Sri Lankan reality :
Waking up to Panama Papers' reality
On 3 April 2016, Suddeutsche Zeitung, Germany's largest daily
newspaper leaked 11.5 million files from the database of Mossack
Fonseca, a law firm headquartered in Panama City, Panama.
The firm is one of the world's top creators of shell companies,
corporate structures that can be used to hide ownership of assets. The
files exposed financial dealings of some of the world's richest and most
powerful individuals. The documents included records dating back over 40
years, which reveal offshore accounts of current and former world
leaders as well as individuals with close ties to political figures and
business moguls around the globe.
The files also revealed that it is not only politicians who are found
to be tied to the alleged laundering of funds but many celebrities,
professional sporting stars and even sporting bodies too. Now that the
door is open, new revelations are bound to come forward to expose the
depth of the Panamanian corruption scandal. The release of the Panama
Papers is thought to be merely 'Chapter One' of a much more serious and
Chapter one only
Analysts comment that these findings show how deeply ingrained
harmful practices and criminality are in the offshore world and that the
release of the leaked documents should prompt governments to seek
'concrete sanctions' against jurisdictions and institutions that peddle
offshore secrecy. The documents reveal that Mossack Fonseca, far from
being an aberration, was an integral part of the operations of leading
As the International Consortium of Investigative Journalists (ICIJ)
puts it, "The documents make it clear that major banks are big drivers
behind the creation of hard-to-trace companies in the British Virgin
Islands, Panama and other offshore havens. The files list nearly 15,600
paper companies that banks set up for clients who want to keep their
finances under wraps, including thousands created by international
giants UBS and HSBC. This leak is thus proof that despite explicit
banking laws against tax evasion, criminal uses and money laundering,
the global offshore shell game business remains open for the wealthy and
well connected to exploit."
This state of affairs bears much direct relevance to Sri Lanka as
well, as the map, published by the Irish Times, titled as 'secret
companies around the world' indicates that there were three too which
were listed in the report with three clients and 22 shareholders.
Therefore, there is direct interest for Sri Lanka to investigate
further regarding this exposure about Sri Lankan companies and entities
being named in this controversy. The government should however, not just
limit their interest to a full detailed exposure of those companies and
personalities involved, but also ascertain the extent of the tentacles
of corruption and money laundering followed by politicos and businesses
in stashing their 'ill-gotten' wealth abroad.
One of the largest protests in Iceland's history demanding Prime
Minister Sigmundur Gunnlaugsson to step down after the leaked files
revealed he and his wife were hiding investments worth millions of
dollars behind a secretive offshore company, has much resonance to all
of us following political developments in Sri Lanka.
Mangala Samaraweera went on record some time back saying that Sri
Lanka had already secured support from four countries to track an
estimated US$ 18 billion in assets stolen by former president Mahinda
Rajapaksa and his family. The US and India had previously announced they
were helping Sri Lanka's new government track down stolen wealth stashed
abroad, allegedly hoarded in tax havens.
Yet the start of the Maithripala-Ranil era too smacked of corruption.
One prime example was the Central Bank Governor's alleged shady deal,
which dented this government's credibility to a great degree.
It is therefore vital that the new government too, reads their
mandate correctly, as it was the result of the winds of political change
which swept through Sri Lanka in 2015. People demanded a clear plan of
action to bring in good governance, transparency and accountability; not
just small doses of them.
Of course, investigative and law enforcement arms such as the
Financial Crimes Investigative Division (FCID) and the Commission to
Investigate Allegations of Bribery or Corruption (CIABOC) were set up
and/or strengthened. It has been a routine daily news bulletin item in
the post-January 2015 period, with many parties submitting petitions to
the Commission and the Police subsequently arresting and releasing
various culprits. These staged dramas, now almost a source of public
entertainment rather than showing any significant results, have made the
public question whether the Yahapalanaya promise to have zero tolerance'
to corruption is merely an eye wash or a serious commitment to clean the
stables and ensure a clean political culture.
Of course, there are noticeable improvements in accountability and
transparency and press freedom, arming people with knowledge about how
political leadership is managing public finances. However, people are
quite rightly demanding concrete steps to achieve the ideal of zero
tolerance to corruption; not just 'flash in the pan' marginal
improvements to attract public attention or gain short term cheap
political mileage by hunting down political opponents. The public also
needs to know about the progress of the government's drive to track down
the nation's wealth allegedly stashed abroad, which was a major
campaigning point during election time. Sri Lanka was ranked 83rd out of
175 countries, according to the 2015 Corruption Perceptions Index
reported by Transparency International. Sri Lanka's corruption Rank
averaged 81.79 from 2002 until 2015, reaching an all-time high of 97 in
2009 and a record low of 52 in 2002. Sri Lanka clearly need to aim for a
consistent plan of action to achieve a higher rating on the
Anti-Corruption Index of Transparency International (TI).
Black money is basically income from which tax has been evaded and
tax havens are territories which provide a safe and easy environment for
such money to come in. Such territories are "safe" because neither do
they ask the depositors where the money is coming from nor do they share
such account information of depositors easily with other countries. It
is a known fact that the flow of black money out of a country into tax
havens of dubious nature, such as Mossack Fonseca in Panama (reportedly
only the third largest in the world and certainly not the only one), can
easily destabilise the financial market of a country.
It is developing countries like Sri Lanka that are impacted more due
to such capital outflows, hence the need to take immediate and stringent
measures to put these practices to an end. It has been estimated that
every year, developing countries lose about US$160 billion to such tax
Adopting urgent measures to curb such an outflow of black money is
therefore the need of the hour for Sri Lanka at this crucial point of
time, when there is a new government which has much more credibility
than the previous one. There is clamour from the public and aspirations
are at an all-time high to ensure a clean political culture for Sri
Lanka. Besides, it is also important to reform the vital institutions of
the judiciary and the law enforcement authorities, particularly the
Police, to crack down on corruption and nepotism to regain public
Perhaps, this is an opportune time to reflect on this national
priority when constitutional reforms are also on the cards.
Will the Panama Papers therefore propel Sri Lanka to go beyond mere
verbosity and put their house in order - to take concrete action to
bring culprits who have siphoned out public funds abroad to their
advantage, to close the legal /financial loopholes and to hold public
representatives to account by ensuring accountability and transparency
on their part? Only time will tell.