This ‘PANAMA’ hat fits all

Editorial Hardnews Delhi

The world has become rather comfortable with the hacking of data. In 2010, Wikileaks was considered to be the ‘mother of all leaks’ when it put a trove of sensitive information about how the US government conducted its foreign policy in the public domain. It stank. If that was big, then the Panama Papers, in terms of its sheer size and spread, is far bigger. Interestingly, this is only ‘one law firm’ creating shell companies for all kinds of politicians, businesses and other beneficiaries of big monies. As one of the founders of the Panamian law firm Mossack Fonseca and Co said, the dirty funds that they have exposed is surely less than what is present in only one city of New York, for  instance. 

No one denies the humongous presence of dirty money and its constant search for safe havens. These funds are generated through avoidance of tax, commission, kickbacks, drug-related funds and other means. With a click, the money is transferred from one account to another. This is mostly done by law firms. There are so many of them located in different parts of the world -- many of them under the suzerainty of the British government. 

The details of these accounts are hidden in many dense layers of false information that is not easy to expose. From this standpoint, the Panama Papers are significant. It has not just not breached the innocuous façade of a shell company, it has also reached the names of beneficiaries and their transactions. This requires serious understanding of ‘financial forensics’ or insider knowledge of the operations. If we go by the testimony of the German newspaper that first got the tip-off from an insider source within the Mossack Fonseca law firm, the information initialy came in driblets, and then the flow became so huge that multiple servers were used to store it. 

German newspaper Sueddeutsche Zeitung claims that its secret source was driven by a moral impulse and this source provided a mind-boggling number of documents -- 11.5 million. Zeitung wants to use its discretion to expose the names of the big names that have figured in these pages. Finding that it did not have the resources to glean through all these documents straddling different countries, the German newspaper decided to take the help of the International Consortium of Investigative Journalists (ICIJ). This means that 370 journalists belonging to 70 publications worked on these documents for more than eight months. The fact that so many journalists and so many publications were broadly chasing the story from different locations and standpoints created a buzz all around that something big was likely to be exposed in the coming days. ICIJ is sponsored by USAID and Open Foundation, which belongs to businessman George Soros. This has seemingly created an impression that this entire expose was spurred by the US government against its enemies. 

These leaked papers claim that some people close to Putin opened shell or offshore accounts in Panama and they rolled money worth $2 billion. The Chinese leadership, which is considered to be extremely parsimonious, is also present through its benamis in many accounts. Interestingly, there no names from the US

If one looks at the major political personalities that have been hit, then this allegation in some ways has reasonable merit. The main target has been Russian President Vladimir Putin and the Chinese leadership in Beijing. What are these allegations suggesting? These leaked papers claim that some people close to Putin opened shell or offshore accounts in Panama and they rolled money worth $2 billion. The Chinese leadership, and their relatives, which is considered to be extremely parsimonious, is also present through its benamis in many accounts. Interestingly, there no names from the US. 

This has given an opportunity to its opponents to shout ‘foul’.  According to the Zeitung, there are 200 photocopies of US passports and they are being verified and more details will follow soon. The spokesperson from the Zeitung says that the US presence is low as its citizens can open shell companies from Wyoming and Delaware. All this means that there is a lot more to the Panama Papers than what has found space in the newspapers -- from Iceland to India. 

This is particularly relevant in the case of India. On the first day of the expose, the name of Amitabh Bachchan, and his daughter-in-law, actress Aishwarya Rai, came up. Other Indian names too are floating in the papers. Only a few days earlier, Bachchan’s name was being happily presented as that of the next president of India by lobbies in the ruling regime in Delhi. This is not the first time that Bachchan’s name has figured in connection with a foreign bank account. During the Bofors investigation, Bachchan and his brother had found mention in the Swiss accounts. That was a long time ago. However, his presence in the Panama Papers may have effectively shot down any chances of him occupying any important position in this dispensation that has shown prickliness in associating itself with those exposed on the issue of black money. The prime minister’s lofty promises on ‘getting back black money’ has proved to be hollow, and the entire self-righteous campaign seems to have exposed the current regime’s difficulty in dealing with black money. 

On the first day, the name of Amitabh Bachchan, and his daughter-in-law, actress Aishwarya Rai, came up. Other Indian names too are floating. Only a few days earlier, Bachchan’s name was being presented as that of the next president by lobbies in the ruling regime. This is not the first time that Bachchan’s name has figured in connection with a foreign bank account. During the Bofors investigation, Bachchan and his brother had found mention in the Swiss accounts

There have been other interesting revelations too as in the case of the biggest Swiss bank note manufacturer De la Rue’s attempt to bag the contract in lieu of 20 per cent commission at the time the NDA was in power in 2003-2004. This matter has been raised by the Congress party, which seems to be delirious that none of its leaders have figured in the Panama Papers. Early reports suggested that 30 top leaders figure in the papers, and speculation is rife. Till the time of writing, no names have appeared and the government has instituted an enquiry. RBI Governor RaghuramRajan, like many in the commercial world, are quite circumspect about these papers; they do not want the media to jump to conclusions as many of the accounts could be perfectly legitimate as they may have been created for above board business activities. 

While that may be the case, many of the details that are coming out carry a bad odour. There are arms deals, dodgy companies involved in IPL deals, dubious individuals sporting large sums of money and worst, large transactions suggesting how dirty wars have been financed in Syria, Libya, Iraq and elsewhere. Again, we need to remember that this is just one law firm in Panama and there are so many more outfits that not only deal with similar dirty money, but also help in transacting dirty deals. In 2008, after the great economic recession, there was enormous pressure to shut down these tax havens or bring them under regulatory control. Panama, which was recently certified for good practices, proves that bad money is business as usual. It’s a hat which a lot of big names with big fat wallets seem to prefer.