The Panama Papers come at a time when countries across the globe are facing a financial shortfall. It would be in their interest to recover monies illegal parked in offshore accounts.
With the leaking of documents from a Panamanian law firm that specialises in setting up offshore companies, governments across the world have begun investigating into possible financial wrongdoings arising out of this massive leak. The treasure trove of documents relate to transactions that occur across four decades. The intriguing details of the wealthy and powerful could have serious ramifications across the globe.
The leak has been dubbed as the “Panama Papers” reveal the financial arrangements of public figures and politicians. So far, public figures including relatives and friends of the Prime Ministers of Pakistan, Ukraine, Russia, Britain and Iceland have surfaced from the leak.
Although holding funds in offshore companies is not illegal by default, journalist who have received and have gone through the documents say they have the potential of uncover evidence of hidden wealth, or instances of tax evasion, including money laundering, drug deals, sale of arms, and other such crimes.
Mossack Fonseca, the Panama based law firm from which all of this data has been leaked, has outright denied any kind of wrongdoings and has termed media reports as having “misrepresented the nature of our work.” It has also called itself a victim of a campaign against privacy.
“We routinely resign from client engagements when ongoing due diligence and updates to sanctions lists reveal that a beneficial owner of a company for which we provide services is compromised,” said the law firm.
It went on to add that “excluding the professional fees we earn, we do not take possession or custody of clients’ money, or have anything to do with any of the direct financial aspects” of their business operations.
In Denial
Like Mossack Fonseca, leading public figures have responded to the leaks with denials as investigators and prosecutors have begun studying the documents provided by the U.S. based International Consortium of Investigative Journalists (ICIJ).
Already prosecutors in France have announced the opening of a preliminary investigation for aggravated tax fraud. Meanwhile the U.S. Department of Justice is in the process of determining whether there is any evidence of violation of U.S. law and corruption, as per its spokesman. German is also said to have “pick[ed] up the ball” as reported by its Finance Ministry. As per a source who is close to German Financial watchdog Bafin which reports directly to the Ministry, it is looking into the matter closely.
Other countries which have begun their own investigation into the 11.5 million documents includes, Sweden, Austria, Australia and India. Banks have also come under the spotlight over allegations that they have helped clients hide their wealth offshore.
Opposition parties in Argentina have seized this opportunity and have demanded an explanation from Mauricio Macri, its President, who had served as a director of an offshore company in the Bahamas, which relates to his father’s business in the past. As expected, Macri has denied any wrongdoing in a short television interview and has claimed that the company founded by his father was legal.
“It was an offshore company to invest in Brazil, an investment that ultimately wasn’t completed, and where I was director. There is nothing strange about this,” said Macri.
In Brazil, as per the country’s O Estado de S.Paulo newspaper, politicians from seven parties, other than Rousseff’s Workers’ Party, have been named as being Mossack Fonseca clients.
Brazil’s tax agency has said it would verify the information provided in the leaked documents and could impose fines on any undeclared assets in offshore accounts of upto 150% of their value.
“I think the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents,” said Gerard Ryle, ICIJ’s director.
A Growing Pressure on politicians
As per a statement made by the spokesman for the British Prime Minister, David Cameron, the documents provide “nothing concrete and nothing new,” and his late father’s reported links to the offshore company were just a “private matter.”
Pakistan’s Nawaz Sharif’s daughter and son have been linked to offshore companies. He has denied any wrongdoing.
Ukrainian President Petro Poroshenko, has reacted to the leak by tweeting, “I believe I might be the first top official in Ukraine who treats declaring of assets, paying taxes, conflict of interest issues seriously,” and has defended his commitment to transparency. Ukrainian lawmakers have called for an investigation into the allegations in the leaked documents.
Iceland’s Prime Minister, Sigmundur Gunnlaugsson, is already facing intense political pressure as he and his wife have been linked to a secretive company. His political opponents have already filed a no-confidence motion against his government.
“I certainly won’t (resign) because what we’ve seen is the fact that, well, my wife has always paid her taxes. We’ve also seen that she has avoided any conflict of interest by investing in Icelandic companies at the same time that I’m in politics,” said Gunnlaugsson during an interview to Reuters.
As per the Tax Justice Network, a British based organisation, many offshore accountants, lawyers and bankers have taken it upon themselves to shield their wealthy clients from financial regulations.
As per John Christensen, the Director of the Tax Justice Network, Mossack Fonseca operates with “extreme secrecy and discretion”, “which was attractive to many clients engaged in tax evasion, fraud, hiding conflicts of interest, and other white collar crimes.”
As per the Paris based Organisation for Economic Cooperation and Development, it had earlier warned the G20 finance ministers, before the leak took place, that Panama was backtracking on its commitment to share account information with other governments. It feels that Panama “must put its house in order.”
“The consequences of Panama’s failure to meet the international tax transparency standards are now out there in full public view,” said Angel Gurria, OECD’s Secretary General in a statement.
Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy
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