In 2016, The Panama Papers laid bare the murky relationship between global banks, accountants, company incorporators and law firms – the ‘professional enablers’, who with their specialised knowledge and façade of legitimacy, were helping corrupt politicians, fraudsters and drug traffickers to conceal their identities and activities through shell companies, complex legal structures, and financial transactions.
Indeed, it was revealed that Panama law firm Mossack Fonseca had collaborated with more than 14,000 of these intermediaries, including some of the biggest names in finance and professional services, to establish offshore conduits that were, in many cases, used to manage illicit funds. Mossack Fonesca maintains that it complies with international protocols.
Five years on and the Pulitzer Prize winning media project has become a global touchstone on the debate around transparency and financial crime.
Progress has certainly been made. Countries have recovered billions in unpaid taxes, heads of governments implicated in corruption have resigned or faced prosecution, and parliaments have enacted new laws.
But, whilst the fight against tax evasion and money laundering has intensified, shrewd enablers who understand loophole-riddled legislation and are connected to profit-driven tax havens continue to facilitate financial crime.
We seem unable to deal with the lawyers, notaries, accountants, banks and company formation agents who hold the key to the successful commission of tax evasion, money laundering, and fraud. Crimes which accelerate economic equality, drain public funds, undermine democracy and destabilise nations.
A prime example is the now infamous 1MDB corruption scandal which, according to US and Malaysian prosecutors, saw billions of dollars, ostensibly raised for public development projects in Malaysia, land in private pockets, including those of former prime minister Najib Raza and financial fugitive Jho Low, who both deny all wrongdoing.
Since the global scheme unfolded in 2015, a number of enablers have been implicated.
Goldman Sachs admitted its role in the foreign bribery case, paying out $3.9bn to resolve all outstanding charges and claims against the bank. Similarly, Deloitte was forced to pay an $80 million penalty to Malaysia, as part of a settlement deal to resolve all claims related to its auditing of accounts of 1MDB. In May, court documents revealed that 1MDB was also claiming billions of dollars from units of Deutsche Bank, J.P Morgan and Coutts for negligence and dishonest assistance.
Furthermore, client accounts at two major American Law firms, DLA Piper and Shearman & Sterling, were used to help the Aziz and Low purchase high end real estate in London and New York with funds from 1MDB. There is no suggestion either firm broke anti-money laundering rules. However, the American Bar Association’s voluntary code of practice recommends that “any time lawyers ‘touch the money’ they should satisfy themselves as to the bona fides of the sources and ownership of the funds in some manner.” Questions have been raised if these firms did follow this code of practice.
The scale of the problem does not stop there. Indeed, in January 2020, the Luanda Leaks revealed two decades of inside deals and government giveaways in Angola that were aided by Western lawyers and accountants. Allegedly, these deals enabled Isabel dos Santos, the daughter of the country’s former ruler, to amass an estimated $2.2bn fortune and, at the expense of the Angolan state, become Africa’s richest woman. The exposé also revealed how Dos Santos had spent $115m on distinguished consultancy firms including BCG, Mckinsey and PWC, despite red flags indicating corruption. Dos Santos denies all wrongdoing.
The Russian Ananyev brothers also proved how easy it is to manipulate international financial systems with the right advisors. Through a complex scheme involving multiple shell companies in several countries and transactions that flowed through U.S. banks, including JPMorgan Chase, BNY Mellon, and Citibank, the brothers have been charged with embezzling $1.6bn from their own bank, Promsvyazbank, which included the life savings of hundreds of ordinary Russian Citizens.
The brothers fled in 2017, leaving taxpayers to foot the nearly $4bn bill to repay creditors and maintain operations at Promsvyazbank when it was taken over by the Central Bank of Russia. Dimitry and Alexei, who face criminal charges if they return home, deny all charges and continue to operate without repercussion in Austria, The UK, and Cyprus.
A key element protecting the brothers are the cash for citizenship schemes that allowed them to secure residency in Cyprus and the UK. Senior British politicians like Rishi Sunak and Priti Patel, and Cyprus’s Minister of Finance Constantinos Petrides have been questioned on the provenance of the money used to gain residency, but no action has so far been taken.
Instead, legal action against the brothers has so far focused on trying to retrieve the funds stolen from their victims, who have raised cases in London, the Netherlands and New York.
Unfortunately, thanks to incorporators of shell companies like Trident Trust, who have a history of association with questionable individuals including Indian fugitive Nirav Modi, Azerbaijani fraudster Jahangir Hajiyev and convicted arms trader
, the Ananyevs’ opaque and complex corporate structures have raised questions of jurisdiction that have made it incredibly challenging for the victims to secure justice.
All of these cases demonstrate that much more still needs to be done to regulate the professional enablers, who too often take the role of wilfully blind professionals in either supporting or ignoring criminal activities and facilitating the global flow of dirty money.
It is true that in many countries, these enablers are required by law and by industry supervisory bodies to run checks on their customers, as well as report on suspicious transactions to authorities. However, it seems that in too many cases the punishment for negligence is worth absorbing.
Nonetheless, there is a feeling that things are beginning to change. Two landmark reports released this year show just how seriously the issue of facilitating financial abuse is being taken. The first is from the United Nations High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda, called the FACTI panel. The second is an OECD publication: Ending the shell game: cracking down on the professionals who enable tax and white-collar crimes.
What was made clear in both reports is the urgent need for political and civil society to exert pressure on the professional associations of bankers, lawyers, accountants and other financial intermediaries who profit from financial crimes, seeking to hold enablers to account, and agree on standards for these industries.
Furthermore, the reports maintain that national and international strategies and guidelines need to be put in place to deal with those who continue to help the rich and powerful spirit money away from the billions of people around the world trapped in poverty by systemic tax abuses, corruption, and money laundering.
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