Tuesday, April 05, 2016

Don't Get Distracted By the Bright, Shiny Thing

All eyes are on the Panamanian law firm of Mossack Fonseca. We've even named the scandal after their homeland, the Panama Papers. As I noted in my previous post, the Mossack firm isn't the alpha or omega of the offshore tax dodge scandal. Mossack is merely the player that was hacked. There are others. From Vice News:

"Today, Mossack Fonseca is considered one of the world's five biggest wholesalers of offshore secrecy," ICIJ wrote. "It has more than 500 employees and collaborators in more than 40 offices around the world, including three in Switzerland and eight in China, and in 2013 had billings of more than $42 million."

One of the five biggest and who knows how many lesser players there are in this market. You can be sure they're not all in Panama either. You can expect to find them anywhere that small governments earn big money to do nothing more than look the other way. You can also find them in the boardrooms of major banks and accounting firms in big cities just about everywhere. And those guys have collaborators in legislatures around the world. It takes a village.

This is not a lawyer problem. That's the tip of the iceberg. Mossack is just the bright, shiny thing. If, however, your government limits its focus to Mossack and that firm's clients and doesn't wade into the home grown dodgers in the boardrooms of its own high rise office towers, that's how you'll know it too is in the bag, as bent as a two penny nail.


Toby said...

Agreed, Mound. We are seeing fingers pointed at foreigners but not at rich and powerful Canadian tax dodgers. Does that mean Canadians are clean or they use Grand Cayman instead of Panama for their hidden accounts. Or does it mean we have a media cover-up?

Rural said...

A good explanation of 'offshore banking' for us uneducated peons here......

The Mound of Sound said...

Toby the 'investigation' is only beginning so I don't think we can expect a raft of names quite yet. I'm getting the impression that the Mossack firm was like the WalMart of this business - mainly high volume but, by virtue of its size and reputation, not entirely to be trusted as secure.

Now we know that Mossack was one of five high-volume shops but I would expect those to be somewhat pedestrian. My hunch is that there are "boutique" shops, one or two key operator shops, that are far more discrete and have the top notch talent to handle the bigger, more sensitive stuff. These sort of ultra-high powered small shops are not uncommon in legal and tax advisory circles. They specialize in bringing great expertise to narrow, "niche" matters.

Look at it this way. If you were doing a huge-dollar dodge would you entrust it to a shop that's been splashed around in the pages of The Economist for years? The Royal Bank might deal with them because, at 378 clients, they need a high-volume firm like Mossack. Others want more bespoke service.

The Mound of Sound said...

Hi, Rural. Yeah I read it but I didn't think it went to the real core of the issue.

Anonymous said...

It seems my suspicions are well founded.



The Mound of Sound said...

I fear you could be right, Trailblazer. When the ICIJ spokesman said they wouldn't be releasing the papers, en masse, with the throw away line that, "We're not WikiLeaks. We're trying to show that journalism can be done responsibly" it was cringeworthy.


Anonymous said...

I suspect there are some potential law suites hanging over editors heads, worldwide.
It's an easy mark to finger Putin the Chinese and the glamour boys but when you get down to the really dirty money launderers an expose puts your arse in a sling.
Lets hope there will be some leaks to the non main stream media