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The Panama Papers scandal
Latinamerica Press
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Journalistic investigation reveals how a Panamanian company created offshore companies in tax havens to launder money and evade taxes.

The International Consortium of Investigative Journalists (ICIJ), the German daily Süddeutsche Zeitung and over 100 journalistic organizations around the world unveiled on Apr. 3 a file that contains 11.5 million documents showing just how companies and financial institutions, along with politicians, multimillionaires, celebrities, sports figures, and even swindlers and drug traffickers use tax havens to evade taxes and launder money.

The leaked documents that were received anonymously and were reviewed by a team of more than 370 journalists from 76 countries, “come from a little-known but powerful law firm based in Panama, Mossack Fonseca, that has branches in Hong Kong, Miami, Zurich and more than 35 other places around the globe,” the ICIJ said.

In a revealing confidential document, Mossack-Fonseca — founded in the late 70s by Panamanian lawyer Ramón Fonseca and his colleague of German origin Jürgen Mossack — explains that it provides “a broad range of services that include establishing companies, foundations and the opening of bank accounts in banks and financial institutions around the world. In order for the signature [and the name] of the clients to not appear in the documentation related to banking transactions, we offer the service of account administration by providing authorized signatories. At the moment of making a transfer we must receive written instructions from the end beneficiary in order to proceed for we act solely under instructions from this person.”

The report, called The Panama Papers, details the secret business dealings of 128 politicians and public officials from around the world, including the President of Argentina Mauricio Macri and at least two presidential candidates in Peru.

“In the largest media collaboration ever undertaken, journalists working in more than 25 languages dug into Mossack Fonseca’s inner workings and traced the secret dealings of the law firm’s customers around the world,” the ICIJ said. “The offshore system relies on a sprawling global industry of bankers, lawyers, accountants and these go-betweens who work together to protect their clients’ secrets. These secrecy experts use anonymous companies, trusts and other paper entities to create complex structures that can be used to disguise the origins of dirty money. The story of Mossack Fonseca is, in many ways, the story of the offshore system itself.”

Dirty money
The offshore tax heavens are jurisdictions that apply favorable tax structures for companies and non-residents, invoking banking secrecy laws and refusing to cooperate with other tax administrations or foreign legal entities. Several Caribbean nations are in the Financial Secrecy Index of 81 countries created by the Tax Justice Network, a group of researchers and activists who work on the negative impacts of tax avoidance. Included are independent countries as well as US, British, French, and Dutch territories like the Cayman Islands, Bermuda, the Virgin Islands, Barbados, Bahamas, Aruba, Curacao, Anguilla, St. Vincent and the Grenadines, Turks and Caicos, St. Lucia, Antigua and Barbuda, Grenada, Dominica, St. Kitts and Nevis, and Montserrat. Also on the list are Brazil, Costa Rica, the Dominican Republic, Guatemala, Panama, and Uruguay.

Although most of the money in tax havens comes from perfectly legal sources, there are those who use this secrecy to keep illicit funds.

According to the Latin American Network on Debt, Development and Human Rights (LATINDADD), between 1970 and 2011, US$2 trillion coming from Latin America and the Caribbean were deposited in tax havens. This is money that moves undetected by the States through illicit financial flows, that is transnational transfers of funds stemming from three illegal sources: corruption (bribes), money laundering (contraband, drug, weapons and human trafficking, among others) and from the commercial flows of large companies (tax evasion and avoidance, and fraudulent billing practices).

Mossack-Fonseca is considered as one of the five top companies in the world for creating offshore companies in tax havens. Among the leaked information are documents, records, contracts, memos, emails of the company for the last 40 years.

Besides Argentina, where Macri and his family and government officials of former presidents Néstor Kirchner (2003-2007) and Cristina Fernández (2007-2015) are involved, in Brazil there are at least 57 persons linked with the Lava Jato case that have some 200 offshore companies.

“The leaked documents show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs,” mentioned the report on the investigation in Brazil. —Latinamerica Press.

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