Panama papers case study
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An analysis of Panama papers based on legal and ethical perspectives.
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Panama papers case study
- 2. The Panama Papers is the largest financial data leak in history It covers nearly 40 years, from the late 1970s through the end of 2015 214,488 offshore accounts revealed across 200+ countries The leaked documents illustrate how wealthy individuals and public officials are able to keep personal financial information private They were created by a corporate service provider in Panama, “Mossack Fonseca”
- 4. About Mossack Fonseca A Panamanian law firm known for helping clients set up offshore accounts Helps clients move money into offshore shell companies Their clients include criminals and members of various Mafia groups, in addition to government officials
- 6. Victims Politicians and their relatives and associates Russia’s president, Vladimir Putin’s relatives and associates Pakistan’s prime minister, Nawaz Sharif and his family members Brother-in-law of China's President Xi Jinping President of Ukraine, Petro Poroshenko Son of Egypt’s former president, Alaa Mubarak Prime minister of Iceland, Sigmundur Davíð Gunnlaugsson Father of Former British Prime Minister David Cameron
- 7. Victims Sports Personalities Former members of FIFA Executives of football teams like FC Barcelona, Real Madrid Football players like Lionel Messi, Andy Cole Other sports personalities like Tiger Woods
- 8. Victims Entertainment Personalities Amitabh Bachchan Aishwarya Rai Bachchan Sarah Ferguson Jackie Chan Emma Watson Simon Cowell
- 9. Impact on Victims Political Backlash British Prime Minister, David Cameron was dealing with allegations of impropriety Pakistan’s prime minister, Nawaz Sharif is receiving backlash from the opposition Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson resigned from his position Lawsuits Messi and his father were convicted of tax fraud given a suspended 21- month prison sentence each and ordered to pay a collective fine of €3.1m
- 10. Impact on Victims cont.. Legal investigations Several countries like France, Netherland opened investigations Sri Lanka sets up panel to investigate 'Panama Papers’ Imprisonment Countries like Uruguay, Azerbaijan, Brazil have arrested and imprisoned people Bad press
- 11. Responsible Parties and Their Roles The anonymous whistle-blower Provided the leaked documents German newspaper Sueddeutsche Zeitung First outlet to publish about the leak International Consortium of Investigative Journalists (ICIJ) Analysed the leaked documents and published
- 12. Responsible Parties and Their Roles cont.. Mossack Fonseca Owners of the documents Illegal shell corporations CIA Conspiracy According to UBS Whistleblower and Russia’s president, Vladimir Putin
- 13. Legal Perspectives Mossack Fonseca & Co The firm was founded by German lawyer Jürgen Mossack in 1977 and joined by Panamanian novelist/lawyer Ramón Fonseca in 1986 It specializes in commercial law, trust services, investor advisory, and international business structures Civil law with influences from Spanish legal tradition and Roman law
- 14. Legal Perspectives Contd. Anglo-American law have also been accepted in Panama habeas corpus Judicial precedent It provides intellectual property protection and maritime law services In February 2015, the firm was implicated in the German government's investigation of money laundering and tax evasion schemes at Commerzbank
- 15. Is Having an Offshore Account Illegal? No Having an offshore company can be seen as a logical business decision Accounts are often used for tax evasion, money laundering, and corruption
- 16. Is Tax Evasion Legal? No, Tax evasion is illegal One definition of evasion is “exploiting a tax advantage that Parliament never intended”.
- 17. What does Mossack Fonseca say? “Our firm has never been accused or charged in connection with criminal wrongdoing. If we detect suspicious activity or misconduct, we are quick to report it to the authorities.”
- 18. Ethical Perspectives Ethical analyze under for category Parking profits offshore : - shifting or parking the profits in a foreign country Tax evasion:- Not paying tax Bribery:- give any value or render any service in exchange for the payment Whistle blowers:- who leaked the information to Süddeutsche Zeitung, a German newspaper
- 19. Parking Profits Offshore –Is Ethical? Unethical Patriotism is the last refuge of a scoundrel Ethical High amount of unfair taxes Skimming a portion of the corporation’s profits
- 20. Is Tax evasion Ethical? Ethical Unfair tax rate for rich Keep assets in the more productive private sector rather than shifting those assets into the less productive public (government) sector Evil or corrupt or engages in unjust wars Significant portion of the money collected winds up in the pockets of corrupt politicians If the government discriminates against me because of my religion, race or ethnic background. Depend on religious literatures
- 21. Is Tax evasion Ethical Contd. Church of Jesus Christ Strongest against tax evasion Tax evasion only in cases where the government persecutes members of the Baha’i faith Jewish Religious Tax evasion in general but does provide justification in some cases There is no moral duty to pay taxes where a king forces himself onto a country if the people do not accept him. There is no duty to pay taxes where the leadership or government is not legitimate . Evasion is not justifiable, tax evasion is regarded as theft
- 22. Is Tax evasion Ethical Contd. Muslim Religious Views The moral duty to provide for the poor, but they did not address the ethics of tax evasion directly. There is no duty to pay customs duties, restrictive tariffs, court fees, revenue stamps, or any tax on income. They suggest that the state should levy a proportional tax along the lines of Zakat on accumulated wealth. also against indirect taxation, since they believed all taxes should be direct
- 23. Is Tax Evasion Ethical Contd. Christian Literature Somewhat of a duty to pay just taxes and somewhat less of a duty to pay unjust taxes Payment may be forgiven where there is no ability to pay. It might be acceptable to evade taxes imposed on the necessities of life in certain situations
- 24. Whistle Blowers – Is Ethical? Un Ethical Cause several resignation Violation of their property rights -someone is hiding assets from some government does not automatically means they are acting unethically. In some cases they are merely protecting their property from greedy or evil governments Ethical Bribery is come out Not all tax evasion is unethical, as has been pointed out elsewhere
- 25. Behavior of players in panama papers based on ethical theories Relativism Utilitarianism Deontology
- 26. Relativism Theory Jewish religious - Tax evasion is regarded as theft Muslim religious views –There’s no duty to pay any tax on income If government is evil or wrong doing – Tax evasion is ethical Under the Act utilitarianism ,whistleblowers perform in an ethical way Under Deontology and Utilitarianism theory tax evasion can be considered as unethical
- 27. Professional Lapses Mossack Fonseca as a professional law firm Legal but unethical business function Due to lack of data security damaged the trust of their clients Clients of Mossack Fonseca Illegal acts e.g. tax evasions, flow of black money Unethical – avoid the responsibility towards society, act against their professional conducts John Doe, the information leaker Information is obtained by illegally hacking German newspaper Süddeutsche Zeitung (SZ) and International Consortium of Investigative Journalists (ICIJ) is leaktivism ethical and legal
- 28. Professional Bodies Legal Netlink Alliance The Municipality of Regulation and Supervision of Financial Subjects in Panama Tax Authority for Latin America International Consortium of Investigative Journalists (ICIJ)
- 29. Code of Conduct – Law Firm “Know Your Client” Collection and analysis of basic identity information Name matching against lists of known parties such as "politically exposed person” Determination of the customer's risk in terms of propensity to commit money laundering, terrorist finance, or identity theft Monitoring of a customer's transactions against expected behaviour and recorded profile as well as that of the customer's peers
- 30. Code of Conducts - Journalists Strict set of principles about how the information was to be handled Journalists from the Sueddeutsche Zeitung had access to the data for over a year Nature of the information could potentially put the journalists at risk for retribution; only a simultaneous release could protect them Even now, asked to release the raw data, but rejects; to protect source
- 31. Practices Tax Authority for Latin America: different countries have differing tax codes and charge different rates, foreign individuals and companies are taxed at very low, or even non- existent, rates The Municipality of Regulation and Supervision of Financial Subjects in Panama Panama doesn’t ask offshore companies to pay income tax on international transactions, sales tax, and other fees—only an annual franchise tax of $300 to the government
- 32. Actions taken by the Professional bodies after the scandal Procuraduría de la Nación Nación (General procuraduria of the nation) announced that it would investigate Mossack Fonseca and the Panama papers Prosecutor against Organized Crime -Raided Mossack Fonseca The Attorney General's office issued a press release about the raid The Municipality of Regulation and Supervision of Financial Subjects initiated a special review of the law firm Mossack Fonseca
- 33. How could have they avoided it Mossack Fonseca – use of proper security measures Strength the code of conduct called Know Your Customer Clients of Mossack Fonseca – avoid performing financial misconducts Tax authorities and governments – better legal system for avoid financial misconducts, Followed the globally standard tax code Publish professional journals and magazines
Editor's Notes
- The firm has nine offices in China,[3] several in Latin America,[14] others in the United States[7] and Europe, with two in Switzerland. In fev 2015 the firm is to be involved in a crime. some several features of anglo-american law also in panamanian law.
- The firm has nine offices in China,[3] several in Latin America,[14] others in the United States[7] and Europe, with two in Switzerland. In fev 2015 the firm is to be involved in a crime. some several features of anglo-american law also in panamanian law.
- the Panama Papers – the most extensive leak of financial documents ever . Tax evasion is the illegal evasion of taxes by individuals, corporations, and trusts. .It is where you deliberately break the rules and deceive the taxman about what your tax bill should be. Examples of tax evasion you r, not declaring your full income or hiding taxable assets. If you are caught evading tax, you could be sent to prison for up to 10 years in the U.K.
- Mossack Fonseca argues that it does not help their clients commit crimes or bypass sanctions rather it provides them with privacy.
- morality is relative to the norms of one's culture. That is, whether an action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another. …………………. choice that yields the greatest benefit to the most people is the choice that is ethically correct. -Act utilitarianism -person performs the acts that benefit the most people, regardless of personal feelings or the societal constraints such as laws -Rule utilitarianism -takes into account the law and is concerned with fairness ….. concerned with what people do, not with the consequences of their actions. Do the right thing. Do it because it's the right thing to do. Don't do wrong things.
- those are the money that the government could have used in improving healthcare, education or infrastructure Jewish -tax evasion is regarded as theft
- - John doe leaked the information because of his strong distaste for income inequality and because of his view that there were many injustices being perpetrated by some of the entities and individuals who were availing themselves of the entities just because someone is hiding assets from some government does not automatically means they are acting unethically. In some cases they are merely protecting their property from greedy or evil governments
- After the panama papers leak the first thing asked by people is whether the business functions of Mossack Fonseca are legal’ According to the executives of law firm their operations are legal The use of offshore business entities are not illegal where they are registered and providing such services also legally accepted in Panama But they are not ethical They knew about the tax evasions and handing of black money done by many of their clients and still they provided a place and opportunities for those financial misconducts Law firm was a trusted firm among their clientele as we can see their clients include many reputed people they failed in keeping the trust their clients put on them as a secure company for their business deals According to data experts Mossack Fonseca had been implementing a vulnerable e-mail server with outdated software versions This professional lapse on their side caused this information leak and brought great disturbances to their clients Many clients of Mossack Fonseca have done illegal acts like tax evasions and other illegal activities to earn money which they have hide using Mossack Fonseca they are currently going through legal confrontations from respective countries Also their acts are unethical and against their professional conduct as responsible people This information are obtained by illegally hacking. Hacking information systems without an authorization is an illegal but in this case the hackers have a good intention which is revealing the financial misconducts done by famous and infamous figures around the world But the way this information were obtained is illegal and unethical whether the informant is a concerned whistleblower from inside the company or an external IT professional A German news paper and the International Consortium of Investigative Journalists are the entities who analyzed and published the leak information from Mossack Fonseca Paved the way for a new era of journalism called leaktivism - is the act of releasing confidential information to the world at large as an effective form of social protest panama papers is certainly a good turning point in protest against economic inequalities. But is this kind of journalism professional or ethical and legal. In this panama papers incident it doesn’t create a big negative impact for the society. may lead to creating even national security threats for countries as well, depending on their information source.
- Legal Netlink Alliance is a global alliance of carefully selected, midsized, general practice, independent law firms
- Know your customer (KYC) is the process of a business verifying the identity of its clients. prevent identity theft, financial fraud, money laundering and terrorist financing.
- Where Mossack Fonseca’s code failed them, the journalists’ did not
- Monitoring compliance with the Constitution and the law , promote the protection of fundamental rights , respect for citizens duties and protect public property , with benchmark efficiency 2)Also an operation of the newly formed Second Specialized ….supported by the Panamanian police……..searched their Bella Vista offices. 4) which lasted 27 hours, stating that the purpose was "to obtain documents relevant to the information published in news articles that establishes the possible use of the law firm in illegal activities. 5)to determine whether or not tax law stipulations were fulfilled.
- 1)Even though most of the Professional bodies involved on the scandal, they could have taken some precautions to avoid this kind of scandals in different aspects From company side this information leak could have been avoided if company implemented proper security measurements. Their email server was vulneable to threats. 2) in descriptive way. By issuing proper Code of Conduct is another way of avoid from illegal activities. 4)This case study mentioned that the Tax Authority does not have a unified tax codes for Latin American countries, including Panama. for all countries instead having low tax codes for the Panama, they might have ability to avoid the situation. 5)Most of the people involved in this kind of illegal things mainly because of the unawareness to educate the people about this kind of offshore companies might have avoid from illegal activities.