More than ever before, these articles pulled the curtain back on how an estimated $100 billion in undeclared money has been siphoned from Canada into offshore tax havens.
Since the first investigations were published, the federal government has invested almost $500 million in the Canada Revenue Agency aimed at tougher tax enforcement, launched investigations into 85 Canadians identified in the Panama Papers and compelled banks to divulge their offshore tax haven client lists.
“The Panama Papers were a revelation to many people, revealing how widespread the use of bank secrecy and tax secrecy jurisdictions are and how they obfuscate money flows,” said Peter Dent, former president of Transparency International Canada. “It adds evidence to the case that these tax havens are not inert. They are the bedrock for people to move illicit funds and the proceeds of crimes around and allow them to use them for their personal enjoyment.”
Beyond raising awareness, the Panama Papers have also sparked anger at the two-tiered tax system that allows the wealthy to opt out of paying tax.
“The Panama Papers, and the journalistic efforts here as well, have caused public outcry and regulators to take action,” said Richard Leblanc, a corporate governance expert and professor at York and Harvard Universities. “Regulators are strengthening disclosure and transparency of true (actual human) ownership.”
The reports have also shone a light on the role of intermediaries — the lawyers, accountants and financial institutions — who provide access to the offshore system.
“These firms and professionals are now doing thorough background checks on prospective clients, and internally, are exceedingly careful of reputational and other types of risk that accompany highly aggressive tax advice,” he said.
Here’s a sampling of the Canadian revelations so far:
Canadian faces in the data: Wealthy Canadians emerged from the millions of names contained in the leak revealing new insights into the offshore money industry.
British-Canadian billionaire Victor Dahdaleh, publicly honoured by three Canadian universities for generous contributions, was identified for the first time as the mysterious middleman in what U.S. authorities called a “corruption scheme” that triggered one of the largest-ever financial penalties issued by U.S. authorities. The Panama Papers confirmed Dahdaleh was the man behind a British Virgin Islands company that allowed him to “enrich” himself with $400 million (U.S.) in mark-ups, the U.S. Department of Justice found, while paying tens of millions of dollars in bribes to Bahraini officials.
Dahdaleh, through a spokesperson, said he has not been involved in any wrongdoing nor convicted of any offence “in any court in the world.”
Vancouver businessman David Ho, appeared in the database thanks to a company he registered in the tax haven of Seychelles in 2011 while facing criminal charges of unlawful confinement, cocaine possession and illegally possessing a loaded Glock 9-mm handgun. Ho faced little resistance to his incorporation from Mossack Fonseca despite his legal challenges, revealing how easy it is to access the offshore world.
Ho’s lawyer told the Star “there was no relationship or connection between the offences with which Mr. Ho was charged and the possible misuse of an offshore company.”
Canadian lawyer Hélène Mathieu appeared throughout the Panama Papers as Mossack Fonseca’s Dubai agent, registering nearly 900 shell companies, including some that were targeted with sanctions for supplying fuel to the Syrian government, which U.S. authorities believe was used to attack Syrian citizens. Despite internal inspections by Mossack Fonseca that found “serious failings were evident in procedures or controls” and “urgent remedial action is required,” she continued to register companies with the firm until the Toronto Star/CBC stories were published. After briefly shutting down her website, it is now back online.
“We regret any misuse of companies that we incorporate or the services we provide and take steps wherever possible to uncover and stop such use,” Mathieu’s firm told the Star in a statement.
The Panama Papers revelations have sent banks and other financial institutions scrambling to determine their risks in suspicious offshore activity.
According to a global survey conducted by accounting firm KPMG, more than 80 per cent of financial firms have conducted internal reviews of their exposure to Mossack Fonseca and entities identified in the Panama Papers. Half of those firms surveyed said they had been contacted by authorities and more than one-quarter of respondents said they had reported a suspicious transaction to authorities.
The Panama Papers have also inspired a renewed spirit of vigorous tax oversight by the Canadian government. Only days after the first stories broke in early April, the revenue minister announced a $444-million investment in Canada Revenue Agency’s enforcement ranks and has targeted the gateway into the offshore industry: Canada’s banks.
In May, the federal government sought a court order to compel the Royal Bank of Canada to reveal the identities of clients with “relationships or connections” to Mossack Fonseca. The Royal Bank did not oppose the request.
In July, a Federal Court judge ordered RBC and Citibank to disclose their dealings with a major bank in the Cayman Islands.
In September, a new leak of Bahamian corporate registry documents showed three of Canada’s big banks — CIBC, Royal Bank and Scotiabank — registered nearly 2,000 offshore companies and private foundations in the Caribbean tax haven.
The Panama Papers also revealed details in SNC-Lavalin’s saga of secret payments for overseas business. The Canadian engineering giant, which has been charged with bribing a foreign public official and fraud for its business practices in Libya in the 2000s, also signed contracts for more than $21 million with an anonymously owned company in the BVI to gain access to Algerian markets during the same period, documents in the data showed.
Vancouver businessman Fred Sharp and his Belize-based Bond & Company helped create 1,167 companies and foundations, consulting with Mossack Fonseca officials about ways of structuring companies “so that no taxable income accrues,” according to internal MF documents. Among Sharp’s colleagues was convicted fraudster Michael Ritter, who registered 60 companies through his former firm — Newport Pacific Financial — in tax havens such as Niue, the British Virgin Islands and the Bahamas.
It is “no secret that my firm created hundreds of offshore corporations through Mossack Fonseca,” Ritter said.
“Tax planning is a global reality that results from international competition and inefficient governmental regulation,” Sharp told the Star. “It promotes efficiency and is legal.”
Transparency International has found that the rate of incorporations in the British Virgin Islands has dropped by 30 per cent since the Panama Papers were first published.
Internationally, nine Mossack Fonseca offices have shuttered — in the British dependencies of Jersey, Isle of Man and Gibraltar, as well as Peru, Sao Paolo in Brazil, the Netherlands, New Zealand, Lugano, Switzerland, and Nevada — since the revelations were published, and the law firm has been fined close to $500,000.
After the database was published online, an ICIJ analysis estimated $135 billion had been wiped off the value of nearly 400 companies associated with the Panama Papers.
Many of the more than 6,500 tax evasion and fraud investigations initiated after the Panama Papers leak continue. To date, they have recouped at least $110 million in unpaid taxes and asset seizures.