Sunday Observer Online


Sunday, 24 April 2016





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Ten things we've learned

1. It does what it says on the tin

A tax haven is a tax haven. This may sound simple but, although there were lots of accusations that so-called offshore financial centres were little more than places where the rich, corrupt and criminal could hide their ill-gotten gains, the proof was not always there.

The countries themselves talk about their 'specialist financial expertis' and 'tax planning' abilities, while their critics say that this was being used as a front for crime on a massive scale. The sheer size of the volume of released documents has enabled us to see numerous examples of what has been going on. We always suspected it was a can of worms - now the lid has been lifted and we know for certain that it is.

2. Everybody needs friends they can trust

None of the money that seems to have flowed from Russia into tax havens belongs to President Putin, but billions of dollars of it seems to belong to his friends. For the Kremlin, this is a sign that the revelations are driven by Putinphobia and those determined to do down Russia. For many others, it looks like the Putin is using his trusted friends to launder money for him.

If you think that this is a conspiracy against President Putin, you might need to reconsider why one of his best friends, a Russian classical cellist, has made so much money.

3. Iceland is more interesting than we thought

For all its beauty and the famous collapse of its banking system, the assumption up until now has been that Iceland, like its Scandinavian cousins, is one of the good guys - honest, decent and trustworthy.

But the Icelandic prime minister has had to resign over accusations he hid millions of dollars in a company in the British Virgin Islands -which had a direct interest in the health and wealth of Iceland's banks - which as prime minister he was responsible for. Sigmundur David Gunnlaugsson has insisted he and his wife have followed Icelandic law and have paid all their taxes in Iceland, but that is not really the point when your country was brought to its knees by a banking crisis.

4. Common criminals' money is as good as anyone else's

While much of the focus has been into the dealings of dictators and corrupt regimes, it seems that Panama is not above helping good old-fashioned robbers. For it is also alleged that Mossack Fonseca helped launder the millions stolen during the notorious Brink's Mat gold bullion robbery of 1983, when three and a half tonnes of gold disappeared.

Allegedly the Panamanian company tried to stop the British Police from tracking down that cash, by setting up a company for a property dealer called Gordon Parry. Even though it knew Parry was laundering money from the Brink's Mat robbery, it even helped him regain control of the stolen money when the police were drawing near. Parry was finally caught in 1990 and sentenced to 10 years in prison.

5. There is still a great deal of explaining to do

Some of the leaked files show it enabled a leading regime figure in Syria, Rami Makhlouf, to keep his companies trading, despite being blacklisted by US Treasury sanctions and UK sanctions. The papers also show the Foreign Office in the UK was aware of one of those companies.

In 2011, after sanctions on Makhlouf were in place, HSBC - one of Britain's largest banks - asked the governor of the British Virgin Islands for a certificate of incumbency for Drex Technologies, one of the businesses owned by Makhlouf. That certificate is basically an identity check.

In order to get it approved, the governor of the British Virgin Islands needed to get it signed by an official at the Foreign Office on behalf of the Foreign Secretary. The document clearly states that the director of Drex Technologies is Rami Makhlouf and is stamped and signed by a Foreign Office official.HSBC has denied any wrongdoing.

6. The tax man cometh

The list of countries that are interested in examining the 11.5 million documents continues to grow. Germany, Norway, France, Spain and Australia are just a few that have promised to examine how many of their citizens have been using the company and evading tax. The German authorities have already been raiding homes and businesses looking for evidence.

There was a surge in business for Mossack Fonseca when the European Savings Directive made hiding your money in Europe more difficult. With many people looking to hide "black" money, there must be a lot of nervous tax dodgers out there.

7. Some people know less than we do

It is difficult to research parts of the Panama story online in China, especially the allegation that close relatives of seven current or former Chinese leaders have been found to have links to offshore firms. Documents leaked from Panama name family members of Chinese President Xi Jinping and two other members of China's elite Standing Committee, Zhang Gaoli and Liu Yunshan.

8. Do they play footie in Panama?

FIFA President Gianni Infantino has denied wrongdoing after leaked documents suggested he signed on a contract with two businessmen who have since been accused of bribery.

Hugo and Mariano Jinkis own a company called Cross Trading and bought TV rights for Uefa Champions League football, which they immediately sold on for almost three times the price. The 2006 contract was signed off by Infantino when he was a Uefa director.

Cross Trading also has links to Juan Pedro Damiani, a member of FIFA's Ethics Committee who has already been placed under internal investigation

9. Offshore firms help push up London house prices

The leaked papers shows how many of the most expensive properties in London are owned by foreigners through offshore companies that hide their identities.

House prices in much of the UK are already at eye-watering highs but in the centre of London, they are at a different level. While some British people can afford those prices, many are bought by foreigners.

The attraction is obvious: London is a safe and attractive city and every time there is a crisis somewhere in the world, another swathe of worried wealthy locals decide to put some of their money in London.

That forces up the price of property in central London and that ripples out across the capital and then the country.

London mortgages could be so large in part because of the ease with which Middle Eastern royal families, Russian billionaires and the political leaders of corrupt regimes can use secret offshore companies and how much property wealth they have in London.

10. This is just the start

The list of allegations continues to grow and the scale of the issues involved is also on the rise. So far, we have read only a small percentage of the released documents.

The accusations are likely to increase the pressure on governments to do something.

Jonty Bloom is a Business correspondent with BBC News.



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