On Sunday, the West woke up to the smell of coffee and a huge leak of confidential documents which has revealed how the rich and powerful use tax havens to hide their wealth.
Eleven million documents from the secret files of Mossack Fonseca were published by an international coalition of media outlets. Mossack Fonseca is a law firm headquartered in tax haven Panama, known for its factory-like production of offshore companies for its worldwide of rich and famous. These documents are the records of an extensive investigation into the offshore financial dealings of the rich and famous – money laundering, sanction dodges and tax evasions. The documents are reportedly provided by an anonymous source.
Based in Washington, the International Consortium of Investigative Journalism (ICIJ) is a non-profit organization. It said that it has obtained a cache of 11.5 million records detailed the offshore holdings of a dozen current and former world leaders, as well as businessmen, criminals, celebrities and sports stars.
The documents show links to 72 current or former heads of state in the data, including dictators accused of looting their own countries. It has brought to light the secret offshore dealings of aides to Russian president Vladimir Putin, world leaders and celebrities including Barcelona forward Lionel Messi.
An investigation into the documents by more than 100 media groups, described as one of the largest such probes in history, revealed the hidden offshore dealings in the assets of around 140 political figures —— including 12 current or former heads of states.
It was a Sueddeutsche Zeitung, a Munich based news agency that was offered he data through an encrypted channel by an anonymous source who requested no monetary compensation and asked only for unspecified security measures, said Bastian Obermayer, a reporter for the paper. The German paper then went on to share it with International Consortium of Investigative Journalism. ICIJ later on shared it with 107 media organizations.
The data concerned internal documents from a Panama—based law firm, Mossack Fonseca. Founded by German—born Juergen Mossack, the firm has offices across the globe and is among the world’s biggest creators of shell companies, the newspaper said. But one of the co-founder of Mossack Fonseca Ramon Fonseca, said the firm had no control of how its clients might use offshore vehicles created for them.
Mossack Fonseca says it has always complied with international protocols to ensure the companies they incorporate are not used for tax evasion, money-laundering, terrorist finance or other illicit purposes. The company says it conducts thorough due diligence and regrets any misuse of its services. “For 40 years Mossack Fonseca has operated beyond reproach in our home country and in other jurisdictions where we have operations. Our firm has never been accused or charged in connection with criminal wrongdoing. “If we detect suspicious activity or misconduct, we are quick to report it to the authorities. Similarly, when authorities approach us with evidence of possible misconduct, we always cooperate fully with them.” Mossack Fonseca says offshore companies are available worldwide and are used for a variety of legitimate purposes. “We are not responsible for the actions of a corporation that we set up,” he told.
Meanwhile, Juan Carlos Varela, the President of Panama issued a statement that government would cooperate “vigorously” with any judicial investigation arising from the leak of the law firm’s documents. He said that the revelations shouldn’t detract from his government’s “zero tolerance” for any illicit activities in Panama’s finance industry.
ICIJ informed that the leaked document show the internal files of Mossack Fonseca which depicts the information on 214,488 offshore entities connected to people in more than 200 countries and territories. It said it would release the full list of companies and people linked to them early next month.
Further, Obermayer stated that the German paper received nearly 2.6 terabytes of data more than would fit on 600 DVDs over the span of several months. He said that the amount of data it obtained is several times larger than a previous cache of offshore data published by WikiLeaks in 2013 that exposed the financial dealings of prominent individuals. “To our knowledge this is the biggest leak that journalists have ever worked on,” Obermayer said.
The ICIJ said the documents included emails, financial spreadsheets, passports and corporate records detailing how powerful figures used banks, law firms and offshore shell companies to hide their assets. The data spanned a time frame of nearly 40 years, from 1977 through the end of 2015, it said.
According to the media group’s website, global banks including HSBC, UBS, Credit Suisse, Deutsche Bank and others have worked with Mossack Fonseca to create offshore accounts.
Iceland, Ukraine, Pakistan, Saudi Arabia, Russia and Argentina feature prominently among the countries ith past or present political figures named in the reports.
UK news paper, The Guardian opened the Pandora’s box when it brought out in public Mossack Fonseca data which shows how Icelandic Prime Minister Sigmundur Gunnlaugsson had an undeclared interest in his country’s bailed-out banks. Mr Gunnlaugsson has been accused of hiding millions of dollars of investments in his country’s banks behind a secretive offshore company. Leaked documents show that Sigmundur Gunnlaugsson and his wife bought offshore company Wintris in 2007. He did not declare an interest in the company when entering parliament in 2009. The offshore company was used to invest millions of dollars of inherited money, according to a document signed by Mr Gunnlaugsson’s wife Anna Sigurlaug Pálsdóttir in 2015.
He sold his 50% of Wintris to his wife for $1 (70p), eight months later. Mr Gunnlaugsson is now facing calls for his resignation. But he asserted that he has not broken any rules, and his wife did not benefit financially from his decisions.
Similarly, the data also revealed a network of secret offshore deals and vast loans worth $2bn has laid a trail to Russia’s president Vladimir Putin. It depicts how this money has made members of Putin’s close circle fabulously wealthy.
Though the president’s name does not appear in any of the records, the data reveals a pattern – his friends have earned millions from deals that seemingly could not have been secured without his patronage. The offshore trail starts in Panama, darts through Russia, Switzerland and Cyprus – and includes a private ski resort where Putin’s younger daughter, Katerina, got married in 2013. The Panama Papers shine a particular spotlight on Sergei Roldugin, who is Putin’s best friend. Putin also owns 3.2% of Bank of Rossiya in St Petersburg besides having a 12.5% stake in Russia’s biggest TV advertising agency, Video International, which has annual revenues of more than £800m. And this just a tip of his proverbial iceberg.
Argentina’s president, Mauricio Macri too has been revealed to have ties with off shore company in Bahamas named Fleg Trading Ltd, which has helped him in several in tax evasion and money accumulation. But the office of Argentina’s president, Mauricio Macri, confirmed on Sunday that the business group owned by his family set up Fleg Trading Ltd., an offshore company based in the Bahamas. But it said Macri himself had no shares in Fleg and never received income from it.
The data contains secret offshore companies linked to the families and associates of Egypt’s former president Hosni Mubarak, Libya’s former leader Muammar Gaddafi and Syria’s president Bashar al-Assad.
Speaking about the document leak ICIJ said, It allows a never—before—seen view inside the offshore world providing a day—to—day, decade—by—decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.”
India and Panama files
Along with International leaders, businessmen, sports person and celebrities, more than 500 Indian including top Bollywood actors, industrialists and politicians have been named in a massive leak of 11.5 million tax documents exposing their secret offshore dealings.
These records reveal a list of individuals who have paid the firm — and bought the benefits of the secretive, lax regulatory system in which it operates — to set up offshore entities in tax havens around the world.
Indian Express from India is one of the members of International Consortium of Investigative Journalists (ICIJ) to participate in the investigation. Having joined the group in July 2015, Indian Express with its team of 25 investigators joined 375 journalists in 76 countries to scour through electronic databases of documents registered in tax havens, joining digital dots (emails, PDF and TIFF files with one document sometimes yielding attachments with hundreds of pages of correspondence, agreements and contracts), cross-referencing company data with lists of names to bring out the names of tax offenders.
The list of the people named in the infamous reports includes Bollywood actors like Amitabh Bachchan, Aishwarya Rai Bachchan, DLF’s K P Singh along with nine family members, Gautam Adani’s elder brother Vinod Adani, Indiabulls promoter Sameer Gehlaut and Apollo Tyres promoter. The list also named two politicians – Shishir Bajoria from West Bengal and Anurag Kejriwal, former chief of Delhi Loksatta Party.
From Mumbai gang lord the late Iqbal Mirchi, the list includes scores of businessmen with addresses in nondescript neighborhoods in Panchkula, Dehradun, Vadodara and Mandsaur. Addresses of individuals, in many cases, The Indian Express found out, led to physical locations, but with no trace of the individual.
The Panama files not only brings just individuals to close scrutiny, but also reveals details of hitherto unknown deals, in some cases involving the government, too.
Though as per Reserve Bank of India (RBI) guidelines, Indian citizens were not allowed to start an overseas entity before 2003, it however, in 2004, allowed individuals to remit funds of up to $25,000 a year under the Liberalised Remittance Scheme (LRS). But it never allowed Indian citizens to set up companies abroad.
RBI on other hand refused to grant permission for the Indians to set up companies abroad, having clarified it through an FAQ mid-way in September 2010. In most of the cases in The Panama Papers, companies were set up long before the rules were changed and the purpose, experts said, was to park foreign exchange in a tax haven. It was only in August 2013 that individuals were allowed to set up subsidiaries or invest in joint ventures under the Overseas Direct Investment window.
So the records which are now currently investigated investigated reveal detailed correspondence between Indian tax authorities and those in British Virgin Islands, Seychelles, Panama or other tax havens seeking shareholder, bank account and asset details of offshore companies set up by Mossack Fonseca for Indians. They must have resorted to depend on Mossack Fonseca as the Panama government does not concern itself with the repository of ownership details.
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