[PANAMA] A huge data leak from a law firm in Panama suggesting it hid billions of dollars in assets of global politicians, sports stars and entertainers threatened Sunday to dramatically boost the country’s reputation as an offshore haven for money laundering.
Panama, a small nation of just four million people, has a booming financial services sector that, including revenue from its famous canal, accounts for nearly 80 per cent of gross domestic product.
It has one of the best sustained economic growth rates in Latin America, low inflation, and uses the US dollar as its currency.
Successive governments have strenuously sought to portray the country as a business-friendly financial hub akin to Singapore that actively encourages banking and investment.
But they have found it hard to shake a widely held image of Panama as a place where shady deals are done in secret to hide money from tax authorities and launder the proceeds of the rich, the powerful and the criminal.
After coming under heavy scrutiny in recent years from other countries, especially the United States, Panama has cleaned up its act somewhat, enough to get off an international “blacklist” of suspected money-laundering states.
In February, Panama was also taken off a “gray list” of nations with lax financial laws, but still flagged as having deficiencies in fighting money laundering.
Sunday’s revelations, published under the title “The Panama Papers,” could put the progress it has made at risk.
Although the media investigation into the data leak notes that many of the transactions may not in themselves be illegal, they were often politically unpalatable – and were facilitated by Panama’s tardiness in fully applying international transparency rules.
Despite foreign pressure Panama has dragged it feet on exchanging financial information with other countries and lifting its banking secrecy.
“Panama has become the most opaque place on earth,” the director of the Center for Tax Policy in the Organisation for Economic Cooperation and Development (OECD), Pascal Saint-Amans, told France’s iTele network on Sunday.
The Tax Justice Network, an advocacy group, in December said: “Panama thumbs its nose at transparency.”
Transparency International, a corruption watchdog, ranks the country 72 out of 168 in the world (168 being the least transparent), with a pretty secretive financial system put at 14 out of 71 jurisdictions.
Last month, Panama’s Foreign Minister and Vice President Isabel De Saint Malo told BBC radio her country was “completely committed” to exchanging financial information.
But she said Panama was “concerned about the cost to our financial institutions” under proposed reporting guidelines.
She was also asked specifically about the Panama-based law firm at the centre of the data leak scandal, Mossack Fonseca, and its role in a huge bribery case unfolding in Brazil involving the state oil company Petrobras.
“I think that needs to be cleared up,” she admitted in the March 7 interview.
She stated, however: “Our financial sector abides by the highest standards internationally.”
The Washington-based International Consortium of Investigative Journalism said the extensive investigation detailed the offshore holdings of a dozen current and former world leaders, as well as businessmen, criminals, celebrities and sports stars.
The allegations were published by more than 100 news organisations around the world, and the German newspaper Sueddeutsche Zeitung, which first received the data more than a year ago, said it was confident the material was genuine.
The Munich-based daily was offered the data through an encrypted channel by an anonymous source who requested no monetary compensation, said Bastian Obermayer, a reporter for the paper.
The data concerned internal documents from a Panama-based law firm, Mossack Fonseca. Founded by German-born Juergen Mossack, the company has offices across the globe and is among the world’s biggest creators of shell companies, the newspaper said.
Ramon Fonseca of Mossack Fonseca said the firm had no control of how its clients might use offshore vehicles created for them.
“We are not responsible for the actions of a corporation that we set up,” he told Panama’s Channel 2.
ICIJ said the law firm’s internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories, and it thought it was the biggest leak journalists had ever worked on.
Among the countries with past or present political figures named in the reports are Iceland, Ukraine, Pakistan, Saudi Arabia, Russia and Argentina.
The Guardian newspaper, which took part in the investigation, published a video on its website showing an interview with Iceland’s prime minister, Sigmundur David Gunnlaugsson conducted by Sweden’s SVT television.
He is asked about a company called Wintris, and responds by insisting that its affairs are above board and calling the question “completely inappropriate” before breaking off the interview.
In Russia, the Kremlin last week said it was anticipating what it called an upcoming “information attack”.
Vladimir Putin’s spokesman, Dmitry Peskov, told reporters the Kremlin had received “a series of questions in a rude manner” from an organisation that he said was trying to smear the Russian president.
“Journalists and members of other organisations have been actively trying to discredit Putin and this country’s leadership,” Mr Peskov said.
The office of Argentina’s president, Mauricio Macri, confirmed the business group owned by his family set up Fleg Trading, an offshore company based in the Bahamas.
But it said Mr Macri himself had no shares in Fleg and never received income from it.
The ICIJ said the documents included emails, financial spreadsheets, passports and corporate records detailing how powerful figures used banks, law firms and offshore shell companies to hide their assets. The data spanned nearly 40 years, from 1977 through to the end of 2015.
According to the media group’s website, global banks including HSBC, UBS, Credit Suisse, Deutsche Bank and others have worked with Mossack Fonseca to create offshore accounts.
“The allegations are historical, in some cases dating back 20 years, pre-dating our significant, well-publicised reforms implemented over the last few years,” HSBC spokesman Rob Sherman said.
“We work closely with the authorities to fight financial crime and implement sanctions.”
Panama’s president said his government will co-operate “vigorously” with any judicial investigation arising from the leak.
President Juan Carlos Varela said the revelations should not detract from his government’s “zero tolerance” for any illicit activities in Panama’s finance industry.