Author Topic: Mossack Fonseca  (Read 7419 times)

former player

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Mossack Fonseca
« on: April 04, 2016, 02:17:24 PM »
Anyone else feeling gleeful about 40 years of Mossack Fonseca's money laundering documentation being leaked to investigative journalists?

I'm assuming it's an IT tech somewhere who has done the world a solid favour on this one.

nobodyspecial

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Re: Mossack Fonseca
« Reply #1 on: April 04, 2016, 08:45:18 PM »
There's no such thing as bad publicity.
I imagine it's quite hard to advertise these services, unless there is a "dictators world" magazine I don't get.
 

cerat0n1a

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Re: Mossack Fonseca
« Reply #2 on: April 05, 2016, 02:47:16 AM »
That was my thought too - great publicity for them. Love the fact that the Panamanian authorities are now looking into it - don't think that will save them from criminal proceedings elsewhere. It's one thing hiding money for the rich and laundering it for dodgy dictators & criminals, but sanctions busting gets taken a bit more seriously. Maybe a competing offshore location is behind the leaks?

Private Eye has been documenting dodgy offshore goings-on for years in the UK and nothing much happens. The UK government seems to have done numerous things to make money laundering & tax evasion easier, while claiming to be cracking down on it. So I'm expecting it to blow over pretty quickly with a few vague promises being made by politicians.

marty998

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Re: Mossack Fonseca
« Reply #3 on: April 05, 2016, 05:41:37 AM »
Yes there's no crackdown because the politicians are the ones using it.

Why is it only the tax authorities getting onto it? Why not the federal police? After all tax evasion is a crime...

The names of people caught are quite interesting:

- associates of Putin and the Chinese Politiburo
- the PM of Iceland
- David Cameron's father
- Lionel Messi and his father

The Australian connection is even more interesting... the fraudster behind the Fine Cotton scandal in 1984 has been caught up in this with a company registered over there...

Fine Cotton was a racehorse... it was substituted for a much better horse called Bold Personality that was painted (yes with paint) to look like Fine Cotton and won the race...


NoStacheOhio

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Re: Mossack Fonseca
« Reply #4 on: April 05, 2016, 05:42:30 AM »
The interesting thing is that this was one leak from one firm in one tax haven, and it's a huge amount of data. I can't even imagine the scale of this globally.

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Re: Mossack Fonseca
« Reply #5 on: April 05, 2016, 09:17:24 AM »
NPR's Planet Money has done a podcast on off shore shell companies that is really good. Go into why someone would get them (obvious reason), how to get one and the implications of having one. They even went and made their own in Belize, called it UnBelizeble.

http://www.npr.org/sections/money/2016/03/16/470722656/episode-390-we-set-up-an-offshore-company-in-a-tax-haven
http://www.npr.org/sections/money/2016/03/30/472452808/episode-403-what-can-we-do-with-our-shell-companies

MgoSam

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Re: Mossack Fonseca
« Reply #6 on: April 05, 2016, 09:32:44 AM »
I wonder if it will snare any Americans.

Can anyone explain if there are any differences between the banks in Panama, Cayman Islands, Switzerland, and Lichtenstein. There likely are additional places where people park their cash that I didn't mention.

NoStacheOhio

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Re: Mossack Fonseca
« Reply #7 on: April 05, 2016, 09:39:15 AM »
I wonder if it will snare any Americans.


No Americans in the initial disclosures, but one of the lead people was quoted as saying something to the effect of, "just wait, it's coming."

chesebert

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Re: Mossack Fonseca
« Reply #8 on: April 05, 2016, 10:49:57 AM »
I wonder if it will snare any Americans.

Can anyone explain if there are any differences between the banks in Panama, Cayman Islands, Switzerland, and Lichtenstein. There likely are additional places where people park their cash that I didn't mention.

Shell and bank accounts typically don't have to be in the same jurisdiction. Perfectly fine to have a BVI trust with BVI corporate trustee going into Cayman beneficiary shell with Swiss account. Try to unwind that!

Do not try this at home :)

nobodyspecial

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Re: Mossack Fonseca
« Reply #9 on: April 05, 2016, 08:50:50 PM »
Can anyone explain if there are any differences between the banks in Panama, Cayman Islands, Switzerland, and Lichtenstein. There likely are additional places where people park their cash that I didn't mention.
Generally the more major countries have got a lot more legitimate. Switzerland and Lichtenstein have had to clean up their act because of pressure from the Eu. ie You can have secret banks  but expect a trade embargo on everything else

For the countries who only have secret banks it's hard to put a lot of pressure on them without actually invading.

Canadian TV did a series on how to pick the best one http://www.cbc.ca/news2/interactives/offshore-tax-havens/
 

Taran Wanderer

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Re: Mossack Fonseca
« Reply #10 on: April 05, 2016, 09:04:14 PM »
NPR's Planet Money has done a podcast on off shore shell companies that is really good. Go into why someone would get them (obvious reason), how to get one and the implications of having one. They even went and made their own in Belize, called it UnBelizeble.

http://www.npr.org/sections/money/2016/03/16/470722656/episode-390-we-set-up-an-offshore-company-in-a-tax-haven
http://www.npr.org/sections/money/2016/03/30/472452808/episode-403-what-can-we-do-with-our-shell-companies

I had the good fortune of listening to podcast 390 just last week.  Interesting timing with the "Panama Papers" news.  With regard to the OP, yes, I had a bit of glee at the news!

misterhorsey

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Re: Mossack Fonseca
« Reply #11 on: April 06, 2016, 03:42:28 AM »
There's no such thing as bad publicity.
I imagine it's quite hard to advertise these services, unless there is a "dictators world" magazine I don't get.
 

I imagine if you were shopping around for a law firm to help you open up a tax haven domiciled shell company with nominee directors to preside over swiss bank accounts that keep all your stolen loot, and you wanted this all to be secret, then Mossack Fonseca's inability to keep this information secret would pretty bad publicity.


cerat0n1a

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Re: Mossack Fonseca
« Reply #12 on: April 06, 2016, 07:27:22 AM »
Can anyone explain if there are any differences between the banks in Panama, Cayman Islands, Switzerland, and Lichtenstein. There likely are additional places where people park their cash that I didn't mention.

The commentary here in the UK has to be quite careful of our ridiculous libel laws, but I have seen comments to the effect that there are legitimate and above board reasons for people based in UK/Europe to have offshore accounts in places like Switzerland, Lichenstein, Monaco or British offshore tax havens, Jersey, Isle of Man etc. and that someone would only need to go to Panama, Cook Islands etc. if they needed more services than just avoiding paying tax. Some commentators have said that certain offshore locations and firms would only come into play for things like bribes, drug money laundering, illicit arms deals, third world dictators moving money from their own government etc.

Very carefully worded statement from our prime minister, I thought. I'm sure it's 100% factually correct and truthful in every regard, but it didn't appear to say anything about whether he or his wife have benefited from offshore arrangements in the past or might do so in the future.

MgoSam

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Re: Mossack Fonseca
« Reply #13 on: April 06, 2016, 08:34:52 AM »
, but I have seen comments to the effect that there are legitimate and above board reasons for people based in UK/Europe to have offshore accounts in places like Switzerland, Lichenstein, Monaco or British offshore tax havens, Jersey, Isle of Man etc.

Yeah I don't doubt that, but I would be interested in learning what these reasons are. Here are two that I can think of

a. Liability insurance (way to hide your money so that you can avoid getting taken to the cleaners, not sure how legit this is)
b. If you live in an unstable country- if I was a rich Russian I would hide my money to avoid Putin taking it.

cerat0n1a

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Re: Mossack Fonseca
« Reply #14 on: April 06, 2016, 08:59:26 AM »

Yeah I don't doubt that, but I would be interested in learning what these reasons are. Here are two that I can think of

a. Liability insurance (way to hide your money so that you can avoid getting taken to the cleaners, not sure how legit this is)
b. If you live in an unstable country- if I was a rich Russian I would hide my money to avoid Putin taking it.

One big difference between the US and most other countries is that it's relatively easy to leave other countries and stop paying tax as a result. The US continues to tax you wherever you are, although you won't be double taxed if there's an appropriate treaty.

So, it's relatively common for rich people who spend some amount of time in Britain to be not actually resident for tax purposes; they may keep assets in some offshore location and "visit" Britain for a small part of the year. The ultra-rich may go to Monaco, the "millionaire next door" scrap dealer might go and live on the Isle of Man instead. The banks in those locations will still need you to show that the money was legitimately gained and will (now, at least) co-operate with other european jurisdictions on money laundering, fraud etc.

MgoSam

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Re: Mossack Fonseca
« Reply #15 on: April 06, 2016, 12:05:11 PM »
One big difference between the US and most other countries is that it's relatively easy to leave other countries and stop paying tax as a result. The US continues to tax you wherever you are, although you won't be double taxed if there's an appropriate treaty.

I keep forgetting about this. I wonder how badly this will effect my FIRE plans. Right now upon FIREing and deciding to leave my profession, I plan on traveling the world and eventually settling down somewhere. My current thinking if Thailand, but that can change over the years and might change once I actually get there. I hope to work in some capacity purely as a way of keeping me motivated and active, though an advantage of Thailand is that I practice muay thai and would be able to get world-class training there at a fraction of the cost of training here.

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Re: Mossack Fonseca
« Reply #16 on: April 06, 2016, 01:42:30 PM »
, but I have seen comments to the effect that there are legitimate and above board reasons for people based in UK/Europe to have offshore accounts in places like Switzerland, Lichenstein, Monaco or British offshore tax havens, Jersey, Isle of Man etc.

Yeah I don't doubt that, but I would be interested in learning what these reasons are. Here are two that I can think of

a. Liability insurance (way to hide your money so that you can avoid getting taken to the cleaners, not sure how legit this is)
b. If you live in an unstable country- if I was a rich Russian I would hide my money to avoid Putin taking it.

c. If you live in one country but work in another, and want to make sure you don't have to pay personal income tax on all your earnings in every country where you work. The best way is to have your registered base of operations in one country, contract your services out as necessary in whatever countries require your work, and draw your personal paycheck from that company. This happens in construction all the time.

d. If the kind of business you conduct is subject to different rules in different countries, such that heavy taxes or fees apply if you register assets such as cargo ships or airplanes. Pick the country with the fewest restrictions, and register your assets there even if you live somewhere else. It's called "flag of convenience". Nobody really believes Liberia is a big oil producing state populated exclusively by wealthy tanker owners although you could be excused for thinking so by looking at a list of ship registrations. Liberia benefits by getting an extremely small slice of a very large business, without a substantial amount of overhead associated with collecting it. Win for the small country which gets a low maintenance revenue source it wouldn't otherwise have; win for you.

e. If you do business (never mind live) in a country with a history of nationalizing assets owned by citizens of rival countries, you can fly under the radar better if you look neutral.

f. Related to the liability issue: if you do business in a country that has a history of messed up tort law such that you stand a very good chance of having assets seized or frozen following a decision by a kangaroo court, put those assets out of reach in a nation that has a history of protecting property rights. This applies in just about all developing countries.

g. If you are not a publicly traded company and most of your personal wealth is tied up in your business, and you regularly do business or live in a country known for corruption or predatory taxation.

h. If you have an opportunity to earn a lot of money in a short period of time by doing business overseas (say you've got an opportunity in sports, the arts, or something else that won't last long) but live in a country with a higher marginal tax rate, such that it would be better if you received your personal income in smaller amounts over a short period of time. You stash the money in an overseas account, invest it perhaps, and then instead of paying an extremely high tax on the lump sum, you draw it out slowly and pay tax only on what you actually receive. This is perfectly legal and it allows you to receive a greater share of the income you earn. It's roughly on par with taking your (local) lottery jackpot winnings as an annual payment instead of as a lump sum.

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Re: Mossack Fonseca
« Reply #17 on: April 06, 2016, 01:58:58 PM »
, but I have seen comments to the effect that there are legitimate and above board reasons for people based in UK/Europe to have offshore accounts in places like Switzerland, Lichenstein, Monaco or British offshore tax havens, Jersey, Isle of Man etc.

Yeah I don't doubt that, but I would be interested in learning what these reasons are. Here are two that I can think of

a. Liability insurance (way to hide your money so that you can avoid getting taken to the cleaners, not sure how legit this is)
b. If you live in an unstable country- if I was a rich Russian I would hide my money to avoid Putin taking it.

c. If you live in one country but work in another, and want to make sure you don't have to pay personal income tax on all your earnings in every country where you work. The best way is to have your registered base of operations in one country, contract your services out as necessary in whatever countries require your work, and draw your personal paycheck from that company. This happens in construction all the time.

d. If the kind of business you conduct is subject to different rules in different countries, such that heavy taxes or fees apply if you register assets such as cargo ships or airplanes. Pick the country with the fewest restrictions, and register your assets there even if you live somewhere else. It's called "flag of convenience". Nobody really believes Liberia is a big oil producing state populated exclusively by wealthy tanker owners although you could be excused for thinking so by looking at a list of ship registrations. Liberia benefits by getting an extremely small slice of a very large business, without a substantial amount of overhead associated with collecting it. Win for the small country which gets a low maintenance revenue source it wouldn't otherwise have; win for you.

e. If you do business (never mind live) in a country with a history of nationalizing assets owned by citizens of rival countries, you can fly under the radar better if you look neutral.

f. Related to the liability issue: if you do business in a country that has a history of messed up tort law such that you stand a very good chance of having assets seized or frozen following a decision by a kangaroo court, put those assets out of reach in a nation that has a history of protecting property rights. This applies in just about all developing countries.

g. If you are not a publicly traded company and most of your personal wealth is tied up in your business, and you regularly do business or live in a country known for corruption or predatory taxation.

h. If you have an opportunity to earn a lot of money in a short period of time by doing business overseas (say you've got an opportunity in sports, the arts, or something else that won't last long) but live in a country with a higher marginal tax rate, such that it would be better if you received your personal income in smaller amounts over a short period of time. You stash the money in an overseas account, invest it perhaps, and then instead of paying an extremely high tax on the lump sum, you draw it out slowly and pay tax only on what you actually receive. This is perfectly legal and it allows you to receive a greater share of the income you earn. It's roughly on par with taking your (local) lottery jackpot winnings as an annual payment instead of as a lump sum.

i. Brand protection - if you have business interests in different things that you may not want flying under the same flag, so to speak. Say you're a plastics manufacturer that makes kids' action figures, but also has a subsidiary that manufactures sex toys...different universes, may not want to put a big shiny "Mattel" label on both, for instance. The anonymity offered by a shell corporation might prevent brand dilution.

I also wonder if/how many Americans will be caught up in this data breach. I'm curious what incentives Americans would have to go all the way to Panama to do this, when it can be done just as easily (or even easier) domestically, in either Nevada or Delaware? I think I read yesterday that Delaware has more registered corporations than people on its census...

cerat0n1a

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Re: Mossack Fonseca
« Reply #18 on: April 06, 2016, 02:00:03 PM »
One of the comments I've seen here a few time is that relatively few Americans have been named in this leak because Americans can go to Delaware and to a lesser extent Nevada & Wyoming to form corporations with low tax, minimal hassle and a fair degree of secrecy. Not sure how fair that is. Also that Americans  might favour Bermuda or the Caymans rather than Panama for language, stability & legal system reasons.

StockBeard

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Re: Mossack Fonseca
« Reply #19 on: April 06, 2016, 04:45:02 PM »
Having lived in Japan, France, and the US, my perspective is that one of the reasons is that taxes are reasonably low in the US, which reduces the reasons for people to try and break the law to hide their investments here.

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Re: Mossack Fonseca
« Reply #20 on: April 07, 2016, 08:37:43 AM »
One of the comments I've seen here a few time is that relatively few Americans have been named in this leak because Americans can go to Delaware and to a lesser extent Nevada & Wyoming to form corporations with low tax, minimal hassle and a fair degree of secrecy. Not sure how fair that is. Also that Americans  might favour Bermuda or the Caymans rather than Panama for language, stability & legal system reasons.

The Channel Islands are always a good idea if you want the low tax and minimal hassle, but don't care about whether there's secrecy. The US Virgin Islands are an option for some, as is Guam.

The thing about forming corporations in Delaware, Nevada, and Wyoming is that federal tax laws still apply, including the marginal tax rate.

onlykelsey

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Re: Mossack Fonseca
« Reply #21 on: April 07, 2016, 08:44:46 AM »
One of the comments I've seen here a few time is that relatively few Americans have been named in this leak because Americans can go to Delaware and to a lesser extent Nevada & Wyoming to form corporations with low tax, minimal hassle and a fair degree of secrecy. Not sure how fair that is. Also that Americans  might favour Bermuda or the Caymans rather than Panama for language, stability & legal system reasons.

Forming entities in American jurisdictions doesn't get you out of the federal tax code.  Very very very few (sophisticated) partnerships, limited liability companies or corporations are formed in any American jurisdiction but Delaware or New York, but it's not a tax evasion issue.  The case law and courts are considered sophisticated and capable of understanding complex set ups because they've been the flagship jurisdictions for so long.  Offshore jurisdictions often copy Delaware partnership law, but part of the appeal is a court devoted to businesses.

lemanfan

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Re: Mossack Fonseca
« Reply #22 on: April 07, 2016, 09:30:03 AM »
It's kind of fun that the recent regulation makes it very easy for the US authorities go get information from large parts of the world, but aparantly it's not easy at all to get info OUT of the US.   

Delaware is considered a confidentiality haven for many non-US governments, apparantly.  :)

onlykelsey

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Re: Mossack Fonseca
« Reply #23 on: April 07, 2016, 09:34:33 AM »
It's kind of fun that the recent regulation makes it very easy for the US authorities go get information from large parts of the world, but aparantly it's not easy at all to get info OUT of the US.   

Delaware is considered a confidentiality haven for many non-US governments, apparantly.  :)


I guess it depends on whether you're looking to tax assets the government feels it should have the right to, or get access to confidential information.  I am more sympathetic to the former than the latter, although I admit I don't fully understand AML regulations, KYC, etc.

lemanfan

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Re: Mossack Fonseca
« Reply #24 on: April 07, 2016, 09:40:55 AM »
A reasonable start would be to have it symmetrical.  If the USA can get a certain information from country X, then the authorities in X should be able to get the same info from the USA.

Kind of like when Venezula introduced finger printing of US nationals entering their country. :)

AZDude

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Re: Mossack Fonseca
« Reply #25 on: April 07, 2016, 09:44:00 AM »
It's kind of fun that the recent regulation makes it very easy for the US authorities go get information from large parts of the world, but aparantly it's not easy at all to get info OUT of the US.   

Delaware is considered a confidentiality haven for many non-US governments, apparantly.  :)

Delaware purposefully crafted their laws in a way to lure big datacenters. I forget the name of the town, but its just outside Philly, and its one of the biggest datacenter hubs in North America. Wilmington?


onlykelsey

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Re: Mossack Fonseca
« Reply #26 on: April 07, 2016, 09:47:00 AM »
Sounds like WIlmington.  I think INGdirect was there, as well.

Actually asking, what does "Datacenter" mean here?

MgoSam

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Re: Mossack Fonseca
« Reply #27 on: April 07, 2016, 09:47:50 AM »
Kind of like when Venezula introduced finger printing of US nationals entering their country. :)

I had a girlfriend in college that lived abroad and she hated coming to see me because she felt degraded by the security questions and tests. And this was from a country VERY friendly with the US. I can't imagine what it's like for citizens of neutral countries...

onlykelsey

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Re: Mossack Fonseca
« Reply #28 on: April 07, 2016, 09:52:03 AM »
A reasonable start would be to have it symmetrical.  If the USA can get a certain information from country X, then the authorities in X should be able to get the same info from the USA.

Kind of like when Venezula introduced finger printing of US nationals entering their country. :)

There are some areas of KYC law where that's exactly what's happening.  But I"m not sure it's a useful starting place, and I think it would/does decrease investment in areas that desperately need capital.  Globally, people want to generally put their money in stable economies (which is why you see capital outflow from natural resource economies like Russia and Saudi Arabia to the US, for example).  If I'm considering investing my money in the US or EU or Australia or wherever, I'm probably fine with the government getting some information about me (both because the governments are relatively well functioning and because I'm willing to pay for stability).  If I'm considering investing in, say, Nigeria, neither of those factors make me comfortable with giving the government information, and I'm likely to walk from the transaction.  Obviously unlimited foreign lending or investment in less developed economies has its own issues, but it's already unattractive enough to lenders.

I'm typing this out and realizing I sound like a wild rightwinger, which I definitely am not.  I just feel like this is an area of the world that people often don't give much thought to, and there's a kneejerk reaction when someone mentions "offshore investing" or "tax haven" or whatever.

lemanfan

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Re: Mossack Fonseca
« Reply #29 on: April 07, 2016, 11:55:53 AM »
You also got to remember that openness about persons (natural persons or legal persons) is not always unconditionally good. 

If I take my own country for example, the income you state to the tax authorities becomes public information - I can call the tax office and ask about the income of any one of my neighbours or colleagues at any time, and they can do the same for me.  Previously, when we had a "wealth tax" you could also get information about the size of the wealth for the persons above the tax threshhold. 

For all incorporated companies, even small ones, the annual report becomes public in the same way, showing both balance sheet and income sheet to anyone who asks.

While this works reasonably well for most people here, imagine the crime attraction that would have in a country with high levels or organized crime or corruption.  If you could select your next house to break into or person to kidnap or blackmail after a call to the tax office, life would be much easier for a gangster.

I understand why people from e.g. post soviet states or some countries in Latin America want to hide some of their wealth.