‘Panama Papers’ is just half of the story, says US researcher

A US researcher says the ‘Panama Papers’ exposing how the rich and powerful use tax havens to hide their wealth are only one side of the story and unless it is seen what big states like the US are “doing, and not doing”, the other side will remain unknown.

News Deskbdnews24.com
Published : 20 April 2016, 12:38 PM
Updated : 20 April 2016, 12:38 PM

Jason Sharman, who teaches governance and public policy at the Griffith University, with his two colleagues ran their own investigation in 2009 to understand how offshore companies and bank accounts worked.

The Panama Papers are over 11 million documents leaked from Mossack Fonseca, one of the largest law firms in the world based in Panama specialising in offshore accounts and incorporation of shell companies.

Sharman described in his article, published by the Washington Post this month, that he along with Michael Findley and Daniel Nielson “pretended to be crooks and terrorists and tried to buy shell companies”.

“...so in 2009 I went shopping to see if I could buy my way into the financial system without having to prove who I really was, directly violating international financial transparency rules that require firms to ‘Know Your Customer’,” reads the article.

The trio approached 54 firms, like Mossack Fonseca, who advertised that they provided services to form shell companies. Some of these were based in tax havens like Panama, the Cayman Island while others were in the US and other OECD countries.

“The result I found was startling. It was much easier to set up a company without having to prove my identity in the United States and other ‘onshore’ countries than in the offshore havens,” Sharman said in the article.

A firm in Wyoming offered them to sell an untraceable shell company as well as a bank account held in the name of the company.

And that’s not all, they also suggested to pay for one of their employee’s Social Security numbers to ‘further obscure the trail’.

However, a tax haven-based firm required sending a scanned and authenticated copy of the picture page of passport before proceeding with business.

In his article, Sharman mentions a similar investigation in 2012 by a journalist of the US’s National Public Radio (NPR).

The NPR journalist managed to set up two companies — one in the tax haven of the central American country of Belize, and the other in the US state of Delaware.

“The result was the same: the Belize firm followed the Know Your Customer rule, but the Delaware firm supplied the shell company, no questions asked,” writes Sharman.

The question that popped up to Sharman and his colleagues now is how the US is facilitating shell companies more easily then in havens like Panama or the British Virgin Islands.

That led them to adopt a larger scheme, a project they named ‘Global Shell Games’, in which they impersonated a group of 21 would-be money launderers, corrupt officials and terrorist financiers

Over 7,000 emails were sent to firms like Mossack Fonseca to set up untraceable shell companies in 180 countries and in which, they wanted to know whether a proof of identity was required.

Sharman says that yielded them the answer to three important questions. “The answers were counter-intuitive – and very worrying.”

About half of the firms asked for proof of identity in compliance with international rules; almost a quarter did not ask for any at all.

The second fact that came out was firms were just as comfortable to do business with high-risk customer as those with low-risk profiles, but with partial exception on who presented with terrorism financing risks.

The third reinforced the fact they had already found — tax haven-based firms are much more likely to follow international rules than firms in US and other OECD countries.

“Does this mean that Mossack Fonseca and other offshore firms are blameless?” asks Sharman before providing with the answer that they should be punished if found facilitating ‘misdeeds.’

In context of the 200,000 offshore companies that appeared in the leaked documents from Mossack Fonseca, Sharman said over 15 million companies were incorporated in the US.

His article ends with the advertising pitch of a US firm to sum it up all.

“A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy. A person you control… yet cannot be held accountable for its actions. Imagine the possibilities!”