Specialised Enhanced Due Diligence: Panama Papers: What the documents reveal

 5 April 2016, Bachir El Nakib (CAMS) Senior Consultant Compliance Alert LLC

A leak of confidential documents has revealed how the wealthy and powerful use tax havens to get around the law.

The 11 million documents were leaked from a Panamanian law firm called Mossack Fonseca.

They show how the firm helped clients launder money, dodge sanctions and evade tax.

Mossack Fonseca says offshore companies are used for legitimate purposes and says it conducts thorough due diligence and regrets any misuse of its services.

A huge leak of confidential documents has revealed how the rich and powerful use tax havens to hide their wealth.

Eleven million documents were leaked from one of the world's most secretive companies, Panamanian law firm Mossack Fonseca.

They show how Mossack Fonseca has helped clients launder money, dodge sanctions and avoid tax.

The company says it has operated beyond reproach for 40 years and has never been charged with criminal wrong-doing.

French President Francois Hollande hailed the "good revelations" which would "increase tax revenues from those who commit fraud".

The documents show 12 current or former heads of state and at least 60 people linked to current or former world leaders in the data.

They include the Icelandic Prime Minister, Sigmundur David Gunnlaugson, who had an undeclared interest linked to his wife's wealth. He has said he will not resign.

The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russian President Vladimir Putin.

Gerard Ryle, director of the International Consortium of Investigative Journalists (ICIJ), said the documents covered day-to-day business at Mossack Fonseca over the past 40 years.

"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," he added.

From Nawaz to Putin: The politicians implicated in the Panama Papers

  • HT Correspondent, Hindustan Times, New Delhi
  •  |  
  • Updated: Apr 05, 2016 09:04 IST

A massive leak of 11.5 million documents from a Panama-based law firm offers a glimpse into the shadowy world in which the rich and powerful stash their wealth — and raises sharp questions about the use of shell companies that hide the identity of their true owners.

Leaders of the Group of 20 — representing almost 80% of the global economy — have vowed to crack down on the practice, which is blamed for aiding money laundering, corruption and tax evasion. Countries have tightened rules on using them — but not enough to satisfy anti-corruption activists.

A number of high-profile heads of state have been implicated in the leaks, from Russian President Vladimir Putin to Syria’s controversial Bashar al-Assad.

Nawaz Sharif



Sharif’s daughter Mariam Safdar was the owner of British Virgin Islands-based firms Nielsen Enterprises Limited and Nescoll Limited, incorporated in 1994 and 1993, both of which were struck off in 2014.

Hussain and Mariam in 2007 conducted transactions in which Deutsche Bank Geneva lent $13.8 million to Nescoll, Nielsen and another unnamed company.

Hasan Nawaz Sharif was the director of Hangon Property Holdings Limited incorporated in the British Virgin Islands.

Xi Jingping



Deng Jiagui was the sole director and shareholder of two British Virgin Islands-based “shell companies” in Mossack Fonseca’s inventory. It is unclear what the two companies were used for.

Kofi Annan



Kojo Annan was sole director of the Samoan company Sapphire Holding Ltd, which was used to buy a $500,000 London apartment.

David Cameron


Ian Cameron helped create Blairmore Holdings Inc. in Panama in 1982 and was involved in the investment fund until his 2010 death, and allegedly managed it to avoid paying taxes.

Vladimir Putin



Arkady and Boris Rotenberg were owners of at least seven companies in the British Virgin Islands. These investments included a pipeline company and helped build an Italian villa for Arkady’s son.

Sergey Roldugin was the owner of three offshore companies. It is alleged that these companies received advantageous loans.

Petro Poroshenko



Poroshenko’s offshore firm, Prime Asset Partners Limited, was set up by Mossack Fonseca in the British Virgin Islands and is described as a “holding company of Cyprus and Ukrainian companies of the Roshen Group, one of the largest European manufacturers of confectionery products.” The Ukrainian President set up this company during the 2014 war with separatists backed by Russia.

Watch | ICIJ explains the importance of the Panama Papers leak



Anurag Kejriwal



Kejriwal and his wife owned several offshore companies and foundations, some of which were used for iron ore trading.

Hosni Mubarak



Alaa Mubarak owned the British Virgin Islands firm Pan World Investments Inc., managed by Credit Suisse.

Bashar al-Assad



Rami controlled key economic sectors such as oil and telecommunications. He allegedly held such control over the Syrian business that any foreign company seeking to do business in the country had to be cleared by him.

Hafez, a general in charge of Syria’s intelligence and security, was suspected of helping his older brother intimidate business rivals.

Both jointly held at least nine overseas companies.

Panama Papers show Syria regime funded war efforts through shell firms


  • AFP, Beirut
  •  |  
  • Updated: Apr 05, 2016 09:22 IST

Syria’s regime has been able to circumvent international sanctions and fund its war effort through shadow companies, according to leaked “Panama Papers” seen by French daily Le Monde.

The newspaper reported on Monday that three Syrian companies, Pangates International, Maxima Middle East Trading, and Morgan Additives Manufacturing, used the services of Panama-based law firm Mossack Fonseca to create shadow companies in the Seychelles.

Le Monde, a partner in the year-long worldwide media investigation into a trove of 11.5 million documents leaked from Mossack Fonseca, said the shadow companies were “a way for the Syrian regime to circumvent international sanctions imposed since the start of the war”.

The three firms are under US sanctions for allegedly providing petroleum supplies to President Bashar al-Assad’s regime likely to be used by his military, including aviation fuel.

Since the start of Syria’s war in 2011, tens of thousands of people have been killed and thousands of homes destroyed in air raids and barrel bomb strikes.

Le Monde said the leaked documents show Mossack Fonseca continued to work with at least one of the companies, Pangates, until at least nine months after the sanctions were announced.

Pangates belongs to the Damascus-based Abdulkarim group, which is close to the Syrian government, Le Monde said.

The probe, coordinated by the International Consortium of Investigative Journalists, has exposed a tangle of financial dealings by global elites.

Assad’s billionaire cousin Rami Makhlouf, who is facing sanctions, was also shown by the leaks as long having registered companies in tax havens.

Syria’s most notorious and powerful tycoon, Makhlouf founded shadow companies such as Drex Technologies SA, which was registered in the British Virgin Islands in 2000 and which it took Mossack Fonseca a decade to grow concerned about, Le Monde reported.

In 2011, the law firm cut ties with Makhlouf, just after the outbreak of the revolt calling for Assad’s ouster.


The King of Saudi Arabia



Used British Virgin Island companies for mortgages on luxury homes in London and to hold a yacht.

President of the UAE



Sheikh Khalifa was the beneficial owner of around 30 companies in the British Virgin Islands, through which he held commercial and residential properties in London, worth at least $1.7 billion.

The Prime Minister of Iceland



Gunnlaugsson owned a British Virgin Islands shell company Wintris Inc., which held nearly bonds worth $4 million in Iceland banks. When the banks collapsed in 2008, he had campaigned against bailing out foreign creditors.

In 2009, when he entered parliament, Gunnlaugsson failed to declare his ownership of Wintris Inc.

Icelanders are now calling for his resignation.

Panama Papers - tax havens of the rich and powerful exposed

  • Eleven million documents held by the Panama-based law firm Mossack Fonseca have been passed to German newspaper Sueddeutsche Zeitung, which then shared them with the International Consortium of Investigative Journalists. Among the 107 media organisations - BBC Panorama and the UK newspaper the Guardian - in 76 countries which have been analysing the documents. 
  • They show how the company has helped clients launder money, dodge sanctions and evade tax
  • Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing

Panama Papers: How assets are hidden and taxes dodged
The revelations in the millions of papers leaked from the Panamanian law firm Mossack Fonseca uncovering a suspected money laundering ring run by close associates of Vladimir Putin may leave readers drowning in a sea of confusing terms and phrases.

Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.

If you are a wealthy business owner in Germany who has decided to evade tax, an international drugs dealer or the head of a brutal regime, the methods are all pretty similar.

Mossack Fonseca says it has always complied with international protocols to ensure the companies it incorporates are not used for tax evasion, money-laundering, terrorist finance or other illicit purposes.

What's a shell company? Why would someone want one?

A shell company has the outward appearance of being a legitimate business. But it is just an empty shell. It does nothing but manage the money in it, while hiding who owns the money. Its management is made up of lawyers, accountants or even the office cleaner, who do little more than sign documents and allow their names to appear on the letterhead. When the authorities try to find out who really owns or controls the money in the company, they are told the management does, but it is all just a front. Someone else is just paying them so they can hide their money from the authorities or in some cases their ex-wives. Shell companies can also be called "letterbox" companies, as they consist of little more than an address to post documents to.

Sometimes a person or a well-known company or institution wants to buy things or own assets in a way that obscures who the real buyer is.

The typical reason for this is a kind of routine corporate secrecy. Apple, for example, appears to have created a shell company called SixtyEight Research that journalists believe to be a front for its interest in building a car. Since Apple happens to be the most-covered company on the planet this hasn't been incredible effective and when SixtyEight Research staff showed up at an auto industry conference everybody noticed.

But in general, companies don't like to tip their hand to what they are doing and the use of shell companies to undertake not-ready-for-public-announcement projects can be a useful tool.

Shell companies are often sometimes used for simple privacy reasons. Real estate transactions, for example, are generally a matter of public record. So an athlete, actor, or other celebrity who wants to buy a house without his name and address ending up in the papers might want to pay a lawyer to set up a shell company to do the purchasing.

As is generally the case in life, secrecy can have illegitimate purposes as well. This is particularly true for shell companies set up in international centers of banking secrecy that offer a level of anonymity and obscurity that goes beyond simply making it hard to look up the real owner's name online.

Your soon-to-be-ex-wife cannot seize half of the money in an account that she and her lawyers don't know exists and can't prove that you own, for example. Nor can your creditors seize such an account in a bankruptcy proceeding. Nor can the government levy estate taxes on it when you die and pass it on to your kids. In all those circumstances, a Panamanian company that you secretly control and that holds stocks, bonds, and other financial assets on your behalf could be the ideal vehicle.

By the same token, if you have made a bunch of money illegally (taking bribes, trafficking drugs, etc.) you need to do something with the money that won't attract the attention of the authorities or the media. A secret offshore shell company is perfect. Not only does it help you avoid scrutiny in real time, but if you are found out its assets can't be taken from you if you have to flee the jurisdiction or even serve jail time.

But even though various criminal money-laundering schemes are the sexiest possible use of shell companies, the day-to-day tax dodging is what really pays the bills. As a manager of offshore bank accounts told me years ago, "people think of banking secrecy as all about terrorists and drug smugglers, but the truth is there are a lot of rich people who don't want to pay taxes." And the system persists because there are a lot of politicians in the west who don't particularly want to make them.


Offshore Financial Centre

If you have a shell company, you don't want it based in London or Paris where the authorities can normally find out who owns it, if they really want to. You need an Offshore Financial Centre, or what is often called a tax haven. These are normally based in small island countries (hence the name), with a great deal of banking secrecy and very low or non-existent taxes on financial transactions. There are many such countries or authorities around the world, from the British Virgin Islands, to Macao, the Bahamas and Panama. Even in such places most of the financial services are perfectly legal: it is just the secrecy which also makes them very attractive to tax evaders and crooks the world over, especially if the regulators are weak or turning a blind eye.

Bearer shares and bonds

Close-up of five-pound noteImage copyrightiStock

For that extra layer of anonymity and so that you can move large amounts of money around easily, bearer shares and bonds are an obvious answer. Every British £5 note has the words "I promise to pay the bearer on demand the sum of five pounds". That means if it is in your pocket it is yours: the person "bearing" or carrying the cash owns it, can spend it or do what they like with it. Bearer shares and bonds work in the same way, the person who has it in their pocket, briefcase or safety deposit box owns it. But they aren't worth £5. Bearer bonds normally come in nice round figures like £10,000. Very handy if you want to move vast amounts of money around and great if you want to deny ownership. If the bond is kept at a lawyer's office in Panama, who is to know whether it is yours, or even that it exists? This helps to explain why the US government stopped selling bearer bonds in 1982. They were just too easy for crooks to use.

Money laundering

Money laundering involves cleaning "dirty" money so that you can use it without arousing suspicion. If you are a drug dealer, fraudster or, let's say, a corrupt politician you will have a lot of cash and no way of spending it or hiding it for a rainy day, without giving the game away. The money needs cleaning, so you can ship it to a dodgy firm in an Offshore Financial Centre and they might help you convert it into bearer bonds, owned by a shell company that no one knows about. You could also use it to buy a bolt-hole in London or the South of France in case of a coup, maybe pay the kids' school fees or fund a great aunt's shopping trips to Paris.

Sanctions and sanctions busting

One of the ways of punishing and trying to limit the power of notorious regimes around the world is sanctions. These can involve limits on the importation of military equipment or ammunition, bans on the exports of oil and other goods, and personal sanctions; closing the bank accounts of dictators and their friends, families and supporters. The British government currently imposes thousands of sanctions against countries, their businesses, banks and many named individuals.

But the more onerous the sanctions on a regime the more money is to be made by breaking or busting them. Providing secret bank accounts for torturers and mass murderers, supplying weapons to one or even both sides in a civil war or funding the nuclear ambitions of isolated regimes. The profits are huge and, of course, lots of secretive bank accounts and shell companies in parts of the world where officials turn a blind eye, is key to making sanction busting profitable and safe. You can see the list of UK sanctions here.

The European Savings Directive

To try to stop people hiding money from the tax authorities the European Union introduced the European Savings Directive (ESD). Basically, banks in EU countries collect the tax due on bank accounts held by citizens of other EU countries. So you can't be an Irish person with a Dutch bank account and hope the Irish tax authorities won't find out about it or collect the tax owed. The ESD made it much more difficult to hide your money in Europe. It is interesting because when the ESD was being discussed and introduced there was a sudden increase in people who wanted to open bank accounts outside Europe, hence the surge of interest in places like Panama and the British Virgin Islands.

Panama Papers - tax havens of the rich and powerful exposed

  • Eleven million documents held by the Panama-based law firm Mossack Fonseca have been passed to German newspaper Sueddeutsche Zeitung, which then shared them with the International Consortium of Investigative Journalists. BBC Panorama is among 107 media organisations - including UK newspaper the Guardian - in 76 countries which have been analysing the documents. The BBC doesn't know the identity of the source
  • They show how the company has helped clients launder money, dodge sanctions and evade tax
  • Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing

Panama papers in numbers: Countries implicated, companies involved

This week the International Consortium of Investigative Journalists (ICIJ) distributed 11.5 million documents compiled by more than 100 newspapers that expose secret offshore financial dealings of aides to powerful global leaders and celebrities in sports and show business.


Here is what the leak is all about:


Censorship, CIA and no US citizens: Panama Papers conspiracy theories

From China censoring its social media to the Kremlin alleging a CIA conspiracy, the Panama Papers revelations have caused major ripples through global powers, with implicated world leaders denying allegations of wrongdoing.


The Panama Papers on Monday brought to light the shadowy world of offshore companies and how the rich and the famous hide their wealth from public view, with its first list of names including heads of state, celebrities, prominent businessmen and football stars.

Spearheaded by the International Consortium of Investigative Journalists (ICIJ), and worked on by over 100 media organisations through the world, the leaks place a Panama-based law firm, Mossack Fonseca, at the centre of the tangled web of shell companies and paper trails.

However, the information, or the blank spaces in between, has led to sharp criticism on social media, with many commenting on the lack of US names or banks in the list. Conspiracy theorists allege a western plot to destabilise Russian president Vladimir Putin, while others raised more serious concerns of media bias.

Corporate media protecting the 1%?

The only direct US link to the Panama Papers so far is that of financial writer and life coach Marianna Olszewski - who allegedly employed a 90-year-old British man as a stand in to mask funds she had confidentially invested in an offshore company.

The lack of any prominent US citizen or institutions’ name appearing on the list - that too despite the ICIJ listing 617 middlemen that Mossack Fonseca worked with in the United States - has begun to attract conspiracy theories and criticism.

One of the most searing criticisms has been that of Craig Murray, the former British ambassador to Uzbekistan, and a prominent human rights figure.

In a blog post on Monday, Murray said that German daily Suddeutsche Zeitung had made the “dreadful mistake of turning to the western corporate media to publicise the results.”

“In consequence the first major story, published today by the Guardian, is all about Vladimir Putin and a cellist on the fiddle. As it happens I believe the story and have no doubt Putin is bent,” Murray wrote.

“But why focus on Russia? Russian wealth is only a tiny minority of the money hidden away with the aid of Mossack Fonseca. In fact, it soon becomes obvious that the selective reporting is going to stink.”

“Do not expect a genuine expose of western capitalism. The dirty secrets of western corporations will remain unpublished.”



Murray points to the US-based ICIJ’s funders as being a reason why no American politician or public figure has been named so far.

Their funders include the Ford Foundation, the Carnegie Endowment, The Rockefeller Family Fund, the WK Kellogg Fund and the Open Society Foundation (Soros) - all significant (and significantly wealthy) industrial and corporate entities.

“I know Russia and China are corrupt, you don’t have to tell me that,” writes Murray. “What if you look at things that we might, here in the West, be able to rise up and do something about?”

While Murray’s points have more substance than, say, conspiracy theorists on social media, it’s more likely that no United States citizens have been named because of the sheer volume of data that needs to be analysed.

‘It’s bullshit’

Among the most high-profile names implicated in the leaks was Russian president Vladimir Putin. While the Russian leader was not directly named in the Panama Papers, some of his closest associates including Sergei Roldugin, godfather to Putin’s daughter Maria, and Yuri Kovalchuk, Bank Rossiya’s biggest shareholder, were.

In this file photo, Russian cellist and House of Music Director Sergei Roldugin (L) escorts then Russian Prime Minister Vladimir Putin, (C), and President Dmitry Medvedev as they tour a restored House of Music in St Petersburg, Russia. (AP Photo)

“The leak exposes the offshore holdings of 12 current and former world leaders and reveals how associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies,” the ICIJ wrote, while The Guardian on Monday led with how Putin’s closest friends had operated a network of companies and banks to allegedly create a slush fund for the former-KGB spy.

“It’s obvious the main aim of this dump is our president in the context of parliamentary elections and, in the longer term, presidential elections... It’s obvious the barbs of this attack are directed against our country and, personally, against our president,” Dmitry Peskov said on Monday, according to RCB News.

“The degree of Putinophobia has reached such a level that you’re just not allowed to say good things about Russia or about Russia’s successes. The bad things — that you have to talk about,” Peskov added.

One of the few other Russian officials to address the sensational claims was Andrei Kostin, the head of state-owned banking giant VTB.

“Mr. Putin was never involved. It’s bullshit,” Kostin said in an interview with Bloomberg on Monday.

Chinese censorship

Meanwhile, China also appears to be censoring social media posts about the Panama Papers leak which has named several members of China’s elite, including President Xi Jinping’s brother-in-law, Deng Jiagui.

The ICIJ shows Deng as having registered two companies in 2009; around about the same time that Jinping was “rising in power.”

An investigative report by Bloomberg News in 2012 revealed that Deng and his wife had hundreds of millions of dollars in real estate, share holdings and other assets.

Hundreds of posts on networks such as Sina Weibo and Wechat on the topic have been deleted since Monday morning.

The website Freeweibo.com, which actively tracks censorship on Weibo, listed “Panama” as the most censored term on the network.

The American angle

Given that the ICIJ has listed 617 middlemen in the US, it would be surprising, to say the least, if American figures were not linked to the growing scandal.

The law firm, which helped its clients (including firms subject to sanctions, such as in North Korea and Syria) set up offshore companies, came into the spotlight after more than 11 million of its internal files were leaked to German daily Suddeutsche Zeitung.

Zeitung then approached the ICIJ, which helped organise a 9-month long global investigation into the leaked files, the results of which were made public on Monday.

US reviewing Panama Paper revelations, will act: Justice Department

  • AFP, New York
  •  |  
  • Updated: Apr 05, 2016 11:08 IST




The US Justice Department is reviewing the Panama Papers leaks, and will follow up on wrongdoing or corruption linked to the US, an agency spokesman said on Monday.

“We are aware of the reports and are reviewing them,” Justice Department spokesman Peter Carr.

“While we cannot comment on the specifics of these alleged documents, the US Department of Justice takes very seriously all credible allegations of high level, foreign corruption that might have a link to the United States or the US financial system.”

The comments came one day after the release of some 11.5 million documents by the International Consortium of Investigative Journalists, concerning some 214,000 offshore entities. The leaked documents came from Mossack Fonseca, a Panama-based law firm with offices in more than 35 countries.

The revelations have left powerful figures from countries including Russia, China, Argentina and Iceland scrambling to explain apparent connections to offshore financial vehicles that look to have been set up to hide assets.

France, Spain and Australia all opened legal probes on Monday.

Jubilee USA Network, a faith-based anti-poverty group, called for Congress to prevent the establishment of anonymous companies in the United States.

“These companies fuel corruption, poverty, human trafficking and armed conflict,” said Eric LeCompte, executive director of the Jubilee USA.


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