Tuesday, April 5, 2016

Panama Papers: Mossack Fonseca leak reveals elite's tax havens



A huge leak of documents has lifted the lid on how the rich and powerful use tax havens to hide their wealth. The files were leaked from one of the world's most secretive companies, a Panamanian law firm called Mossack Fonseca.

What are the Panama Papers?

The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.
In one case, the company offered an American millionaire fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money laundering and tax evasion.
It is the biggest leak in history, dwarfing the data released by the Wikileaks organisation in 2010. For context, if the amount of data released by Wikileaks was equivalent to the population of San Francisco, the amount of data released in the Panama Papers is the equivalent to the population of India.

Who is in the papers?

There are links to 12 current or former heads of state in the data, including dictators accused of looting their own countries.
More than 60 relatives and associates of heads of state and other politicians are also implicated.
The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russia's President, Vladimir Putin.
Also mentioned are the brother-in-law of China's President Xi JinpingUkrainePresident Petro PoroshenkoArgentina President Mauricio Macri; the late father of UK Prime Minister David Cameron and three of the four children of Pakistan's Prime Minister Nawaz Sharif.
The documents show that Iceland's Prime Minister, Sigmundur Gunnlaugsson, had an undeclared interest linked to his wife's wealth. He is now facing calls for his resignation.
Part of the documents suggest that a key member of Fifa's ethics committee,Uruguayan lawyer Juan Pedro Damiani, and his firm provided legal assistance for at least seven offshore companies linked to a former Fifa vice-president arrested last May as part of the US inquiry into football corruption.

How do tax havens work?







Aerial view of the Panama City bay taken on March 23, 2015Image copyrightAFP/getty Images
Image captionPanama is one of a number of popular tax havens in the Caribbean


Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.
Some of the main allegations centre on the creation of shell companies, that have the outward appearance of being legitimate businesses, but are just empty shells. They do nothing but manage money, while hiding who owns it.
One of the media partners involved in the investigation, McClatchy, has more on how shell companies work in this video.

What do those involved have to say?

Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing.
Mr Putin's spokesman Dmitry Peskov said the reports were down to "journalists and members of other organisations actively trying to discredit Putin and this country's leadership". Publication of the leaks may be down to "former employees of the State Department, the CIA, other security services," he said.
In an interview with a Swedish television channel, Mr Gunnlaugsson said his business affairs were above board and broke off the interview.
Fifa said it is now investigating Mr Damiani, who told Reuters on Sunday that he broke off relations with the Fifa member under investigation as soon as the latter had been accused of corruption.

Who leaked the Panama Papers?

The 11.5m documents were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ).
The ICIJ then worked with journalists from 107 media organisations in 76 countries, including UK newspaper the Guardian, to analyse the documents over a year.
The BBC does not know the identity of the source.
BBC graphic comparing size of Panama Papers data leak to other recent leaks

In all, the details of 214,000 entities, including companies, trusts and foundations, were leaked.
The information in the documents dates back to 1977, and goes up to December last year. Emails make up the largest type of document leaked, but images of contracts and passports were also released.

How can I read the papers?

So far, a searchable archive is not available at the moment.
There is a huge amount of data, and much of it reportedly includes personal information (including passport details), and does not necessarily include those suspected of criminal activity.
Having said that, there is plenty of information out there. The ICIJ has put together a comprehensive list of the main figures implicated here - you can also search by country.
You can sign up on the ICIJ's website for any major updates on the Panama Papers here.
Panama Papers: Full coverage; follow reaction on Twitter using #PanamaPapers; in the BBC News app, follow the tag "Panama Papers"
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The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.

What do they reveal?

The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.
A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.
Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
An offshore investment fund run by the father of British prime minister David Cameron avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign its paperwork. The fund has been registered with HM Revenue and Customs since its inception and has filed detailed tax returns every year.
A lengthier overview of the revelations can be found here.

What is Mossack Fonseca?

It is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management.

Where is it based?

The firm is Panamanian but runs a worldwide operation. Its website boasts of a global network with 600 people working in 42 countries. It has franchises around the world, where separately owned affiliates sign up new customers and have exclusive rights to use its brand. Mossack Fonseca operates in tax havensincluding Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies Guernsey, Jersey and the Isle of Man.








How big is it?

Mossack Fonseca is the world’s fourth biggest provider of offshore services. It has acted for more than 300,000 companies. There is a strong UK connection. More than half of the companies are registered in British-administered tax havens, as well as in the UK itself.

How much data has been leaked?

A lot. The leak is one of the biggest ever – larger than the US diplomatic cables released by WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013. There are 11.5m documents and 2.6 terabytes of information drawn from Mossack Fonseca’s internal database.








Are all people who use offshore structures crooks?

No. Using offshore structures is entirely legal. There are many legitimate reasons for doing so. Business people in countries such as Russia and Ukraine typically put their assets offshore to defend them from “raids” by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning.

Are some people who use offshore structures crooks?

Yes. In a speech last year in Singapore, David Cameron said “the corrupt, criminals and money launderers” take advantage of anonymous company structures. The government is trying to do something about this. It wants to set up a central register that will reveal the beneficial owners of offshore companies. From June, UK companies will have to reveal their “significant” owners for the first time.

What does Mossack Fonseca say about the leak?

The firm won’t discuss specific cases of alleged wrongdoing, citing client confidentiality. But it robustly defends its conduct. Mossack Fonseca says it complies with anti-money-laundering laws and carries out thorough due diligence on all its clients. It says it regrets any misuse of its services and tries actively to prevent it. The firm says it cannot be blamed for failings by intermediaries, who include banks, law firms and accountants.
Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins