack and Ramon Fonseca. Usually setting up such companies requires the help of banks and these companies takes care of their banking transaction. Its core service is not trust services but the large-scale sale of dummy companies and trusts to institutional intermediaries that is banks, asset managers and lawyers. These companies do not have any employees at the headquarters or workplace. Thousands of firms have their registered office in a single building. They conceal the name of the beneficial owner and they appoint or bring some other person who can act like a nominee director who is paid to act as the director of a particular company it only remains on paper. Usually, these politicians are beneficial owners to their children or wives or relatives.
This book includes many examples of corrupt officials and the allies of rogue regimes hiding away their millions. Mossack Fonseca gives secrecy and that is one thing- if not the only thing for which terrorists, arms dealers, and dictators are willing to pay many dollars.
Shell companies, whether legitimate or illicit, typically require bank accounts to conduct financial transactions. Banking services play a crucial role in opening, managing, and maintaining these accounts. Banking services are essential for shell companies engaged in legal business activities, such as international trade, investment, and cross-border transactions. However, they can also be misused to move illicit funds across borders or disguise the origin of funds. Some individuals and entities set up shell companies to evade taxes. Banking services in jurisdictions with low or zero tax rates can be used to shift income and assets, reducing tax liabilities. Shell companies are the most famous vehicle for money laundering and the proceeds of crime. One of example is Hezbollah financed its attacks in part through smuggling cigarettes, which it transacted through several shell companies.
German banks are not only organizing and managing offshore companies but also earning money by holding accounts for anonymous shell companies without exercising due diligence. German banks act as correspondent banks for shady financial institutions that are strongly suspected of involvement in money laundering this involves large banks enabling smaller institutions without the relevant foreign branches to transfer money from one country to another. These banks move money that has come from drug cartels, arms smugglers and terrorists.
Deutsche bank is one of the bank which is involved in providing shell companies to its client. It even set up a dedicated website to promote its service but same was taken down after it was criticized in the offshore secrets reports. It offered services and allowed some practices to American taxpayers to hide their assets. They don’t disclose the name of real owner. Mossack Fonseca provides blank, pre signed account opening documents of the clients and the name of the real owner is then entered by bankers so that no one knows the real name of their clients. Banks might offer nominee services, where individuals associated with the bank (such as employees or agents) are appointed as directors, shareholders, or beneficial owners of the company. This can help conceal the actual ownership. In Germany, state-funded banks have mossfon’s major German clients. These banks deny that they are not offering such services but secretly they are providing assistance to set up a shell company. Mossack Fonseca needs to set up bank accounts for their clients. Bank often help clients open corporate bank accounts for their newly established companies. These accounts can be used to receive and manage funds. And this is were banks play huge roles in such services. These banks have levied huge fines for providing such services.
People have these companies incorporated because they want to hide something from the taxman, their ex-wife, or their former business partner. These shell companies give the benefit of being anonymous like they act as a mask for individuals who want to hide their money and to from evasion of tax. These companies basically do not reveal individuals’ true identities and their true intentions and the individuals here include drug cartels, drug smugglers, people traffickers and other criminals.
This leak has numerous politicians or head of state who has shell companies. Basically, this money or asset they hide are looting their own people that is people of that country. In many countries, there is a rule or law regarding the disclosure of their assets in other words if a person is entering politics or in any department then such person needs to disclose all about their assets. Shell companies are not illegal if it complies with all the required conditions by law. But these companies are used illegally for money laundering, fraud, and also to evade taxes. It only becomes illegal when potential income is withheld from the financial authorities.
In Africa, an authors states that an invisible machine is working to rob the continent. A looting machine that is operated by corrupt dictators, immoral large corporations, and ruthless banks all are working hand in hand, united by greed. Autocrats send their money abroad to keep it safe instead of investing it in schools and hospitals. These people have made the continent dry and sucked out all the money. Africa is facing diseases by starving women and children just because of lack of money in the continent.
The World Bank and the UN highlighted the issue in a comprehensive report in 2011. Their analysts investigated 213 cases of corruption that went to court across the globe out of which 150 of these cases involved at least one shell company that helped to conceal the identity of the beneficial owner of the assets.
Daniel Balint-Kurti of global witness with his colleague investigated that in the usual way, involved amounts running into many millions being smuggled out of the country and in this countries faces hunger issues.
One of the case I have discussed here is about Russian head of state.
Sergei Roldugin is a cellist and best friend of Vladimir Putin. Also known as the godfather of Putin’s daughter. He is at the center of a web of anonymous offshore companies. Totally $2 billion was channeled via this network with the help of banks and some shell companies. In interviews, Roldugin said that he did have millions to his name and that he was a musician, not a businessman. By Vladimir’s biography and books, it has come to the conclusion that he is the best friend and a trusted associate of the Russian president. He owns three shell companies namely International Media Overseas, Raytar and Sonnette. The law firm acts for his network as a gatekeeper. The bank involved here was Rossiya Bank, which is situated in St. Petersburg. Experts regard this bank as Putin’s bank and several close friends of Putin’s owns shares in this bank. This bank has its co-owner as Sergei Roldugin A Bank employee was authorized to sign documents for Roldugin’s companies. According to leaked data, it has been found that $1 billion has been transferred into the Roldugin network and a large portion came from the Russian Commercial Bank (RCB) in Cyprus. It is wholly owned subsidiary of VTB Bank which is largely in Russian state ownership. RCB bank was used by family members of Putin for shopping, yacht, trip, or other investments without any questions. Loans were taken by these banks without furnishing any collateral and no interest to pay this was a strong indicator that these were cash gifts rather than loans. The underlying purpose of such acts was money laundering. One of the Roldugin’s companies received or obtained money into millions for consulting services. Experts of money laundering view the term consulting services as an easy camouflage for massive movements of money. There is one more way which is an ideal way of shunting money from one place to another: one offshore company undertakes to buy corporate shares from another offshore company. However, the company failed in its commitment to provide the shares so now the company has to pay compensation for not fulfilling its commitment. This is a clear business transaction and the transfer can neatly be labelled. Mostly such ways are used by companies.
The doubtful or suspected loans running into millions, the backdated share transactions, the consulting fees, and compensation all seem part of a colossal shadow system. The task of money laundering is handled by an authority known as Rosfinmontioring which actually can read emails, tap phone conversations, and access all of the person’s bank details. Nothing escapes them.
Mossack Fonseca runs a whole web of shell companies associated with the brutal Syrian regime. Dictators, mafia bosses, and other criminals have their bagmen for this kind of job these are foot soldiers who collect, manage, and invest money for secretive notable persons and bring it wherever it is required. This cash serves to equip the dreaded Shabiha militia with weapons and vehicles as well as enable the production of poison gas and other torture facilities. The people who are involved are Rami Makhlouf who is the richest man in Syria and has been on the sanction list. He is the cousin of Assad and was classified as the ‘financier of the regime’. He has improperly benefited from and aided the public corruption of Syrian regime officials. His brother Hafez who is a brigadier and regional head of the Syrian Civil Intelligence Service was on the sanction list for alleged participation in attacks on civilians.
In such acts, other heads of state are also involved they are Ukrainian Prime Minister Yulia Tymoshenko and Pavel Lazarenko. Two of them are alleged to have taken millions of state funds in the 1990s for which Lazarenko was imprisoned.
Icelandic prime minister, former Nicaraguan president Arnoldo Aleman, and Chinese people are using shell companies as handbags one of them is Li Xiaolin who is the daughter of former prime minister, Bo Xilai and his wife Gu Kailia, Andrew M was financing child prostitution ring and illicit money from it was kept in his shell companies, Libyan leader Muammar Gaddafi, famous football player Messi all of them were directly or indirectly involved in crimes like tax evasion, fraud or money laundering.
Conclusion
Dictators, mafia bosses, and drug cartels for them to keep their illicit money or to evade tax is not an impossible task because if something isn’t possible in one country, they can simply do it in another jurisdiction. The world of organized crime in all its forms makes use of the offshore industry to erase its tracks and conceal its crimes. Experts talk about two main requirements. The first step would be an automatic global exchange of information about bank accounts that is the authorities would automatically know about any accounts held by citizens. The second step would be to have a globally transparent register of companies it would have a list of real owners of companies and foundations and providing false information should be made a crime act and this register should be freely accessible of everyone. Because of these steps, Mossack Fonseca would ban its services like nominee shareholders, and anonymous bearer shares, and hired real owners. These steps should be implemented in a systematic way. Governments need greater transparency to prevent such acts in a country. These crimes are almost impossible to combat due to the concealment tactics of the offshore industry. The consequences of this leak were police raided the Mossack Fonseca headquarters in Panama and started their investigation. The banking regulators in New York ordered 13 banks to hand over all the data on business dealings with Mossack Fonseca. Some of the heads of state resigned from their position on public demand. Bearer shares were abolished by Panama’s president Juan Carlos Varela.
