The only good news for South Africans in the explosive #PanamaPapers scandal is that their deeply flawed President Jacob Zuma is not the only global leader trading influence for financial gain. In Zuma’s case, though, the actions are particularly distasteful, risking the lives of uniformed countrymen to feather his family’s nest. The leaking of 11.5m documents from Panama-headquartered law firm Mossack Fonseca included many that were top secret. They expose the link between a meeting with the DRC’s leader Joseph Kabila and subsequent deployment of SA troops in that country. Quid pro quo was a gift by Kabila’s Presidential decree of two massive oil-bearing blocks to the Zuma family. That the reallocation as part of the Presidential deal would severely impact public opinion seemed to matter not to the involved parties. Neither did the fact that the previous owner, LSE-listed Tullow Oil, owned the adjacent rights in Uganda and had won the DRC blocks four years before in a transparent bidding process. Needs must, it seems, in the world of this continent’s Big Men. But for South Africans, any number of questions flow from the long rumoured Zuma/Kabila deal now that hard evidence is surfacing in the wake of the Mossack Fonseca expose. Where in the Constitution, or the ANC’s own rules, is the President allowed to risk the lives of SA soldiers in return for blocks of oil-rich land given to his own family? If the deal was above board, why was it necessary for Zuma’s nephew Khulubuse to employ a stinky law firm headquartered in Panama to create secretive offshore structures to hide true ownership of the Zuma family’s gifted DRC assets? And when did South Africans agree to endorse reallocation of a multinational’s fairly acquired property? Overlay Guptagate, and it should be clear even to Zuma loyalists that new rules are desperately needed to govern the financial manouvering of political leaders. Not just in South Africa, as this Financial Times update on the #PanamaPapers illustrates. – Alec Hogg
A huge leak of data from Panama has exposed a web of secret offshore companies that has allegedly been used to hide wealth, evade taxes and launder money. Hundreds of politicians, business people and sportspeople, including 72 current or former heads of state, have been implicated in the findings published by the International Consortium of Investigative Journalists (ICIJ).
What has been leaked?
The report is based on a data leak from Mossack Fonseca, a Panamanian law firm, of 11.5m records for 214,488 entities connected to people in more than 200 countries or territories. The leak includes emails, financial spreadsheets, passport information and corporate records. It spans almost 40 years, from 1977 through to the end of 2015.
Do the findings reveal wrongdoing?
The ICIJ says that “most of the services of the offshore industry are legal if used by the law abiding”. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements designed to ensure clients are not involved in criminal enterprises, tax dodging or political corruption.
Mossack Fonseca says its findings reveal cases of money laundering, tax evasion and sanctions-busting. This includes at least 33 people and companies blacklisted by the US government because of evidence of activities such as doing business with Mexican drug lords, terrorist organisations such as Hizbollah, and rogue nations including North Korea and Iran.
The firm told the ICIJ that it “does not foster or promote illegal acts”. It described the data theft as a crime and said privacy was “a fundamental human right that is being eroded more and more in the modern world”.
Are there precedents?
A. This is the latest in a series of leaks of data from firms operating in secretive jurisdictions including Switzerland and the British Virgin Islands. In 2013, for example, the ICIJ published data showing government officials in China, Russia, Mongolia and elsewhere were using secret companies and bank accounts. But the latest tranche of data is bigger and features more high profile figures than that involved in previous leaks.
Is Panama particularly secretive?
A. Panama has long had a reputation for secrecy and was perceived to be immune to international pressure because of the importance of its canal. Until recently, it was just one of many secretive jurisdictions. But as other tax havens have bowed to international pressure to become more transparent, its reputation as a haven for dirty money has become entrenched.
What will the impact be?
Tax authorities in countries such as Australia, New Zealand and the UK have already said they are ready to follow up allegations of tax evasion and money laundering resulting from the leak of the confidential data. But as well as affecting individuals, the release of the Panama Papers is likely to have a big impact on the global crackdown on tax havens.
Panama is the most significant financial centre to hold out against a global transparency initiative. It is one of just four jurisdictions – including Bahrain, Nauru, Panama, Vanuatu – that have refused to sign up to global transparency rules, apart from the US, which has adopted similar but different rules. The leaked data will shine a spotlight on Panama’s refusal to exchange tax data automatically with other countries and put pressure on legitimate businesses to consider whether to continue using the country.
(c) 2016 The Financial Times Ltd.
