FAQ

By and

Investigative work

- Could you explain how the Panama Papers information was obtained? Could you explain whether such information is in itself complete or if some information may have been either not obtained/ left out of the leak/ not exposed? In other words, how representative is the data that you refer to in your publications for the “offshore world” in general?

Süddeutsche Zeitung obtained the 2,6 terabyte of Panama-Papers-information from an anonymous source calling itself “”. We do not know which percentage of the internal information of the Panamanian law firm this is. We guess it displays pretty much of their business. Süddeutsche Zeitung, ICIJ and its partners with whose Süddeutsche Zeitung shared the data have reported and are still reporting on cases of public interest. As this is such a big amount of data investigations take time. We are pretty sure that there will still be revelations that are at least in parts based on the Panama-Papers-data. The Panama Papers showed that there is a whole parallel world offshore in which the rich and powerful enjoy the freedom to avoid not just taxes but all kinds of laws they find inconvenient. Let’s face the facts: Hiding the real ownership of companies and thus also bank accounts is not an unique approach of Mossack Fonseca and its clients – it is one of the main reasons of individuals going offshore (with Mossack Fonseca’s help or the help of other providers).

- Upon reception of the data, how did you organise your research? How did you select cases to focus on? Every member of the international team that worked (coordinated by the ICIJ) on the Panama Papers had access to the whole dataset. Thus there was no restriction which part to investigate or which not. It was up to the journalistic decision of every journalist and media outlet on which cases to report and on which not. The data provided rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous: hundreds of high ranking politicians, Fifa officials, fraudsters and drug smugglers, to celebrities and professional athletes.

- Did you encounter obstacles (legal, pressure etc. in your investigative work? Have you felt pressure after the publication of the outcome of your inquiry? If yes, could you please explain? Some of the individuals and companies we wrote about hired expensive law firms, which send us long letters why we should not report about their case. Apart from some of these subtile threats of legal consequences fortunately there we no threats against both of us. It was nevertheless shocking to see the negative consequences of the Panama Papers for some of the involved journalists. In Hong Kong the executive chief editor of the Ming Pao newspaper, was dismissed hours after the Panama Papers revelations were made public. The official reason given for the sacking was that the paper had to cut costs. And our newspaper colleagues in Panama had to print the first issues about the Panama Papers at a secret location for fear that someone would use violence to stop their work. One of our Venezuelan colleagues was dismissed by her employer, the pro-regime newspaper Últimas Noticias. The website of our Tunisian partner – the online magazine Inkyfada – was attacked by hackers after it reported on the offshore connections of a former adviser to the president. And in Ecuador, President Rafael Correa tweeted the names of the journalists involved in the Panama Papers investigation. The message was clear: he wanted to put them under pressure.

- Your investigative work could start thanks to the input from an (anonymous) whistle- blower. In your views is there any EU-legislation that (effectively) protects the position of whistle-blowers? No, unfortunately not. And this is a scandal, and a problem we have to solve. The Luxembourg-Leaks have shown the problem: the whistleblowers who uncovered how Luxembourg actually cheated on other EU-member states had to face trial - whereas one of the individuals responsible for the Luxembourg-tax-system is still in a high-ranking EU- position: Jean-Claude Juncker.

Role of intermediaries

- In your opinion, is Mossack Fonseca a singular case of a corporate service provider specialising to such a huge extent on shell companies or are there more and possibly many companies with similar business models? Can you name companies for which you have reasons to suspect that they engage in activities similar in type and scope? Mossack Fonseca is only one of several big players in the offshore-world. Although the lawfirm has shown astonishing unscrupulous behaviour there are other companies offering the same services and behaving, at least that’s what he hear from sources, in a similar unlawful way as Mossack Fonseca.

- Mossack Fonseca is at the centre of the Panama papers. What was its role in setting up shell companies? What was the role of banks and financial intermediaries that worked with Mossack Fonseca? Which conclusions would you draw on the role of - on the one hand- advisors and - on the other hand- banks?

Along with lawyers, asset managers and accounting firms, banks are the biggest players in the offshore business. Very few people contact firms such as Mossfon directly. It is usually their bankers or lawyers who take care of that part. They grease the wheels of the offshore machine: they advise, order and manage. Even for blatant tax evaders, and often, as the Panama papers show, knowingly. The data contains countless examples of advisers explicitly telling Mossack Fonseca, during meetings in random hotel lobbies or at their offices, for example, that their clients have tax problems. Naturally, these conversations took place behind closed doors. It is mainly large financial institutions that send money around the globe – the major US banks, but German banks are pretty good at this business too. Even state-owned banks or banks just saved with state-money help clients to cheat the state.

- In your views, on the basis of this should the regulations on tax advisors and auditors be strengthened? Should the regulations on banks and financial intermediaries be strengthened? If yes, do you have suggestions on how this be done? According to you are the rules in place sufficient? Would you think there is a problem in the implementation or law enforcement? The rules are not sufficient, and where they are, they are not duly applied. We need more control, a public register of Beneficial Owners, a strict handled automatic exchange of tax data, stronger rules for banks, and a new mentality. Because the problem is not only the illegal stuff, the sanctions breaking, drug dealing, arms smuggling. The problem is, as Barack Obama said in May referring to the Panama Papers, “that a lot of this stuff is legal, not illegal.”We have to rethink if we really accept that there’s a one set of rules in our societies for the simple people – and a second one for the superrich. Even EU countries are a part of this problem, as we all know, look at Malta, at Luxembourg, at Ireland.

And we need more resources for law enforcement. We know of many cases in which tax authorities didn’t act as they could have, because of a lack of manpower.

Role of the Commission and EU Member States

- Would you say that some member states devote significantly less resources to enforcing AML legislation and detecting money laundering or tax evasion activities than other member states (relative to the size of their financial sector)? We can only speak for Germany as this is my field of expertise and what we do see hear is chronically under resourced tax-investigators.

- In your views, did the Panama papers reveal any shortcomings in the implementation or application of EU law in relation to money laundering, taxation, banking regulation or with respect to the regulation on some professions (auditors, financial intermediaries,)?

The most discussed EU law was the European Savings Directive, which many banks helped to circumvent by using Offshore Companies. The biggest problem is more, as said, that law enforcement only has limited resources.

- Would you consider that some EU Member States even turn a blind eye to such behaviour, e.g. to promote/raise the attractiveness of their financial centres or protect their own financial industry?

Of course. Without going into details we can say that Malta is a bigger problem, as well as Luxemburg, for example. But we are not specialists on other countries. But also Germany has many issues, we don’t have a public accessible land register, for example. So nobody can really tell what happens in our real estate market. And Germany still allows anonymous shares, which is another problem.

- As far as you are aware of it, do you see that EU and national legislators do recognise this lack of enforcement, and their willingness to act upon this, following your revelations?

We will see. Until now we heard many promises. But the lobby of the financial world has a lot of power…

- The current AML legislation in place in the EU (and worldwide via FATF standard) already require ‘obliged entities’ (usually, but not exclusively banks/ financial institutions) identify the ultimate beneficial owner, and make this information available to competent authorities and financial intelligence units (FIUs). Clearly your revelations in the Panama papers demonstrate that some financial institutions and other intermediaries have not only not met this obligation, but some have actively helped to conceal this information from competent authorities/ FIUs. Would you consider these to be individual cases, which should be for law enforcement bodies and justice departments to follow up; or do you rather consider this a systemic failure by EU Member States to implement and enforce existing law?

We think as long as the fines for misbehaviour are so low, many still choose to take that risk. That’s a problem. So it’s a mix of individual cases and a systematic shortcoming.

International dimension

- At the London anti-corruption summit in May 2016, representatives from the Cayman Islands, Bermuda and the Isle of Man warned that the ‘hypocrisy’ of the US was hurting the global push for greater financial transparency. They put pressure on the U.S. states of Nevada, Wyoming and Delaware to address their lack of corporate transparency. What are your views on this? Did you find evidence of lack of (corporate) transparency in these states?

Of course. Nevada and Wyoming are very problematic, Delaware also, in another sense. Mossack Fonseca even had affiliated companies in Nevada and Wyoming. It’s a huge problem that the US, one of the countries that talk sharply against tax havens, can’t reform their own jurisdictions, because the lobby organisation of the states is too strong.

- In your investigative work, did you find countries that you would consider as more problematic in terms of money laundering or lack of transparency for tax purposes?

It’s a number of countries, that seem really problematic, as seen in the Panama Papers, e.g. BVI, Bahamas, Seychelles, Cyprus, but also many more.

- Besides the usual suspects (Panama, Bahamas, …), figures show that intermediaries were located in countries that are not generally considered as tax havens (UK, Luxembourg, US, Switzerland, Hong Kong), can you explain the role of these countries in the tax schemes set up by Mossack Fonseca? Did you find evidence of loopholes that were used by Mossack Fonseca to secure anonymity of its clients?

Switzerland is a good example. Swiss lawyers firm in Panama as regulated entities, so they are allowed to hold the identity of their clients anonymous. But in Switzerland, those lawyers are self regulated as far as we understand…

Specific issues

- Your investigative work has shown the importance of bearer shares in order to maintain secrecy/anonymity. When the British Virgin Islands cracked down on bearer shares in 2005, Mossack Fonseca moved bearer share clients to Panama. Figures available on your website tend to show that Mossack Fonseca stopped using bearer shares in its tax optimisation schemes (decreasing trend starting in 2005 with almost no use of bearer shares in 2015). Do you know the reasons of this? One of the reasons could be that countries all over the world have abolished bearer shares. Could you however enumerate countries that still have bearer shares? If Mossack Fonseca stopped using bearer shares, do you know by which other scheme they were replaced in order to keep anonymity?

We don’t have the absolute number of countries that still have bearer shares, but it should be easy for the EU parliament to find out. Mossack Fonseca had a range of measures to keep anonymity, for example they used other offshore companies as nominee shareholders, which in turn also were owned by nominee shareholders. Mossack Fonseca even offered the service of “nominee beneficial owners” – natural persons who pretended to be the Ultimate Beneficial Owners (UBO) and acted as UBO when the banks asked for Due Dilligence. Mossack Fonseca denies this, but we have proof. It is clearly illegal.

- Shell companies are not illegal per se. Did you find cases where the setting up of a shell company was not only for tax purposes? If yes so, could you please explain?

There are many purposes users of offshore companies may have in mind. Illegal purposes like tax evading, money laundering, drug dealing, arms smuggling, terrorist financing and others, but also legal purposes, for example for setting up investment vehicles or joint ventures. Still the tax reasons may remain in those cases.

- Have you in your investigative work encountered specific cases of money laundering or tax evasion which you would suspect to be violations of EU law, i. e. pertaining to entities or individuals subject to and in violation of EU law?

The mentioned European Savings Directive and many state laws regulating taxes. But also the whole sanction legislation.

Recommendations?

- What in your views could be an appropriate response by the EU legislator (Parliament and Council) to the Panama Papers?

The EU should call its members to end ALL practises helping this shadowy world, especially countries with deep links into the business. The EU should ban the existence of anonymous companies and obligate its members to start public registers for Beneficial Owners of companies and land.

At the same time the EU shall use its power in the world to abolish tax havens and secretive jurisdictions, those on small islands, but even more those that exist on UK territory or in certain states of the US. The EU has not devoted the necessary resources to this problem yet, so there’s a long way to go. Not only in the interests of all tax payers, but also to fight terrorism financing, money laundering, arms smuggling and drug dealing.

General

- On the basis of the outcome of the Panama Papers, in your view, are there ways to reconcile democracy and globalisation? What interaction do you see, based on your work, between, on the one hand, the structural features of globalisation (such as guarantees for the free movement of capital) and the problem of offshore finance and, on the other hand, the capacity of governments to actively regulate and constrain practices that have been laid bare in the Panama Papers?

The offshore world is not designed for the blue-collar worker or the average earner. It’s not for the 99%. The Panama Papers showed us you need to own at least a solid million euros if you want to go offshore and see your taxes drop. And the more you have, the easier it is to pay less tax. This is wrong and we have to stop it. To be precise: we, politicians, citizens, taxpayers, have to stop it. The rules that govern how lower- and middle-income earners pay tax have to apply to everybody. Otherwise our democracy is at stake. People will lose faith. There are already signs of deep hatred towards the elites and scorn for democracy. This will only increase if politicians keep ignoring this issue. Because here’s the thing – people know the world has got less equal. And we all know what happens when faith in democracy diminishes: people vote for politicians who offer simple solutions, they vote for populists, for racists, for fascists.