Who has benefited from the fraud of Panama's papers?

  • Posted By : Admin
  • Tax havens
  • 08-09-2016
Index [Hide] [Show]

The Panama Papers has shown that stealing is legal. The Mossack Fonseca law firm has suffered the biggest leak of information perpetrated by a company with the objective of benefiting high-tax countries. 

The leak of the world's largest information perpetrated by a law firm and a year-long journalistic investigation has culminated with the revelation of what have been called "Panama Papers". Those who still have not got an idea of the importance of the operation of tax havens in terms of the magnitude of the millions of euros that have been saved in them legally or who have made use of these ways to protect their money and tax planning legally. 

The Panama papers have highlighted the corporate discrimination suffered by the Panamanian law firm Mossack Fonseca. In this way, public figures, multiple entrepreneurs and savers from around the world have been involved in the leak of information and violation of privacy more disproportionate in recent years, more than 11 million documents stolen from the Panamanian law firm Mossack Fonseca give the origin to the papers of Panama. To better understand the concept of Panama's papers, let's first look at some basic concepts of tax havens and then we will talk about the operation of Mossack Fonseca, which has become the fifth most important in terms of opening offshore companies and involvement of some of the most influential people. 

Tax havens, offshore companies and Panama papers 

The concept of tax haven must be widespread, because there is no global conceptualization between different states or international organizations (OECD, UN, European Commission, etc.) regarding the consideration or not of a territory as a tax haven. Generally speaking a tax haven is that territory that offers its residents and non-residents, companies and individuals, tax conditions of exceptional minimization or even non-existent, under cover in addition to banking secrecy that safeguards the anonymity of the final beneficiaries. These advantages make these tax havens a net recipient of mercantile companies, whose total number often exceeds that of its inhabitants. With the tightening of the law against money laundering, especially after the Swiss scandal of 2014, banks subject to this regulation are obliged to inform account holders as long as they are private, but not in the case of companies. At this point, the creation of offshore companies finds an escape point to these controls to achieve greater privacy. 

An offshore company is created following the laws of a foreign jurisdiction, but may or may not operate in another territory. These companies are companies that develop or not a business activity and are used only to open accounts in other tax havens or countries with low tax rates (Switzerland and Andorra, for example), treasury personal assets, divert personal or business profits, acquire shares or other movable or real estate property. In order to register an offshore company it is not necessary for the final beneficiary of the funds to be included as administrator. In the case of Panama, for example, a company of this type can be created with three administrators and a shareholder or owner, without being any of them the final beneficiary. In this way, if we register an offshore company to open an account in Switzerland, this country is no longer obliged to give the ownership of its account and, even if it did, the name of the person to whom the money really belongs would not appear. How do we relate all this with the Panama papers? Well, in a very simple way: the owners of the companies used the large banks as intermediaries for the opening of offshore companies that could be used, among other things, to protect legally their money and have more privacy or perform illegal activities such as tax evasion. Let's see next how this operation works as investigated in the Panama papers. 

Mossack Fonseca and the papers of Panama 

If anything characterizes the Panamanian law firm Mossack Fonseca is that it has become the fifth law firm with the highest number of offshore companies, a fact that has not gone unnoticed by the investigators of the Panama papers. The lawyers of Mossack Fonseca are specialists in commercial law and in the creation of international structures and, although in their defense they claim total legality in their actions, they do not escape the accusations of several countries, including Germany, for having helped other citizens countries to evade taxes. The fact of registering an offshore company is completely legal and the law firm cannot be responsible for the activity or illegal use of it. The truth is that the failure to communicate the existence of this type of company and the capital that has the tax agencies, first considered as a structure of tax evasion if not proven otherwise, is at this point where the magnitude of the data stolen from the Panamanian law firm. 

Law firms such as Mossack Fonseca are key to giving life to all the business structures analyzed in the Panama papers, where we have seen that Mossack Fonseca had created more than 200,000 companies between 1977 and the end of 2015. Although any individual or legal entity can register an offshore company, Panama's papers have shown that the figure of this law firm is imperative to run its opening. Necessarily, an intermediary must appear to put the owner of the capital in communication with the law firm, who often performs his work without knowing the final client. As we see in the Panama papers, the role of the intermediary has been taken frequently by the big national banks to facilitate their clients the formation of these companies. Once the banks were contacting Mossack Fonseca, the firm carried out a series of actions to complete the operation and provide the lawyers who will be in charge of the company, hiding the true identity of the beneficiaries. In fact, in many cases legal requirements are necessary to find out the name of the real owner of the money of these companies. One more piece of information about the documents of Panama: the fact that this office was Panamanian does not imply that the more than 200,000 companies registered in this country, since half of them were registered in the British Virgin Islands, a territory considered a tax haven even for Germany. 

Influential individuals in the Papers of Panama case 

In the Panama papers have appeared names of public and political figures of world recognition that have been able or not to carry out some type of irregular activity and its revelation has already had as consequence the resignation of several positions, among them, the Prime Minister of Iceland. Among the political sector, Panama's papers echo how Vladimir Putin's closest environment, especially the musician Sergei Roldugin, who took refuge in the creation of a complex web of offshore companies to divert funds whose origins could be hardly explained. Maurici Macri, currently president of the Argentine Republic, was until 2009 on the board of directors together with his family members of an offshore company registered in the Bahamas. The King of Saudi Arabia, Salman bin Abdulaziz, also present in the Panama papers. He made use of a registered company in the British Virgin Islands to acquire real estate. The leaders of the Chinese Communist Party have not missed the opportunity to use several companies in tax havens. 

Everyone who was mentioned in the Panama papers case can not be judged equally, because not all of those who appeared on the list have committed irregular activities or have been engaged in legal activities. A study carried out by a prestigious Andorran bank showed that less than 1% of the bank's clientele had carried out some kind of illicit activity, 99% of the bank's clientele were carrying out legal activities and declared in their country of origin. One can not look back and criticize fiercely offshore territories when in banks of countries like Germany, France and Italy there are also high rates of activities that are not entirely legal. Also the highest amounts of money flow on the planet are in the main offshore financial centers such as New York, London, Hong Kong, Frankfurt, Singapore and Tokyo. Logically the reflection that one can get is: is all money legal? The answer is no, but the easiest and most hypocritical action is to criticize the countries that attract capital from the countries where all economic activity is generated. The latest international regulations on automatic information exchange will set in place those who truly want to protect their money and save taxes legally and those who will carry out some kind of illegal activity.