One of the founders of Panama law firm Mossack Fonseca has dismissed accusations of wrongdoing following the leak of millions of its documents as a media “witch hunt” aimed at undermining the legitimate industry of setting up offshore companies. Ramón Fonseca, said he believed the disclosure was the work of hackers, staunchly defended the legality of his firm’s work over nearly 40 years in which he said it had faced no charges of wrongdoing.

He is quoted in the financial times (5/4/2016) with the following statement by telephone from Panama

• “I don’t expect this to lead to one single legal case,”

Mr Fonseca insisted that his firm did not deal with end-clients directly — and that in its early days, before the introduction of stricter global and Panamanian regulations and know-your-customer laws, it would not even have known their identities.

He went on to say to the financial times (5/4/2016)

• “It’s like if you buy a car and sell it to a dealership and it sells it to a woman who kills someone — the factory isn’t responsible,” Mr Fonseca said.

Rather than setting up offshore companies directly for clients, Mr Fonseca said the law firm acted on behalf of intermediaries — typically a bank or a lawyer. Although he did acknowledge that after setting up a company, in some instances the firm remains as a registered agent and offers secretarial services and / or supplies directors.

Mossack Fonseca [MF] may suggest what they have been doing is legal and this may be true (in their minds at least!!) and as we know It’s not illegal for most people to own companies in international [offshore] financial services centres. But to use shell companies to launder all the benefit is definitely a crime!!!!

These crimes may include

1. stealing national assets,
2. hide money and property from creditors and spouses,
3. avoid paying taxes, and

From where I am sitting (Jersey) an enabler of the above could be prosecuted for money laundering even if enabler (e.g. MF) did not do the crime….what they [MF] need to appreciate is that they enabled possible criminality (if you believe what you read) and from our legislative perspective this is 3^rd party/end user money laundering.

Further to ML risk

1. There are PEP friends, it can be a conflict of interest and breach of their oath of office for national leaders and politicians to use anonymous offshore companies to keep business deals secret and as we all know PEPs are high risk…and
2. Sanctions – Some of the businesses were registered before international sanctions were imposed, but in several cases Mossack Fonseca continued to act as a proxy for them after they were blacklisted.

Where are we going to see the fall-out from the publication of the Panama Papers?  Here some thoughts 24 hours after the publication

Sanction busting

1. DCB Finance
   1. DCB Finance was established in 2006, with its owners and directors based in North Korea’s capital Pyongyang. It was later put under sanctions by the US Treasury for raising funds for the North Korean regime and being linked to a bank helping to fund the regime’s nuclear weapons programme. Mossack Fonseca appears to have overlooked that the owners and directors of the company were based in Pyongyang until it was contacted by the British Virgin Islands (BVI) authorities in 2010, inquiring about another company Mossack Fonseca had set up with directors in North Korea.
   2. Mossack Fonseca resigned as agents for DCB Finance in September 2010. In 2013 the BVI authorities contacted Mossack Fonseca again, asking what checks they had carried out before opening DCB Finance in 2006.
2. Rami Makhlouf,
   1. Another case involves Rami Makhlouf, who is the cousin of Syria’s President Bashar al-Assad and has reported wealth of $5bn.
   2. In 2008 the US Treasury imposed sanctions on him because it deemed him to be a “regime insider” and someone who “manipulated the Syrian judicial system and used Syrian intelligence officials to intimidate his business rivals”.
   3. Mossack Fonseca continued to front six businesses – including one company called Drex Technologies – for Mr. Makhlouf after the restrictions were put in place. The files also show the Swiss branch of HSBC provided financial services for the firm.

1. Pangates International Corporation Limited
   1. But the leaked documents reveal the firm also provided business services to another company that was registered on a US sanctions list in 2014. The company is called Pangates International Corporation Limited. The US Treasury Department believes it supplied aviation fuel to the Syrian government to fly military aircraft during the current civil war. The files show Mossack Fonseca first incorporated the petroleum firm in 1999.
   2. Nine months after the sanctions came into effect, it was still handling the paperwork for Pangates International Corporation and certified it was a company in the Seychelles of good standing. It was not until August 2015 that Mossack Fonseca acknowledged the company was on a blacklist and reported it to financial regulators in the Seychelles.

PEP FALL-OUT

1. UKRAINE
   1. When Ukraine President Petro Poroshenko took office in 2014, he promised to sell his huge candy business to avoid any conflicts of interest.
   2. The Panama Papers appear to show that Poroshenko instead set up an anonymous BVI company to hold the business.
   3. The move could have saved him millions of dollars in Ukraine taxes.
   4. Prosecutors are investigating the arrangement and opposition politicians are calling for Poroshenko’s removal from office.
2.  ICELAND,
   1. the prime minister has resigned on the 5th April
   2. The Panama Papers appear to show that he and his wife held millions of dollars in debts in collapsed Icelandic banks through an anonymous offshore company.
   3. As prime minister, Sigmundur Davíð Gunnlaugsson also had a hand in helping the banks settle their debts by paying the claims.
3.  GREECE
   1. A Greek politician, Stavros Papastavrou, who also served as an aide to the country’s former Prime Minister Antonis Samaras, is named in the Panama Papers.
   2. Papastavrou became Greece’s chief negotiator with the European Union, the International Monetary Fund, and the European Central Bank for the Greek bailout.
   3. The Panama Papers show he sat on the boards of two Panama foundations and served as deputy chairman of another.
   4. He said he wasn’t compensated for his roles in the foundations and didn’t hold any ownership interest in them.

Creditors/divorces/business debts

1. Creditors who believe they were cheated
   1. When individuals and companies — and even countries — have too much debt, they declare bankruptcy or try to renegotiate with creditors.
   2. Part of the process is disclosing all of their assets.
   3. Did some clients of Mossack Fonseca use anonymous offshore companies to hide assets from courts and creditors?
2. Former business partners and divorced spouses –
   1. some of the people named in the documents will probably have been involved in contentious business splits or marital divorces  and if so might some of them have used an anonymous offshore company to hide assets from a former business partner or spouse – if so they could be in trouble?

TAX

1. Along with a number of countries starting tax investigations based on the Panama Papers include
   1. France, New Zealand, Austria, Sweden, and the Netherlands.
2. In AUSTARLIA
   1. Tax collectors Authorities in Australia are investigating 800 citizens named in the Panama Papers who may have used anonymous offshore companies to evade Aussie taxes.
3. In Canada,
   1. Revenue Minister Diane Lebouthillier told the Canada Revenue Agency to scour the Panama Papers and use the information there to chase tax cheats.

ABC – Anti-Bribery Prosecutors

1. Bribery of the type outlawed by the Foreign Corrupt Practices Act, the UK Bribery Act, and similar laws always happens in secret.
2. The paper and money trails wind through multiple jurisdictions, some of which have nearly impenetrable secrecy laws and practices.
3. The Panama Papers are sure to contain leads that will help those fighting graft overseas and in their own countries.

SEC/FCPA

1. Will some former FCPA defendants be caught up in new troubles?
   1. Last year, Australia-based BHP Billiton paid the U.S. SEC $25 million to settle charges it violated the FCPA when it sponsored foreign government officials as guests at the 2008 Summer Olympics in Beijing.
   2. The Panama Papers reportedly showed links from BHP Billiton to at least 19 companies registered in BVI.
   3. Mossack Fonseca flagged two of the companies as “high risk” because of big money transfers.
   4. Did the SEC know about those companies and transfers when it reached the FCPA settlement with BHP Billiton?