- The Washington Times - Monday, April 4, 2016

A world of blowback descended on capitals from Moscow and Riyadh to Washington and Reykjavik Monday a day after the publication of the so-called “Panama Papers” exposed the offshore and potentially illegal financial dealings of dozens of wealthy, famous and powerful people around the world.

Prosecutors in several European nations, including France and Spain, announced the opening of formal legal probes, and the Obama administration said the global expose orchestrated by a Washington-based investigative group underscored the need for greater transparency in the global financial system.

But the effects were still sinking in around the globe, including in the United Kingdom, where Prime Minister David Cameron, who hosts a global summit on financial corruption next month, came under fire amid questions about the extent to which his late father may have avoided paying British taxes for three decades.

It seems no corner of the world was left untouched by the anonymous leak to international news organizations of a high-powered Panamanian law firm’s confidential records, exposing financial schemes to create shell companies and hide billions of dollars in taxable income and profits by political figures past and present.

While leaders from Iceland, Ukraine, Pakistan, Saudi Arabia and Russia appear to factor most prominently in the massive document trove, political and business operatives from the U.S. are also included.

French President Francois Hollande said the revelations from the estimated 11.5 million confidential files could be a boon for some nations and for the campaign to close loopholes and money-laundering schemes worldwide.

“These revelations are good news because they will increase tax revenues from those who commit fraud,” he said. “I can assure you that as the information emerges, investigations will be carried out, cases will be opened, and trials will be held.”

The names and records of at least 29 individuals on Forbes magazine’s 500 richest people list have turned up in the files, which include financial spreadsheets, client records, corporate registries, passports and other documents.

The records expose apparent shell company dealings by a host of world-famous celebrities, such as Argentine soccer star Lionel Messi and his father. They raise questions about the financial maneuverings of many international leaders, including Chinese President Xi Jinping’s brother-in-law. They cast doubt on money moves by Russian President Vladimir Putin’s inner circle.

The list goes on and on.

Australian authorities claimed to be investigating more than 800 wealthy people for possible tax evasion linked to their alleged dealings with Mossack Fonseca, the Panamanian law firm at the heart of the scandal.

While the firm has vehemently denied any illegal activity, Panamanian President Juan Carlos Varela issued a statement saying his government has “zero tolerance” for illicit financial activities and would cooperate “vigorously” with any judicial investigation arising from the leak of the law firm’s documents.

Fallout in Pakistan, Russia

Details of the leak came to light Sunday through a slew of articles published by an international coalition of media outlets that worked with the Washington-based International Consortium of Investigative Journalists (ICIJ) to examine Mossack Fonseca records.

While the leaked documents show how the Sharif family used the Mossack Fonseca properties as collateral to secure a loan worth millions of dollars, Mr. Sharif’s son Hussain was quoted Monday as saying the family had done “nothing wrong.”

In Russia, where news of the ICIJ investigation was published by independent newspaper Novaya Gazeta, the scandal faced an effective coverage ban, according to The Associated Press. But heads were already beginning to roll in other nations, with outrage particularly fierce in Iceland, where thousands of protesters called for the ouster of Prime Minister Sigmundur David Gunnlaugsson.

The records indicate that Mr. Gunnlaugsson co-owned a company called Wintris Inc., set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments for his now-wife, Anna Sigurlaug Palsdottir.

The couple lived in Britain at the time and had been advised to set up a company in the tax haven in order to hold and invest substantial proceeds from the sale of Ms. Palsdottir’s share in her family’s business back in Iceland, according to The Guardian — one of several European news outlets that published parts of the ICIJ-led investigation.

McClatchy Newspapers, one of the group’s U.S. partners, reported Monday that Mossack Fonseca has more than 35 international operations, including an office in Las Vegas and a representative in Miami. The article described the firm as one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money.

Major international banks, including HSBC, UBS, Credit Suisse and Deutsche Bank, were named as having worked with the Panamanian law firm to create offshore accounts.

Mossack Fonseca has denied all accusations of illegal activity.

Carlos Sousa, a spokesman for the firm, told reporters, “We have not once in nearly 40 years of operation been charged with criminal wrongdoing. We’re proud of the work we do, notwithstanding recent and willful attempts by some to mischaracterize it.”

Blaming Mossack Fonseca for what people do with their companies, firm co-founder Ramon Fonseca told Panamanian television last month, would be like blaming an automaker “for an accident or if the car was used in a robbery.”

Mr. Fonseca did confirm to Panama’s Channel 2 television network that the leaked documents were authentic and had been obtained illegally by hackers.

The Munich-based German newspaper Suddeutsche Zeitung said it was offered the data more than a year ago through an encrypted channel by an anonymous source. The source sought unspecified security measures but no compensation, said Bastian Obermayer, a reporter for the paper.

Suddeutsche Zeitung ultimately shared the data with the ICIJ, which enlisted other partners and hundreds of investigative journalists from around the world to examine the files.

Mr. Obermayer told The Associated Press that the authenticity of the data was verified by comparing it to public registers, witness testimony and court rulings, and to a previous cache of Mossack Fonseca documents obtained by German authorities.

The ICIJ said that, in total, the documents reference some 214,488 companies and 14,153 clients of the Panamanian firm.

“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,” the ICIJ said in a statement on Sunday.

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