Trending: Panama Papers Update and Weekly Roundup

 In Anti-Money Laundering, Political Corruption

“Panama Papers” Effects on Tax Evasion

In early 2016, the leak of what was conveniently coined the “Panama Papers” rocked both the legal and financial industries at the international level. The scandal, centered around one of the world’s larger offshore law firm’s, Mossack Fonseca & Co., is filled with enough dramatic twists and shocking developments that one could find it fit to be a worthy plot for a Hollywood picture. The over-11 million leaked documents revealed multiple international figures in seats of political power that were involved in the creation and use of offshore entities to avoid paying taxes and to facilitate money laundering activity. Since these incidents came to light, it has been found that “twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens” (Harding, 2016). A few of the more notable leaders discovered to be a part of the scheme were Pakistani Prime Minister Nawaz Sharif, former Prime Minister of Iraq Ayad Allawi, Ukrainian President Petro Poroshenko, and Iceland’s Prime Minister Sigmundur Gunnlaugsson. Several of these figures have resigned from their respective posts since the documents were leaked. Additionally, according to the BBC, “the leak also revealed that more than 500 banks, including their subsidiaries and branches, registered nearly 15,600 shell companies with Mossack Fonseca” (BBC News, 2016). Yet the most drastic discovery made through the file leak however was undoubtedly the multi-billion dollar money-laundering ring that had unbelievably close ties to Russian President Valdimir Putin.

Although representatives from Mossack Fonseca have denied any wrongdoing in relation to this case, and continue to maintain their compliance with anti-money laundering (AML) laws, their standing as a reputable organization has nonetheless taken a significant blow. Efforts have been made to hinder activity of this nature from occurring in the future, with legislation proposals to set up a “central register that will reveal the beneficial owners of offshore companies” on the agenda for national governments of countries marred by political corruption and “unethical” financial activity across the globe (Harding, 2016). In addition, companies within the United Kingdom are now required to reveal their significant beneficial owners for the first time in history.

As bleak as the Panama Papers leak made the battle against tax evasion and money laundering look at the time, positive changes like those in the aforementioned policies are taking place on a daily basis globally, with more improvements to come in the near future. The Bloomberg article “EU Panama Papers Investigators to Hold Secret London Talks” cited in BSA News Now on Friday, February 10th, 2017, discusses a new development in the ongoing fight against illicit global activity. Writer Ben Stupples reports, “The European Parliament’s Panama Papers inquiry committee will hold secret fact-finding meetings in London [on February 10th and 11th] to identify global strategies against tax evasion” (Stupples, 2017). The committee will meet with accounting and legal professionals, as well as other non-governmental groups and individuals to discuss the creation of a plan of action to mend the loopholes and gaps created by incomplete or outdated compliance legislation governing the UK. The committee is also aiming to cut down on “constructive non-compliance” – where a member state has compliance and AML laws on paper, but has yet to implement the necessary changes. Among the non-governmental organizations the committee will be meeting with to discuss potential changes in legislation are HSBC (Britain’s largest bank), the Law Society of England and Wales, and the Institute of Chartered Accountants of England and Wales (Stupples, 2017).

Overall, these meetings are being viewed as potentially very constructive, as many believe that they will allow for the parties involved to make educated suggestions on areas that can be improved upon, and will also allow for the parties to share information on what was learned from the Panama Papers data leak. Altogether, the U.K. continues to set the tone for the rest of the world in regards to data analysis and use of their findings to help cut down on the amount of improper activity that is occurring within their borders.

Weekly Roundup

U.S. Stock Fraud Leads to Jail Time

Earlier this week, two U.S. citizens were sentenced to prison due to their involvement in a $250 million money laundering and stock fraud scheme. At the forefront of this scandal is the relatively unknown Cynk Technology Corp., a social media company that rose to international infamy by maintaining a stock market value upwards of $4.5 billion in 2014, yet continually suffered large financial losses and had no revenue or assets. It has been reported that at one point, the company’s share price rose from 6 cents to $21.95 in less than a month’s time (Raymond, 2017). Cynk was the most prominent of the 40 companies on record whose shares were manipulated, ultimately resulting in “$250 million in proceeds that were laundered through offshore law firms” (Raymond, 2017). The group conducting the stock fraud, headed by Gregg Mulholland, primarily conducted their schemes via the use of shell companies and offshore brokerage firms that were originally established by Robert Bandfield.

Mulholland has an extensive history of high-profile unethical conduct relating to fraud, having just recently been the subject of a lawsuit brought against him by the U.S. Securities and Exchange Commission stemming from past fraud-related incidents. Mulholland was sentenced to 12 years in prison as a result of orchestrating the “pump-and-dump” stock scheme, while Bandfield was given a six year sentence.

Tobacco Smuggling & Terrorism

The article “EU anti-fraud official: Tobacco smuggling is ‘major source’ of organised crime”, cited by BSA News Now on February 8th, 2017, provides the transcripts of an interview conducted by Euractiv.com on Margarete Hofmann, the

director of policy at the European Anti-Fraud Office (OLAF). In the interview, Hofmann discusses one of the major talking points, and areas of concern, within the European Union (EU) today: the illicit tobacco trade and the problems it poses for the European economy. According to Hofmann, “tobacco smuggling costs national and EU budgets more than €10 billion annually in lost public revenue” (Michalapoulos, 2017). Hofmann also explains that in some member states, the amount of illicit tobacco activity is worrisome, due to the fact that cigarette smuggling is a large source of revenue for organized criminal groups.

To combat this troubling trend, OLAF has carried out numerous investigations into tobacco smuggling throughout Europe, confiscating approximately” 619 million cigarettes in 2015” (Michalapoulos, 2017). Additionally, OLAF has become increasingly involved in the “Joint Customs Operations” (JCO’s) of several European countries in an attempt to combat the smuggling efforts seen in “problematic” trade routes in Europe. Hofmann concludes the interview by discussing how smugglers are improving their craft and becoming more creative in regards to concealing the goods they are trafficking. Hofmann suggests that these advancements make cooperation between OLAF and Europe’s national authorities vital in order to cut down illegal distribution networks found within the continent and prevent additional revenue losses in the EU.

Brazilians Reap Corruption Reform Benefits

It seems that after a long, difficult battle with the political and economic corruption that has plagued the country for decades, positive socioeconomic changes appear to be on the horizon for Brazil. The article “Just rewards of Brazil’s anti-corruption triumphs”, cited in BSA News Now on Thursday, February 9th, 2017, explains “Latin America’s largest economy is showing signs of growth, including a surprising rise in consumer confidence” (Monitor’s Editorial Board, 2017).

A movement led by federal prosecutor Deltan Dallagnol has pressured Brazilian Congress to pass pieces of legislation that would help to better prevent and detect corruption of all forms within the country. These efforts have conflicted with the stance put forth by Brazilian lawmakers however, as they are hesitant to accept such reforms. Dallagnol believes that the greater the education on the negative effects of corruption throughout the country, the more potent the protests by the Brazilian citizens will become, stating “lower-income Brazilians must understand how money siphoned off by corrupt officials only reduces the ability of government to meet the needs of people” (Monitor’s Editorial Board, 2017). While significant improvements are still necessary in order to correct Brazil’s political corruption, the changes that have already been made provide a glimmer of hope to Brazilian’s hoping for a better tomorrow.

 

 

Citations

Harding, Luke. “What Are the Panama Papers? A Guide to History’s

Biggest Data Leak.” Panama Papers: A Special Investigation. Guardian News and Media, 05 Apr. 2016. Web.

Michalapoulos, Sarantis. “EU Anti-fraud Official: Tobacco Smuggling Is ‘major

Source’ of Organised Crime.” EurActiv.com. 07 Feb. 2017. Web.

Monitor’s Editorial Board. “Just Rewards of Brazil’s Anti-corruption

Triumphs.” Yahoo! News. Yahoo! 07 Feb. 2017. Web.

“Panama Papers Q&A: What Is the Scandal About?” BBC News.

BBC, 06 Apr. 2016. Web.

Raymond, Nate. “Two Men Get U.S. Prison Terms for $250 Million Stock Fraud

Scheme.” Metro. Reuters, 06 Feb. 2017. Web.

Stupples, Ben. “EU Panama Papers Investigators to Hold Secret London Talks.” Bloomberg BNA. Bloomberg L.P., 9 Feb. 2017. Web.

Recommended Posts
Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text.

Start typing and press Enter to search