Either there hasn’t been much going in the money laundering news or I’ve not paid enough attention. On the other hand, governmental investigations are run behind the scenes. Perhaps the regulators are working out of sight.
Here are a few articles I’ve noticed in the last few months.
In their research they have only found 2,400 Americans who ran money through companies set up by Mossack Fonseca, none of them high-profile, and apparently none of them from the political world.
Article tells the tale visible from correspondence for a few people who had already built a private fortune and then decided to park money overseas.
The basic asset protection shell structure includes two entities: a for-profit into which money is moved from the US, and a Panamanian based foundation which receives a contribution from the first shell, thus protecting the money from litigation, taxation, or disclosure.
As a general concept these ideas apply to every business and charity. Getting ready in advance of a media firestorm will improve your chances of surviving the onslaught.
new revelation of an old technique to launder money,
US government actions to reduce laundering that look to me like they are just eyewash, and
small investors in a local real estate project appear to be investors working through the Panamanian system.
5/5 – Star-Telegram – Panama law firm used charities’ names as cloaks for clients – One of the schemes used in hiding money through offshore companies is setting up a foundation under Panamanian law. A private foundation can be set up which requires three directors, two of which must be publicly disclosed. Intended beneficiaries must be identified but could be changed before any funds disbursed.
The way this works is the two named individuals work for the law firm while the third undisclosed person is the person hiding money. The undisclosed person calls the shots with the two staff people from the law firm following instructions. The beneficiaries can be changed at any time.
Panama will be shutting down the bearer share concept for documenting ownership of a company. ICIJ plans to release a huge database on shell companies. Also some reasons I would have an offshore company or maybe five if I was a billionaire or high official in a corrupt country.
Article wonders why the rulers in an absolute monarchy would want to park money in anonymous offshore accounts. Article suggests there isn’t any need to do so since absolute rulers not only own the country but decide by themselves what is legal and illegal.
The reason can be found by looking around after the Arab Spring. It seems like in just a flash the governments of Tunisia, Libya, and Egypt collapsed. Even the current prime minister of Pakistan was ousted (he has since regained power) and had to flee for his life.
The longer answer for hiding money in offshore accounts is it that when things can change overnight, you need to have someplace to run and some money to work with. An escape plan.
And then there are the super rich people who made their money legitimately.
The best stories to be told as a result of the massive data leak cannot yet be written.
Why?
The really smart people use multiple layers of shell companies to hide assets. When laundering money, one should move assets through a series of companies, with each subsequent jump being anonymous.
A long time ago I attended a continuing education class helping CPAs understand fraud. Why are such classes required? So that, hopefully, maybe, CPAs will be able to recognize fraud when it stares them in the face during the course of an audit.
During the class, the instructor went off script and explained to us how to launder money.
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.
Here are a few articles I found of interest in the last few days on offshore banking as revealed by the Panama Papers leak.
4/7 (from 4/9 print edition) – The Economist – A torrential leak– Not much news to me or to you if you’ve been reading my posts this week. This would be a great introduction if you have just tuned in.
A couple of tidbits. The law firm involved worked with around 14,000 law firms, incorporation companies, and banks, according to an estimate by ICIJ. Somewhere around 500 banks were involved in setting up companies. HSBC reportedly set up around 2,000 shell companies.
4/6 – Politico – Panama Papers pose ethics issues for U.S. prosecutors– Apparently there is a massive roadblock for the DoJ using all the materials in the data dump. Prosecutors are not allowed to even look at material that they think might be covered by attorney-client privilege. That makes it an issue to look at anything that came out of a law firm. Many documents are under attorney-client protection and almost all documents might be so covered.
The primary focus in media coverage is on tax evasion. There are other ways to look at the offshore industry. There are more and deeper legal issues involved. The tax evasion concerns under discussion are just the starting point on the list of issues that ought to generate irritation.
Following articles provide a variety of alternative views of what is going on in the Panama Papers leaks. That the articles I mention contradict each other illustrates my point that there are more issues involved than just tax evasion.
Question for you to ponder: Why have people been hiding their money for over 2,000 years?
In 1934 when Switzerland made it a crime for a banker to reveal a customer’s name, they were a bit behind the curve. Liechtenstein, Luxembourg, and Bermuda were tax havens a couple of decades earlier. As a depressing note, the Swiss offered confidentiality for a fee all the way back in 1789.
