Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Update on Panama Papers – 4/19

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Hasn’t been a lot of breaking news on the Panama Papers lately. Fair amount of follow-up though.

Here are a few articles of interest to me.

  • General update. How massive stories might be staffed in future.
  • More comments on the legitimate of offshore banking.
  • Senior government officials under the spotlight.

General update

4/9 – Fabius Maximus –Those Who Are (and Are Not) Sheltered From the Panama Papers – News we’ve heard thus far is likely just the tip of the iceberg of what will ultimately come out of the massive leak. Article pointed me to the following:

4/8 – Stratfor – Those Who Are (and Are Not) Sheltered From the Panama Papers Most of the damaging information released to date hits the developing world the most. Yet the bigger impact in on the western countries where there is relatively little information.

Article starts with point that the news we’ve read so far is just the start. Also points out the big leaks are growing in frequency and volume over the last several years.

Very long article walks through on a country-by-country basis what has been revealed and how big an issue is present. A few things of interest to me:

Senior politicians are implicated in five of the former Soviet republics.

A number of current or former Politburo members in China have family members involved.

Article dives deep into the possible implications or lack thereof in each of many countries.

4/14 – New Yorker – The Panama Papers and the Monster Stories of the Future – The person leaking the story gave the material to a German newspaper, who did not have the staffing to handle the story.

They gave the material to ICIJ, who assembled a consortium of small papers who worked together. The papers helping had to agree to the story line and a publication date.

Major papers, like the New York Times, Wall Street Journal, all the major networks, and I’m assuming the Washington Post either did not agree to play ball or the ICIJ knew they wouldn’t.

Thus 107 small news agencies (other than the big BBC) cooperated to break the story.

The amazing possibility: perhaps monster stories of the future won’t be broken by the humongous legacy papers – perhaps ad hoc consortiums will do the heavy lifting.

More on the legitimate use of offshore accounts

I’m not sure this nuance will appear in much of the media coverage, but we ought to distinguish between legitimate use of offshore accounts versus the illegal and immoral uses.

4/11 Peter Reilly at Forbes – Panama Papers – Much Foreign Ownership is Innocent – Here are five perfectly legal, very moral reasons to have a foreign corporation:

  • Own real estate – In many places, a foreigner may not own land. Thus, a foreigner owns a shell which owns the house where the foreigner lives.
  • Probate – Depending on local laws, a foreign corp. may not go through US probate.
  • Asset protection – There are legitimate reasons to separate assets from unrelated risks.
  • Investment diversification – Some attractive investments outside the US won’t deal with Americans because of the harsh SEC rules.
  • Operate a business – Lots of reasons it might make more sense to run an overseas business out of an overseas corp. Also could be major tax advantages depending on where you choose your business.

4/18 – Time – This is Why Africans Aren’t As Upset About the Panama Papers Revelations – Article gives two reasons why some observers don’t see as much irritation in Africa over information in the Panama Papers leak as there appears to be in Europe and North America.

The media is paying much less attention because if you step on too many toes you could get hauled into court and might wind up in jail. Lack of press freedom obviously makes reporters and editors less aggressive. I certainly get that.

The other reason is there are legitimate reasons to move your money out of the country. This has two subpoints.

In many countries (and not just on the African continent), if you are in favor with the current regime, there is a serious danger that the next regime will either not like you for some reason or you will just fail to gain their favor. If you don’t have favor with the next regime (and there is no telling when the current government may fall from power – it could be next month or could be in two decades) there is a serious risk someone could just take any of your assets that are desirable.

The other sub point here is if you are a legitimate investor you may not be a buddy to the current regime. In that case you are at risk every day.

In either of these two variations, whether you’re not buddy-buddy with the current regime or you fear the next regime will not like you, you might want to move your investable assets out of the country.

All of these issues arise from the lack of a stable, just legal system.

Update on senior leaders under focus

4/15 – International Consortium of Investigative Reporters – Pakistan’s PM Leaves Country, Spanish Minster Resigns – Prime Minister Nawaz Sharif is in London, visiting a hospital for cardiac checkup. Rumors circulating are making wild guesses he may stay there until the furor over his children having their real estate holdings revealed in the Panama Paper leaks.

The Spanish Minister of Industry, responsible for energy and tourism, resigned after it was revealed he had offshore money.

4/19 – New Indian Express – Sharif Leaves for Pakistan, Promises Probe into Panama Papers Leak – The Prime Minister is heading back home, saying his checkup showed he is in fine health. He is promising to start a major probe into the offshore banking scandal.

Article says as a businessman he is affluent. Article says his business interests are in steel, which I assume means his primary focus is steel manufacturing. His family has a number of offshore companies.

Written by Jim Ulvog

April 19, 2016, 7:56 am at 7:56 am

Posted in Audits, Fraud, Other stuff, Pondering

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