Panama data leak uncovers global tax havens of rich and powerful

ONE OF the largest data leaks in history has revealed how powerful political figures and some of the world’s wealthiest stash their money in offshore tax havens.

Over 11 million documents belonging to Panamanian law firm Mossack Fonseca were leaked and reviewed by a team of more than 370 journalists from 76 countries, and allegedly show how the legal services company has aided its clients in evading tax, dodging sanctions and laundering billions in cash over 40 years, from 1977 to 2015.

Banks and Accountants

The files allegedly reveal offshore holdings of 140 politicians, including former and current heads of state – most notably Russian president Vladimir Putin, who used Fonseca to hide $2bn (£1.4bn) through banks and shadow companies.

According to the International Consortium of Journalists (ICIJ), which was part of a yearlong investigation into Fonseca with German newspaper Süddeutsche Zeitung, the group highlights that the complex offshore system “depends on an industry of bankers lawyers and accountants to hide their clients’ tax secrets.”

Big banks also played a major part in hiding cash through almost untraceable companies, with the Panama Papers revealing that HSBC’s Swiss and Monaco arms were two banks that requested the most offshore companies for their clients, requesting 733 and 778 companies respectively, illustrated by an ICIJ graph below.











Another graph highlights the top 10 countries where intermediaries that work with Fonseca operate – the United Kingdom placed second in the list behind Hong Kong.

HSBC is no stranger to controversy. In January HMRC ended ended its inquiries into allegations that HSBC’s Swiss bank helped wealthy clients evade tax, which led to critics stating that the bank got away “scot-free”.

UK connection

Among the names of influential figures who are clients of Fonseca is FC Barcelona star Lionel Messi, who is already the subject of a tax evasion case in Spain.

The data also reveals that Ian Cameron, the late father of prime minister David Cameron, was a client of Fonseca and allegedly used the law firm to protect investment fund Blairmore Holdings from UK taxes.

In 2013 the prime minister urged British overseas territories to work with him to “get their house in order” – a plea that in June 2013 led to the UK’s overseas territories and Crown dependencies agreeing to a clampdown on tax evasion.

Fonseca has said that it “has never been accused or charged in connection with criminal wrongdoing” and that it has operated “beyond reproach” for 40 years.

Crawford Spence, a professor of accounting at Warwick Business School and tax avoidance expert, is not surprised at this latest uncovering of the global elite and their murky tax affairs.

“These latest revelations concerning Mossack Fonseca are novel in that they show how elites from different walks of life come together in order to avoid scrutiny of their affairs by state authorities and the public more broadly.

“Thus, we see that Mossack Fonseca deals with concert cellists and Russian gangsters, Middle Eastern dictators, celebrity life coaches and European Heads of State such as the Icelandic Prime Minister. That one shady law firm in Panama has such a broad and high profile client base really is astonishing,” added Spence, who is urging national tax authorities to look “very closely” at these documents.

Gary Ashford, partner in the private capital group at Harbottle and Lewis said: “We would expect HMRC to start to open civil investigations into individuals with Panamanian structures, and given how things have moved on since 2008, would envisage the possibility of potential criminal investigations.

“In the circumstances, it is absolutely essential that anyone potentially affected takes professional advice immediately, and considers a carefully managed voluntary disclosure to HMRC.”

HMRC has released a statement regarding the Panama Papers, and says its already received a great deal of information on offshore companies, including in Panama, and is “committed to exposing and acting on financial wrongdoing.”

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