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Quartz: German Shell Companies in Panama, and the Hacker who Helped Expose It

March 22, 2013

By Sydney Lucia

Sydney Lucia is a Policy Intern at Global Financial Integrity.

flickr / Contando Estrelas

Just yesterday the German newspaper Suddeutsche Zeitung published the names of wealthy Germans who are listed as company directors in the well-known tax haven of Panama.  An article entitled “Germany’s offshore money and the hacker who helped expose it” by Tim Fernholz at Quartz explains the details and the implications.  Among the names were some of the richest German families that include the automaker Porsche, the coffee king Jacobs, and the banker von Fink.  While some families claimed they knew nothing, that argument holds no water in a tax haven such as Panama.  These names were found by Daniel O’Huiginn, a politically engaged British coder, who was unsatisfied with Panama’s current company registration database and decided to create his own that allows you to search by the names of individuals.

Panama has long been an offshore financial center and secrecy jurisdiction, with laws that allow the beneficial owners to companies to remain secret.  However, with the U.S.-Panama Free Trade Agreement, Panama had to address its tax transparency practices, and subsequently created a database that allowed users to search directors by company name.  This act of transparency was a rare move, but it wasn’t easy to identify individuals, which resulted in O’Huiginn’s new database.  O’Huiginn found evidence of shady persons such as notorious arms-dealer Monzer Al-Kassar’s involvement with several shell companies.

Fernholz writes:

“Tax havens like Panama function not just because of low taxes but because their laws allow companies to keep their owners secret, or to use “nominee directors” to disguise who actually controls a company. (It’s not just Panama or the Cayman Islands; US states like Delaware offer this service as well.) The idea, of course, is that if you transfer money to a company you own in a tax haven, it’s nearly impossible to show that you control it. Creditors can’t track you down, and neither can the tax man.

But in 2008, Panama put its company registration information online, a rare move. You could only search by company name, making it difficult to identify individuals. O’Huiginn scraped the data and created an alternative database that allows you to do just that. In the process, he found the tracks of arms dealers, fraudster billionaires and associates of Saddam Hussein. This was important window on off-shore money in Panama—there’s even a tutorial to teach journalists how to look for people there.

This isn’t a guaranteed way to stop tax avoidance—Panama still allows nominee directors, and it’s safe to say that people who wish to keep their ownership of companies there a secret are switching to this method of control. But it was a small victory for transparency; somewhat poignantly, it seems the late hacker-activist Aaron Swartz was interested in the project.”

Read more here.

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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