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Panama Papers Leak: Centre Orders Probe
Apr 07, 2016

Mossack Fonseca the Panamanian law firm has long been well-known to the global financial and political elite. Now after a massive 2.6-terabyte leak of its confidential papers to the International Consortium of Investigative Journalists (ICJS) the firm is become much better known. A huge team of hundreds of journalists is poring over the documents they are calling the Panama Papers.

The firm's operations are diverse and international in scope, but they originate in a single specialty—helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. Since its founding in 1977, it's expanded its interests outside of Panama to include more than 40 offices worldwide, helping a global client base work with shell companies not just in Panama but also the Bahamas, the British Virgin Islands, and other notorious tax havens around the world.

KEY HIGHLIGHTS

  • ICIJ reports that more-than 11 million documents, date back four decades, are allegedly helped establish secret shell companies and offshore accounts for global power players.

  • ICIJ reports that a 2015 audit found that Mossack Fonseca knew the identities of the real owners of just 204 of 14,086 companies it had incorporated in Seychelles, an Indian Ocean archipelago often described as a tax haven.

  • The documents reference 12 current or former world leaders, as well as 128 other politicians and public officials.

  • The International Consortium of Investigative Journalists has a full profile of political figures and their relatives named in Panama Papers.

Global Connection

  • Vladimir Putin’s inner circle appears to control about $2 billion worth of offshore assets.

  • The Prime Minister of Iceland Sigmundur David Gunnlaugsson secretly owned the debt of failed Icelandic banks while he was involved in political negotiations over their fate.

  • The family of Pakistan's Prime Minister Nawaz Sharif owns millions of dollar worth of real estate via offshore accounts.

  • Ukrainian President Petro Poroshenko pledged to sell his Ukrainian business interests during his campaign, but appears instead to have transferred them to an offshore company he controls.

Iceland PM Resigns: Iceland's Prime Minister Sigmundur David Gunnlaugsson resigned on April 5, becomes the first casualty of Panama Papers Leak. The Panama Papers showed the premier's wife owned an offshore company with big claims on Iceland's banks, an undeclared conflict of interest for Gunnlaugsson, infuriating street protests calling for him to step down. The banks collapsed as the global financial crisis hit in 2008 and many Icelanders blame politicians for not reining in their debt-fueled binge and averting a deep recession.

Pakistan Orders Probe: Pakistani Prime Minister Nawaz Sharif announced the formation of a commission to investigate allegations made in the so-called Panama Papers that linked his family to a series of offshore companies. A high level judicial commission headed by a retired judge of the Supreme Court will investigate the matter.

Indian Connection

  • From India, film stars Amitabh Bachchan and Aishwarya Rai Bachchan to corporates including DLF owner K.P. Singh and nine members of his family, and the promoters of Apollo Tyres and Indiabulls. Two politicians who figure on the list are Shishir Bajoria from West Bengal and Anurag Kejriwal, the former chief of the Delhi unit of Loksatta Party.

  • From Mumbai ganglord the late Iqbal Mirchi, the list includes scores of businessmen with addresses in non-descript neighbourhoods in Panchkula, Dehradun, Vadodara and Mandsaur.

  • Addresses of individuals, in many cases, led to physical locations, but with no trace of the individual.

As per RBI norms, no Indian citizen could float an overseas entity before 2003—in 2004, for the first time individuals were allowed to remit funds of up to $25,000 a year under the Liberalised Remittance Scheme, and this limit stands at $250,000 a year now.

India Sets up Multi-agency Probe: Prime Minister Narendra Modi ordered a multi-agency probe team on the global expose by ICIJ, dubbed the Panama Papers, which found over 500 Indians also had alleged offshore links. A multi-agency group is being formed to monitor the black money trail. The probe team will comprise officers from the Central Board of Direct Taxes' Financial Intelligence Unit, its Tax Research Unit as also officials from the Reserve Bank of India.

What are Shell Companies?

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. Shell companies are often 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.


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