Panama Papers revelations trigger global probes

PARIS, France (UPDATED) – Spain, France and several other countries launched tax evasion probes Monday, April 4, after a massive leak of confidential documents lifted the lid on the murky offshore financial dealings of a slew of politicians and celebrities.

The scandal erupted on Sunday, April 3, when media groups began revealing the results of a year-long investigation into a trove of 11.5 million documents from the law firm Mossack Fonseca, which specializes in creating offshore shell companies in the tax haven of Panama.

Among those accused are close associates of Russian President Vladimir Putin, relatives of Chinese leader Xi Jinping, Iceland’s Prime Minister Sigmundur David Gunnlaugsson as well as Barcelona striker Lionel Messi.

“We have opened an investigation for money laundering in relation to the law firm” Mossack Fonseca, a judicial source at the National Court, Spain´s top criminal court, told Agence France-Presse after the release of the documents which named Messi and Oscar-winning Spanish film director Pedro Almodovar among others with offshore holdings. 

The footballer’s family immediately came to his defense, saying “that Lionel Messi has not carried out any of the acts attributed to him, and accusations he created a… tax evasion plot, including a network of money-laundering, are false and insulting,” it said in a statement.

Messi has been charged with tax fraud in a separate case that is due to go to trial in May.

Australia said it had launched a probe into 800 wealthy Mossack Fonseca clients. Prosecutors in France and tax authorities in the Netherlands also announced investigations in those countries.

Panama also pledged to launch an investigation to identify if any crimes have been committed and any financial damages should be awarded.

President Juan Carlos Varela said Panama would cooperate with the international probes but also vowed to “defend the image of our country”, which has a reputation as a hub for under-the-table dealings.

Kremlin denials

The trove of documents, known as the Panama Papers, was anonymously leaked to German daily Sueddeutsche Zeitung and shared with more than 100 media groups by the International Consortium of Investigative Journalists (ICIJ), with more information expected to be released over the coming days and weeks.

The first revelations elicited a chorus of denials, including from the Kremlin, which suggested a US plot after the ICIJ said that banks, companies and close associates of Putin had “secretly shuffled as much as $2 billion through banks and shadow companies”.

“Putin, Russia, our country, our stability and the upcoming elections are the main target, specifically to destabilize the situation,” said Kremlin spokesman Dmitry Peskov, adding the reports were likely the work of journalists who were “former officials from the (US) Department of State, the CIA and other special services.”

Offshore financial dealings are not illegal in themselves but may be used to hide assets from tax authorities, launder the proceeds of criminal activities or conceal misappropriated or politically inconvenient wealth. (READ: Officials in Latin America linked to Panama Papers)

Iceland PM in storm’s eye

Among other key findings of the probe, which named about 140 political figures, including 12 current or former heads of state:

• The families of some of China’s top communist brass – including President Xi Jinping – used offshore tax havens to conceal their fortunes. At least eight current or former members of the Politburo Standing Committee, the ruling Communist Party’s most powerful body, have been implicated.
• Iceland’s Prime Minister Sigmundur David Gunnlaugsson secretly owned millions of dollars in bank bonds at a time when his country’s banking system was collapsing in 2008. Thousands of Icelanders demonstrated Monday in Reykjavik to demand his resignation – calls he has so far steadfastly refused. 
• A member of FIFA’s ethics committee, Juan Pedro Damiani, had business ties with three men indicted in a corruption scandal. 
• A Panamanian shell company may have helped hide millions of dollars from a $40 million British gold bullion robbery at London-Heathrow Airport in November 1983 that is etched in criminal folklore, according to the ICIJ.

‘An attack on Panama’

The Panama Papers, from around 214,000 offshore entities covering almost 40 years, also name the president of Ukraine and the king of Saudi Arabia, as well as sporting and movie stars including Jackie Chan.

Ukrainian President Petro Poroshenko also denied any wrongdoing, but he may also face an attempt to impeach him by lawmakers.

French newspaper Le Monde cited documents showing that Syria used Mossack Fonseca to create shell companies to help it break international sanctions and fund its war effort.

“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 ICIJ director Gerard Ryle.

Pascal Saint-Amans, head of tax policy at the OECD, said the leaks showed that Panama is now almost unrivalled as a world tax haven.

“Among the countries that refuse to automatically exchange information, there are Bahrain, Nauru, Vanuatu and Lebanon,” he told AFP. “Switzerland is really making progress, so there is a concentration of problems in Panama.”

One of the Panama law firm’s founders, Ramon Fonseca, told Agence France-Presse the leaks were “a crime, a felony” and “an attack on Panama.”

“Certain countries don’t like it that we are so competitive in attracting companies,” he said.

Panama’s government said it had “zero tolerance” for shady deals, and vowed to “vigorously cooperate” with any legal investigations. 

More than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 and HSBC and its affiliates created more than 2,300, while in Germany “at least 28” banks used the law firm’s services in recent years, according to Sueddeutsche Zeitung.

The documents show “banks, law firms and other offshore players often fail to follow legal requirements to make sure clients are not involved in criminal enterprises, tax dodging or political corruption,” the ICIJ said.

Mossack Fonseca is already subject to investigations in Germany and Brazil, where it is part of a huge money laundering probe that has threatened to topple the current government. – David Williams, AFP / Rappler.com