Panama, Bahamas Leaks probe: New laws being framed around the globe

World has seen mixed progress; Pakistan, India, New Zealand others slow in action

LAHORE: As soon as the first news stories pertaining to PanamaLeaks, an unprecedented leak of 11.5 million files from the database of the world’s fourth biggest offshore law firm Messrs Mossack Fonseca had surfaced nearly seven months ago on April 3 this year, various nations had demanded that banks disclose information about their dealings with shell companies and individuals named in the documents---meaning thereby that some paper work is going in those countries.

Meanwhile, the likes of Pakistan, India, New Zealand etc are yet to show the first real signs of any concrete regulatory impact from the leaks, research shows.

We can all recall that many authorities across the world had instantly spurred into action to learn more on how tax havens were used to hide wealth, realising that the leaks had provided fresh impetus for regulatory scrutiny over the role of banks and the financial sector in facilitating the creation of offshore companies, and the accompanying risks of tax evasion and money laundering.

 However, despite a lot of hue and cry everywhere on the planet, only the Icelandic Prime Minister Sigmundur Gunnlaugsson remains the biggest political casualty of the Panama Papers so far.

In 2009, Iceland Premier Gunnlaugsson sold his 50 percent stakes to his wife for a symbolic $1. At this point, he was an MP. In 2013, he became prime minister for the centre-right Progressive Party. He failed to declare his offshore firm, perhaps hoping that its existence would stay hidden.

Spanish Minister Jose Manuel Soria had resigned both his parliamentary seat and his post as Minister for Industry, Energy and Tourism in the country’s caretaker government after his name had appeared in PanamaLeaks.

In a resignation letter, Minister Soria said he had taken his decision to quit “considering the obvious damage that this situation is causing the government of Spain, the Popular Party, my fellow activists and voters.”

British Premier David Cameron had to explain his position in Parliament that his late father, Ian, ran an offshore investment fund.

Cameron’s office at Downing Street had initially said that it was a "private matter," but later the Premier had confessed that he and his wife Samantha did own shares in the shell company.

These shares were sold for £31,500 just before Cameron became prime minister in 2010. Argentinean President, Mauricio Macri, had links with an offshore company in the Bahamas. He failed to list the company in his 2007 financial filing, when he became mayor of Buenos Aires, nor did he mention it in his 2015 declaration when he became president---having campaigned on a platform of cleaning up political sleaze.

A federal prosecutor opened an investigation into the president’s financial dealings, and summoned Macri. The country’s tax authority and anti-corruption bureau gave evidence.

Macri, however, insisted he had done nothing wrong, telling the nation in a TV address: “I want to say one more time that I am very calm, I have complied with the law, I have told the truth and I have nothing to hide.”

It goes without saying that while using offshore companies is not illegal, the practice has long been morally dubious and is under the spotlight amid a wider examination of tax avoidance by large companies.

Such money comes under more spotlights when it is stashed in shell companies by rulers of countries, as is Imran Khan's strong contention against Premier Nawaz Sharif and his family. Prime Minister's Nawaz Sharif's name is not mentioned directly in the Leaks.

Pakistan has, however, gone ahead of India to some extent by consenting to hear the cases being filed by PTI Chairman Imran Khan and others, who have called for an investigation of the ruling Sharif family finances.

By the way, Imran Khan had confirmed May 14, 2016, that he too had owned an offshore company set up in 1983 to avoid British taxes on the sale of a London residence he bought through the company. Earlier he kept it a closely guarded secret and continued assailing the owners of offshore companies. He has yet to explain why he kept his offshore company secret and declared it so late. He claimed that his flat was owned by the company. He should show to the media all the bank transactions of the company and all the other original documents of the company from its beginning.   PPP leader late Benazir Bhutto was also a Mossack Fonseca client.

In 2001, Mossack Fonseca had set up a company called Petroline International for the late Benazir, her nephew Hassan Ali Jaffery Bhutto and her aide Rehman Malik in the British Virgin Islands.

Earlier, Benazir had reportedly owned another shell company Messrs Petrofine FZC. In 2006, the National Accountability Bureau (NAB) had accused Benazir Bhutto, Rehman Malik and Ali Jaffery of owning Petrofine, established since 2000 in Sharjah.

Bhutto and the Pakistan People’s Party had denied it though. And now, like Imran Khan, Benazir's son Bilawal also wants a thorough probe into Panama Leaks!

Research shows that a United Nations committee chaired by former US Federal Reserve head Paul Volcker had determined in a 2005 investigation into abuses of the oil-for-food programme that Petrofine FZC paid $2 million to the Iraqi government of Saddam Hussein to obtain $115–145 million in oil contracts.

Not fewer than 12 current or former heads of state, and at least 60 people linked to current or former world leaders, had featured in the Panama documents, which were analysed by journalists from 107 media organisations in 80 countries.

The leaked files had identified 61 family members and associates of prime ministers, presidents and kings, including children of Pakistani Prime Minister Nawaz Sharif, the brother-in-law of Chinese leader Xi Jinping, Russian President Putin’s close friends, King of Saudi Arabia Salman bin Abdulaziz, the son of Malaysian Prime Minister Najib Razak, the Spanish Royal family, children of Azerbaijani President Ilham Aliyev, the nephew of South African President Jacob Zuma, the grandson of Kazakh President Nursultan Nazarbayev, Ukraine's President Petro Poroshenko, UAE President Khalifa bin Zayed bin Sultan Al Nahyan, former Egyptian president Hosni Mubarak, Libya's former leader Colonel Gaddafi, Syria's president Bashar al-Assad, former prime minister of Qatar Hamad bin Jassim bin Jaber Al Thani, the personal secretary of Moroccan king, the son of former United Nations Secretary General Kofi Annan and the son of former British prime minister Margaret Thatcher etc.

With academic help sought from reputed Indian newspapers like “The Hindu,” innumerable Western media outlets and the London-based Messrs PGI intelligence, a leading provider of Corporate Investigations and Geopolitical risk analysis to multinational corporations and governments around the world, here follow brief details of how far have various countries gone with the investigations related to the PanamaLeaks and making new laws in this regard:

New Zealand:

Urgent action to stop New Zealand being seen as a tax haven seems to have slowed down, a known Kiwi media outlet “1 NEWS” has reported.

The government had promised it would fast-track anti-money laundering laws by mid next year in the wake of revelations from the Panama Papers leak about tax evasion and money laundering.

New Zealand’s Justice Minister Amy Adams plans to include real estate agents and lawyers in the new rules now appear to be on a go-slow, having stated the government still intended to pass the law changes next year.

India:

In August 2016, as ‘The Hindu’ had reported, investigations taken up by Indian law enforcement agencies against specific allegations of over 500 Indians named in the Panama Papers’ expose were still at a "preliminary stage.”

“The Hindu” had stated: “Further course of action depends upon the outcome of investigations in respective cases, official sources said. Nearly five months have lapsed since the Income-Tax Department sent notices to every Indian whose name had appeared in the Panama Papers’ expose, which had set off a global furor. It may be relevant to note that the revelations made against Indian persons did not contain information regarding financial transactions such as offshore bank account details or offshore investments.”

The newspaper had said: “Among those Indians whose names cropped up in the leaked documents were corporate leaders (including DLF promoter KP Singh and Indiabulls owner Sameer Gehlaut) and leading celebrities (including actors Amitabh Bachchan and Aishwarya Rai). The investigations now being made by the Indian law enforcement agencies include making requests to the foreign jurisdictions’ concerned for sharing specific information under the treaties that India may have signed with those jurisdictions. It may be recalled that the Centre had to deal with the Panama Papers expose constituted a multi-agency group for facilitating coordinated and speedy investigations in the case of Indian persons allegedly having undisclosed foreign assets and whose names are reportedly included in Panama Papers leaks.”

“The Hindu” had held: “

This group consisted of the officers of investigation division of the Central Board of Direct Taxes, Foreign Tax and Tax Research Division of CBDT, Enforcement Directorate, Financial Intelligence Unit and Reserve Bank of India. Closely behind British Virgin Islands, the Central American country of Panama has been the second most popular domicile for the anonymous shell companies controlled by the rich and famous around the world, including national leaders and celebrities.”

United States:

On April 20, 2016, the US Department of Financial Services (DFS) had ordered 13 banks — including Credit Suisse, Deutsche Bank, Commerzbank AG, ABN Amro Group and Societe Generale — to hand over information on their dealings with Mossack Fonseca, comprising communications, telephone logs and details of whether their employees were involved with the Panamanian law firm in setting up shell companies.

The United States had launched a criminal probe into possible wrongdoing stemming from the leaks, spurring an aggressive campaign by the Department of Justice against Americans suspected of evading taxes that has been underway since the 2008 financial crisis, as well as entities that have helped them stash away money in offshore accounts.

European Union:

On June 8, 2016, the European Union had agreed to set up an inquiry committee into the Panama Papers to investigate the alleged failure by member states to impose relevant penalties under the group’s laws on money laundering, tax avoidance and tax evasion. The committee consisted of 65 members and was given one year to present its findings.

Canada:

Canada said it had acquired access to the complete set of leaked files —although it had not said how — and had warned that criminal proceedings would be brought against wrongdoers.

United Kingdom:

Following the revelations, the United Kingdom had stepped up its efforts to crack down on tax evasion and create a public registry on company ownership to track the ultimate owners of British firms.

Australia:

Australia had followed London’s lead and announced it would become the second major economy to create such a register with the identities of the owners of shell companies.

Regulators in Canberra said they were considering various recommendations, including imposing a requirement on Australian firms with foreign branches or subsidiaries to evaluate the gaps in anti-money laundering and terrorism financing regimes between jurisdictions abroad and those at home and to apply the higher standard.

The Australian tax office said it was investigating more than 800 wealthy clients of Mossack Fonseca. The figure included 120 people linked to an associate offshore provider in Hong Kong. The revelations caused widespread indignation. The Labour opposition said not enough had been done to tackle tax abuses by individuals.

Hong Kong and Singapore:

Regulators in Hong Kong and Singapore had reportedly issued similar requests to their respective banks, asking them disclose details on whether they have dealings with entities and individuals named in the leaked files.

Mexico:

Mexico’s tax authority had widened the scope of an inquiry it first began in April to investigate 33 Mexicans named in the Panama Papers, and has since asked banking regulators to oblige banks to share details about local clients involved in transactions in more than 100 jurisdictions.

Panama:

On October 22, 2016, during his tour in Germany, the Panamanian President Juan Carlos Varela cautiously remarked that there had been "progress" in transparency, asserting his government had signed many agreements to exchange tax information.

He, however, maintained that tax evasion was a global problem and not just Panama's.