The repercussions of the Panama Papers have been proliferating steadily since they first made headlines back in the beginning of April this year. The leaked documents are the result of the collective work between an anonymous source and the German newspaper Süddeutsche Zeitung. The investigation by both the source and the newspaper went on for an entire year before the documents were made public.
It has been reported that the source of these leaked documents claimed his life was in danger. Nevertheless, he declined remuneration for his data, stating that one of his main motivations for leaking the documents was that he thought Mossack Fonseca acted unethically and was “doing real harm to the world”.
The contents of the Panama Papers consist of sensitive banking documents spanning from the early 1970s to late 2015. A large proportion of these documents do indeed shed an unsavoury light on the unscrupulous nature of the Panamanian corporate service provider Mossack Fonseca (MF). One particularly troubling aspect that was brought to light was how the company apparently enabled Syrian companies and regime insiders to hide assets in offshore accounts.
Among the many international figures mentioned in the Panama Papers is Rami Makhlouf – a 46-year-old businessman considered both one of the richest and among the most hated men in Syria. The cousin to President Bashar al-Assad, he is allegedly in control of 60% of the Syrian economy.
President Assad’s regime managed to circumvent international sanctions and was able to fund its war effort through the use of shell companies and – critically here – the financial backing of Rami Makhlouf.
Towards the end of 2008, companies in the United States of America were banned from doing business with Rami Makhlouf and his various business ventures. Despite these US sanctions, international banks and law firms maintained their working relationship with Makhlouf all throughout the start of the Syrian war.
At the beginning of 2011 the upper echelon of MF dismissed the advice of their own compliance team to sever all ties with Rami Makhlouf, along with his brother Hafez Makhlouf. The MF compliance team stated in an email correspondence with Chris Zollinger, among others, that they “believe if an individual is found on a sanction list then this is a serious red flag and we should make every effort to disassociate ourselves with them”. In response to this, Zollinger stated that “there are allegations (rumours), but not any facts or pending investigations or indictments”, ultimately expressing his reluctance to terminate the company’s dealings with the Makhlouf brothers.
Although the US sanctions against Rami Makhlouf were in place, MF were not legally obliged to comply with said sanctions. This only came about when the EU measures that were imposed in May of 2011 were extended to include the British Virgin Islands in June of the same year. Yet in an act of flagrant disregard, MF continued its dealings with Rami until September 2011. Rami Makhlouf was consequently able to keep his Swiss bank accounts open all throughout the start of the Syrian war.
Rami Makhlouf subsequently attempted to have his assets unfrozen, claiming to have severed all ties with the Syrian regime. The Swiss courts were sceptical about his true intentions and denied his motion. Rami’s brother Hafez, on the other hand, had considerably better luck with the Swiss courts when he managed to persuade them to unfreeze his estimated $3 million in assets within the country.
The ambivalent approach of MF and how they chose to deal with Rami Makhlouf, a man with indisputable ties to the Syrian regime, only further illustrates the duplicitous nature of Mossack Fonseca. When the company’s link to Pangates International, Maxima Middle East Trading and Morgan Additives Manufacturing Co. (three blacklisted Syrian companies) were discovered, they were subsequently found to be providing petroleum supplies to the Syrian regime, and promptly put under US sanctions. These very same supplies were most likely used in the military aircrafts that enforced the lethal air strikes that terrorised Syrian towns and cities during the civil war.
Yet again, as the Papers give evidence, MF chose to continue working with Pangates International to “arrange numerous shipments of base oils and aviation gasoline to Syria” up until nine months after the imposed sanctions.
What the papers make clear is that the intrinsic way in which MF have earned their capital is predominantly through creating shell companies. Shell companies are believed to be of primary use to suspected financiers of terrorists, nuclear weapons proliferators and arms dealers, among others.
To justify their actions, MF have stated that they heavily rely on intermediary banks and law firms for background checks on customers that are referred to them. This is exemplified in how they attempted to deflect blame onto HSBC in the case of Rami Makhlouf, stating that HSBC assured them that the bank’s London and Geneva branches “know about Mr Makhlouf and that they are comfortable with him”.
Syria’s state media are yet to acknowledge the Panama Papers’ leak. Valiantly, independent Syrian radio channel Rozana FM have been covering the developing accounts of the Panama Papers – even when website has been blocked inside Syria, preventing citizens within the country from accessing their coverage of unfolding events.
One distinctly positive outcome of the Panama Papers disclosure is that the Syrian opposition now have gained several key insights into Assad’s military regime. It is possible the information may be key to destabilising the legitimacy of the Syrian regime, along with the companies and powerful individuals who enable it.
Although the most prominent documents of the Panama Papers have cast the individuals named in an dubious light, an important element to take into consideration is that the appearance of a name within these documents does not automatically implicate any wrongdoing. Rather, this merely asserts that some sort of linkage exists between the individual named and the aforesaid offshore company.
One could perhaps wonder why such a fragmented global tax system still exists. Although highly abused by the avaricious wealthy and powerful individuals and companies of the world, there are still legitimate reasons as to why an individual may require anonymity, or companies want to safeguard their finances overseas.
If one should carry anything away from the most distinguished virtual document leak to date, it’s that global capitalism is a tacit problem that needs to be dealt with, now more than ever. It may be hard to conceptualise how an abstract term such as tax havens, on remote islands, millions of miles away affect you as an individual or your society in any substantial way. What needs to be understood is that due to the prevalent social and economic inequalities that exist in our countries and societies today, the impact of tax avoidance through avenues such as tax havens, have, and will continue to have, a devastating effect on our societies, both globally and locally, whether it be a highly secular and westernised society like Perth or a city in a developing country like Kampala, Uganda.
These absent tax revenues are what would pay for our public services, our hospitals, our public transport, our education and our city’s infrastructure that provide us with the safe roads that we commute on regularly. These services may seem negligible and in no real harm of being depleted at the moment. But as the world’s most wealthy individuals and corporations continue to hide and shield their accounts in tax havens, global societies with ultimately suffer as a result of the selfish actions of the powerful few. This is where global capitalism appears to be headed. Yet we should stay hopeful that this leak eventually leads to drastic changes to the global tax system, as well as more strictly enforced regulations for the use of tax havens. Not only to right the wrongs of past and present abuses, but because the future of our societies and what we have come to expect from them depend on these changes.
Words by Leona Mpagi