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The Panama Papers ICIJ Investigation

EU Committee Report on Panama Papers

It’s worth a quick revisit to the recent work on the secrecy world by a European parliamentary committee. Formed in the wake of the Panama Papers revelations, the committee approved its final report after an 18-month investigation.

A vote on the report by the full European Parliament in Strasbourg will come in December. The conclusions won’t change but the recommendations are likely to be weakened. There are simply too many powerful interests that favor the status quo.

Nonetheless, the battle lines are drawn.

The report by the Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (PANA) is damning. It concludes that $2.6 trillion of financial private wealth in Europe is held offshore, leading to tax revenue losses of $78 billion annually. The report also estimates that money laundering accounts for around 2% to 5% of GDP worldwide.

There is plenty of blame to go around for the prevalence of tax evasion and money laundering from lawyers to accountants to company incorporators and tax officials. The list of malefactors is a lengthy one. But the committee was especially truculent toward European member states that have openly flouted EU rules for decades.

EU member states that received a special mention for failing to implement money laundering regulations were the United Kingdom, Luxembourg, Malta and Cyprus. It’s notable that Malta, Denmark and Hungary didn’t even bother to respond to the committee’s inquiries.

Luxembourg in particular was taken to task for prosecuting the whistleblowers behind the Lux Leaks investigation but doing nothing to punish the multinational accounting firms that orchestrated tax schemes to rob the public treasuries of its neighbors.

Shortly after the Panama Papers investigation was published, President Barack Obama gave a press conference. Obama noted that the true scandal of the secrecy world lay with what was legal. The EU parliamentary report points out that legislation around money laundering and who is behind company ownership in the United States, while less ambitious than in the EU, is more effectively enforced.

The committee report paints a picture of legal arbitrage where states benefit from the European Union while they actively sabotage fellow members. It details a number of loopholes that have hobbled European action. Member states fail to report tax information to their neighbors. Despite obligations to create registries of beneficial owners of companies, not all member states have complied nor made this information available to the financial investigative units of EU members.

Tax evasion in many member states is still not a precursor crime for money laundering.

“In many Member states, lawyers cannot be sanctioned for advising non-residents on how to evade tax or launder money in another jurisdiction,” the report notes.

It will be interesting to see if the committee’s more commonsense recommendations such as creating definitions for tax havens, tax evasion and tax avoidance and implementing the anti-money laundering laws already on the books will prosper.

What the report makes abundantly clear is that Europe has a long way to go before it gets a handle on its money laundering and tax evasion problem. What is less certain is whether the political will exists to change that reality.

Panama Papers Update October 8, 2017

More than eighteen months after the first publication, the effects of the Panama Papers continue to reverberate around the globe. In Argentina, where political partisanship is a blood sport, Mossack Fonseca companies have become electoral fodder.

For years, Argentinian prosecutors and journalists have hunted for ill-gotten gains belonging to former president Cristina Fernández de Kirchner and her late husband’s. Initially, some of the fruits of the couple’s corruption were suspected to have flowed through a series of Mossfon Nevada shell companies. You can read more about the remarkable tale of the search for those assets in my forthcoming book the Secrecy World. And today, the former president and her children are currently under indictment over separate corruption charges, which Kirchner claims are politically motivated.

Recently, Laura Alonso, the head of Argentina’s anti-corruption office, said that Fernández de Kirchner also owns more than 60 properties in Miami purchased through “dirty money.” The properties are linked to an aide, Héctor “el Gordo” Muñoz. The Miami Herald located 16 properties, including a CVS drug store in Little Havana, in the Panama Papers connected Muñoz. The paper found no evidence of Kirchner’s direct involvement.

Alsono works for Argentina’s current president Mauricio Macri, an archrival of Kirchner. Macri himself was connected to Mossfon companies. After the revelations came out, a judge investigated allegations the companies were involved in money laundering and exonerated the president.

In Argentina, it’s nigh impossible to separate the allegations flying around from their political context. Last month, Fernández de Kirchner won a Senate seat against a Macri-backed candidate in what many see as a precursor to a battle royale in the 2019 presidential election. Thanks to the Panama Papers and other leak investigations, the offshore holdings of the candidates will surely figure in the campaigns.

Meanwhile in Colombia, a slew of businessmen found in the Mossack Fonseca files were arrested in late September. They are accused of committing fraud and tax evasion, according to Colombia reports. At least fourteen major businesses, including a money-transfer company, are implicated in the investigation. Colombia’s financial crimes prosecutor alleged that Mossack Fonseca Colombia charged a fee between 2.5% and 4% for the value of assets held offshore.

Early Monday, Pakistan’s anti-corruption authorities arrested Muhammad Safdar, the son-in-law of former Prime Minister Nawaz Sharif in connection with corruption cases stemming from the Panama Papers. Sharif, his daughter, son-in-law, and his two sons all face charges over allegations the family held undisclosed assets abroad through secret Mossack Fonseca companies. The charges resulted in Sharif’s removal from office in July.