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The Panama Papers
The opening salvo about
the Panama papers hit the news over the weekend. Eleven million and a half of
records about a quarter million offshore clients hit the sunlight, compliments
of a hacker who got access to a major law firm’s systems. Of course, it wasn’t
really a surprise: it was known that the International Consortium of Investigative
Journalists (ICIJ) had its hands on something big. The surprise is that it is
really big, bigger than all the “Leaks” that came before.
The leak is about a life’s
work at the Panama based law firm Mossack Fonseca, with their total of about
240,000 companies created over the years. The firm’s reaction is of course that
a crime was committed against it. The manuscript is the same than it was for the
defense in Luxleaks and others before: everything is legal, the anonymous
whistle blower committed a crime, and other tax havens do the same. It is a
difficult and long term a losing proposition:
1.
There are probably many wealthy
individuals who chose or were advised to set up a Panamanian company. If it is
transparent, and is not strictly for tax evasion purposes, but for tax “optimisation”
and asset protection, then no crime was committed. It is however that kind of
publicity that a tax haven and its prominent wealthy client really don’t want.
Public opinion will be unforgiving. Mostly among the well-known 99% who cannot
afford similar privilege and tax breaks.
2.
Then there is the corrupt world of world
leaders, sometimes from the poorest countries stealing from their people. The
Presidents for Life, the dictators, the kleptocrats, and the professional
politician who is for sale. In that tango it takes at least two, the corrupted
and the corrupting party, without forgetting the enabler, banks, law firms,
advisors, and all the other “willfully blind”. Most of the latter are not in
Panama. They are in this case in the order of performance: in Hong Kong,
Switzerland, the UK, and Luxembourg.
3.
Then there are the proceeds from other crimes.
Criminal organizations, grand theft, human trafficking, and extortion. Even a
tax haven cannot prosper for long, catering to that sort of clientele.
Eventually political pressure will put it to an end.
There will be no business
as usual in Panama anymore. Of course the country has to clean up to preserve
its financial center. Mossack Fonseca will have some explaining to do. The
excuse “are we supposed to verify if the client is honest?” doesn’t sit well.
Ask us in Luxembourg. The only good news is that previous leaks elsewhere went
by without any real sanctions so far. But Panama Papers will entertain the
world for some time.
As for Luxembourg, it is
not off the hook. There needs to be some explaining too. There is no longer the
lone exception of the famous “Panama Charly”. Hopefully all enablers that
suddenly put Luxembourg into fourth position among the business providers, have
their orchid-white vest on.
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