Huge Blackmail Potential in the Panama Papers

"Forget Panama, Just go to Delaware"

Forget Panama, the US is one of the world's biggest tax havens

NZ Herald,

6 April, 2016

The single-story brick building at 1209 North Orange St. in downtown Wilmington, United States, looks bland and innocuous. But the building, home to the Corporation Trust Company, has an intriguing claim to fame. In the last few years, it has served as the registered address for more than 250,000 businesses, giving companies around the world access to Delaware's business-friendly laws.

During his 2008 presidential campaign, Barack Obama criticized Caribbean tax havens.

He mentioned one building in the Cayman Islands that is the registered home of more than 12,000 US-based corporations, saying, "That's either the biggest building in the world or the biggest tax scam on record." But as the example of 1209 North Orange St. demonstrates, the same activity is going on in President Obama's backyard.

A massive leak of confidential documents from Mossack Fonseca, a law firm in Panama that helped wealthy clients set up anonymous companies in tax havens, is highlighting how the global offshore industry secretly invests massive amounts of wealth around the globe. The 11 million leaked documents cover 40 years of the law firm's operations and allegedly touch on the financial dealings of 12 current or former heads of state, as well as 60 more people linked to world leaders.

The documents, which have not been reviewed by The Washington Post, allege connections among offshore accounts set up by Mossack Fonseca and money laundering, bribery and tax evasion, among other charges, according to The Guardian, the International Consortium of Investigative Journalists, and other publications that accessed the documents.

Mossack Fonseca largely helped its clients set up offshore accounts in the kind of tropical locations that people typically think of as tax havens - the British Virgin Islands, Panama, the Bahamas and the Seychelles - countries that do play a big role in shuttling the wealth of the world's richest people around the globe.

But one of the least recognized facts about the global offshore industry is that much of it, in fact, is not offshore. Indeed, some critics of the offshore industry say the US is now becoming one of the world's largest "offshore" financial destinations.

We often say that the US is one of the easiest places to set up so-called anonymous shell companies.

"We often say that the US is one of the easiest places to set up so-called anonymous shell companies," says Mark Hays, a senior advisor with Global Witness, an NGO that advocates for financial transparency.

Offshore isn't so much a destination anymore as "a set of capabilities," which include ensuring secrecy, minimizing taxes, managing assets, and providing clients security and access to their wealth from anywhere in the world, James Henry, a senior adviser to the Tax Justice Network and former chief economist of McKinsey & Co, wrote in a 2012 report. The Tax Justice Network ranks the US third in terms of the secrecy and scale of its offshore industry, behind Switzerland and Hong Kong but ahead of the Cayman Islands and Luxembourg.

Panama City. Photo / iStock

A 2012 study in which researchers sent more than 7,400 email solicitations to more than 3,700 corporate service providers -- the kind of companies that typically register shell companies, such as the Corporation Trust Company at 1209 North Orange St. -- found that the US had the laxest regulations for setting up a shell company anywhere in the world outside of Kenya. The researchers impersonated both low- and high-risk customers, including potential money launderers, terrorist financiers and corrupt officials.

Contrary to popular belief, notorious tax havens such as the Cayman Islands, Jersey and the Bahamas were far less permissive in offering the researchers shell companies than states such as Nevada, Delaware, Montana, South Dakota, Wyoming and New York, the researchers found.

Part of the reason that the US looks so attractive as a tax and secrecy haven is that the country has not signed on to new global disclosure standards that are forcing anonymous companies to reveal their real owners around the world. Compared with other developed countries, and even traditional offshore destinations such as Switzerland and the British Virgin Islands, the US now appears to be among the most lenient and secure destinations for the fortunes of the global rich.

In some places [in the US], it's easier to incorporate a company than it is to get a library card.

Since the late 1990s, the "onshore-offshore" market in the US has blossomed, as states have competed with each other to provide inexpensive limited liability corporations and asset protection trusts with levels of secrecy and tax advantages similar to those of traditional offshore havens, writes Henry of the Tax Justice Network.

In many American states, people registering shell companies do not need to show a form of identification, like a driver's license or passport, and corporate service providers aren't required to verify the identity of the person who owns the company, called "the beneficial owner," or know what the company is for. The beneficial owner may be asked to give their name, address and phone number, but for an additional fee, the corporate service provider can provide a "nominee" to take their place as the public face of the company -- a person who controls the company in name but not in reality, disguising the beneficial owner's identity.

"In some places [in the US], it's easier to incorporate a company than it is to get a library card," Joseph Spanjers of Global Financial Integrity, a research and advocacy organization that wants to curtail illicit financial flows, said in an interview earlier this year.

There's nothing inherently wrong with shell companies, which are inactive companies without assets or operations. Sometimes shell companies are used for legitimate purposes, such as when companies use them to temporarily conceal the development of a new product until its release, or make an investment in a new technology without alerting competitors. Anonymous companies also help protect the privacy of wealthy individuals, including hiding personal wealth to diminish the risk of kidnapping.

A marquee of the Mossack Fonseca law firm, in Panama City. Photo / AP

Too often, however, shell companies are used as a vehicle for criminal activity -- disguising wealth from tax authorities, financing terrorism, concealing fraudulent schemes, or laundering funds from corruption or the trafficking in drugs, people and arms. A report published by Global Witness in 2014 detailed some of the nefarious purposes shell companies have been used for in the US, including setting up sham companies that tricked elderly people into investing in worthless business schemes, laundering millions of dollars from Mexican drug cartels, accepting political bribes, and circumventing US sanctions against Iran.

Critics of the industry say that those worried about these practices must be concerned about anonymous companies, which are instrumental in funding and concealing them from law enforcement investigations.

In the secretive offshore industry, estimates for how much money is invested through shell companies registered in the U.S. are hard to come by. But anecdotes suggest that this laxity of regulation has led to the creation of many anonymous companies in the US that could be used for nefarious purposes. US firms are legally prohibited from knowingly helping customers to avoid taxes, but they can offer them privacy and secrecy, and ask very few questions.

Washington's independent-minded approach risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime.

Reporting by Bloomberg detailed how lawyers, trust companies and financial firms including Rothschild are moving offshore accounts from locations such as Switzerland and Grand Cayman Islands into the U.S. to take advantage of the country's relative lax regulations. Nearly half of residential properties purchases of over $5 million made in the US in the last few years were carried out by anonymous shell companies, data analyzed by the New York Times has shown.

These trends are in part the result of changing global regulations since the financial crisis, which are making the US look even more appealing as a financial destination.

Since the financial crisis, developed countries have led a crackdown on global tax havens, as a way to recover revenue and mitigate skyrocketing inequality. In 2010, the United States implemented legislation called the Foreign Account Tax Compliance Act, or FATCA, in hopes of catching American tax cheats. The law required financial firms around the world to report accounts held by US citizens to the Internal Revenue Service - or else face being frozen out of the US financial system.

[Americans] discovered that they really don't need to go to Panama.

In response, the Organization for Economic Co-operation and Development, a group of 34 advanced countries, drew up its own tough tax disclosure requirements, called Common Reporting Standards, and asked roughly 100 countries and jurisdictions around the world to approve them. Only a handful of countries have refused, including Bahrain, Vanuatu and the United States.

The United States argues that since its program is similar to Europe's, it doesn't need to join it - instead, the United States plans to sign bilateral agreements with other countries. But in the interim, the United States is not providing European countries with the kind of data it is requesting from them -- creating an incentive for financial firms to move their business to the United States. The result is, basically, a "disaster," says the Tax Justice Network, a research and advocacy group.

"Washington's independent-minded approach risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime," the group says in a report on the US.

European countries are passing other regulations to lift the veil on the kind of secrecy shell companies create. The U.K. has created a public registry for companies, which allows anyone to freely look up the beneficial owners of all British companies. Meanwhile, the EU has passed a sweeping anti-monetary directive, under which countries are setting up company registries that will be available to law enforcement, as well as the public and the media by special request.

In the US, Global Witness and other groups are pushing for similar legislation. Reps. Carolyn Maloney, D-N.Y., and Peter King, R-N.Y., and Sen. Sheldon Whitehouse, D-R.I., have introducing a bill calling for all shell companies registered in the US to report their real owner, called a "beneficial owner."

But the bill has faced resistance from Delaware, Nevada, Wyoming and other states through an organization called the National Association of Secretaries of State, who worry about the loss of tax revenues and the burden of regulation.

So far, the documents from Mossack Fonseca have not implicated American politicians or other wealthy people, according to Fusion, which reviewed the leaked material. Those names may yet emerge, though, in an interview with Fusion, Henry of the Tax Justice Network suggests that there is a reason for their absence.

The US has an onshore haven industry that is as secretive as anywhere, Henry said. "[Americans] discovered that they really don't need to go to Panama."

- Washington Post

Panama is new Switzerland of this world, US preparing for big financial crisis’ – Ernst Wolf

Washington is behind the recently released offshore revelations known as the Panama Papers, WikiLeaks has claimed, saying that the attack was “produced” to target Russia and President Putin.

Journalist and author Ernst Wolf talks to RT on Panama Papers

Selective Leaks Of The #Panama Papers Create Huge Blackmail Potential. “Smear People the U.S. Dislikes”

By Moon of Alabama

Global Research,

4 April, 2016

A real leak of data from a law firm in Panama would be very interesting. Many rich people and/or politicians hide money in shell companies that such firms in Panama provide. But the current heavily promoted “leak”of such data to several NATO supporting news organization and a US government financed “Non Government Organization” is just a lame attempt to smear some people the U.S. empire dislikes. It also creates a huge blackmail opportunity by NOT publishing certain data in return for this or that desired favor.

Already some 16 month ago Ken Silverstein reported for Vice on a big shady shell company provider, Mossak Fonseca in Panama. (Pierre Omidyar’s Intercept, for which Silverstein was then working,refused to publish the piece.) Yves Smith published several big stories about the Mossak Fonseca money laundering business. Silverstein also repeated the well known fact that Rami Makhlouf, a rich cousin of the Syrian president Assad, had some money hidden in Mossak Fonseca shell companies. He explains:

To conduct business, shell companies like Drex need a registered agent, sometimes an attorney, who files the required incorporation papers and whose office usually serves as the shell’s address. This process creates a layer between the shell and its owner, especially if the dummy company is filed in a secrecy haven where ownership information is guarded behind an impenetrable wall of laws and regulations. In Makhlouf’s case—and, I discovered, in the case of various other crooked businessmen and international gangsters—the organization that helped incorporate his shell company and shield it from international scrutiny was a law firm called Mossack Fonseca, which had served as Drex’s registered agent from July 4, 2000, to late 2011.

A year ago someone provided tons of data from Mossak Fonseca to a German newpaper, theSueddeutsche Zeitung. The Munich daily is politically on the center right and staunchly pro NATO. It cooperates with the Guardian, the BBC, Le Monde, the International Consortium of Investigative Journalists and some other news organization who are all known supporters of the establishment.

The SudDeutsche Zeitung claims that the “leaked” data is about some 214,000 shell companies and 14,000 Mossak Fonseca clients. There is surely a lot of hidden dirt in there. How many U.S. Senators are involved in such companies? Which European Union politicians? What are the big Wall Street banks and hedge funds hiding in Panama? Oh, sorry. The Sueddeutsche and its partners will not answer those questions. Here is how they “analyzed” the data:

The journalists compiled lists of important politicians, international criminals, and well-known professional athletes, among others. The digital processing made it possible to then search the leak for the names on these lists. The “party donations scandal” list contained 130 names, and the UN sanctions list more than 600. In just a few minutes, the powerful search algorithm compared the lists with the 11.5 million documents.For each name found, a detailed research process was initiated that posed the following questions: what is this person’s role in the network of companies? Where does the money come from? Where is it going? Is this structure legal?

Essentially the SudDeutsche compiled a list of known criminals and people and organizations the U.S. dislikes and cross checked them with the “leaked” database. Selected hits were then further evaluated. The outcome are stories like the annual attempt to smear the Russian president Putin, who is not even mentioned in the Mossak Fonseca data, accusations against various people of the soccer association FIFA, much disliked by the U.S., and a few mentions of other miscreants of minor relevancy.

There is no story about any U.S. person, none at all, nor about any important NATO politician. The highest political “casualty” so far is the irrelevant Prime Minister of Iceland Sigmundur David Gunnlaugsson who, together with his wife, owned one of the shell companies. There is no evidence that the ownership or the money held by that company were illegal.

So where is the beef?

As former UK ambassador Craig Murray writes, the beef (if there is any at all) is in what is hidden by the organizations that manage the “leak”:

The filtering of this Mossack Fonseca information by the corporate media follows a direct western governmental agenda. There is no mention at all of use of Mossack Fonseca by massive western corporations or western billionaires – the main customers. And the Guardian is quick to reassure that “much of the leaked material will remain private.”What do you expect? The leak is being managed by the grandly but laughably named “International Consortium of Investigative Journalists”, which is funded and organised entirely by the USA’s Center for Public Integrity. Their funders include

Ford Foundation
Carnegie Endowment
Rockefeller Family Fund
W K Kellogg Foundation
Open Society Foundation (Soros)

The International Consortium of Investigative Journalists (ICIJ) is part of the Organized Crime and Corruption Reporting Project (OCCRP) which is financed by the U.S. government through USAID.

The “leak” is of data selected by U.S. friendly organization out of a database, likely obtained by U.S. secret services, which can be assumed to include much dirt about “western” persons and organizations.

To only publish very selected data from the “leaked” data has two purposes:

• It smears various “enemies of the empire” even if only by association like the presidents Putin and Assad.
• It lets other important people, those mentioned in the database but not yet published about, know that the U.S. or its “media partner” can, at any time, expose their dirty laundry to the public. It is thereby a perfect blackmailing instrument.

The engineered “leak” of the “Panama Papers” is a limited hangout designed to incriminate a few people and organization the U.S. dislikes. It is also a demonstration of the “torture tools” to the people who did business with Mossak Fonseca but have not (yet) been published about. They are now in the hands of those who control the database. They will have to do as demanded or else …