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Former Tax Commissioner for President

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HSBC’s top brass have “no idea” about Mossack Fonseca. Here’s a primer peppered with well researched links...

HSBC’s Money Laundering Nightmare (1): Mossack Fonseca

HSBC’s CEO Stuart Gulliver and Chairman Douglas Flint put in an appearance in front of the Treasury Select Committee on Wednesday 25^th February. As usual with these banker-bashing shindigs, the session was tense, with plenty of pointed questions and tortured responses that one could spend weeks parsing.

The one question that really made me prick up my ears was one from the very ferocious John Mann, MP. It’s around 15:51:00 in the session video (slow to load), and it goes like this:

Mann: …Mr Gulliver, quick one: just whether, with your Panamanian setup, whether Mossack Fonseca was involved, directly or Indirectly?

Gulliver: I have no idea, and actually, that structure no longer exists.

Casually saying “I have no idea”, to John Mann, on this particular subject, might turn out not to have been all that clever.

To understand why, we need, for a start, some more detail on this “Panamanian setup”, for instance, from Bloomberg:

Why is Mossack Fonseca  styling itself “M.F.’? Silverstein has a plausible explanation:

This sort of bogus separation is a tactic employed by many big shell-firm incorporators, because it allows the parent company to disavow any connection to its local offices if the shit hits the fan from a legal standpoint. It’s sort of like how Walmart might operate in Bangladesh, distancing itself from sweatshops by long and complex supply chains. (Like Walmart, Mossack Fonseca has never been directly prosecuted for the actions of its affiliates.) “These are seamless, vertically integrated top-down organizations until the minute that a cop or investigator comes along,” says Jack Blum, the money-laundering expert. “Then they disintegrate into a series of unconnected entities, and everyone swears they don’t know anything about anyone else in the system. It’s like a jigsaw puzzle that’s assembled but suddenly falls apart when someone starts investigating.”

Silverstein’s own account of his visit to M.F.’s office, for a little talk with the local director, bears this out. Patricia Amunategui…

runs day-to-day operations, though internal company documents I found in court records show she works closely with Mossack Fonseca employees in Panama, such as Leticia Montoya, the custodian of record for dozens of shell firms linked to Lázaro Báez.

Amazingly, it’s now quite likely to get even worse. On the very same day that Gulliver put in his tense appearance at the Treasury Select Committee, the Süddeutsche Zeitung had this (my English):

·        The Mossack Fonseca Group, of Panama, is a well known provider of shell companies used by tax dodgers and other criminals

·        Investigators from the USA and other states have obtained the firm’s internal documents. Other countries are interested. German tax investigators have bought data relevant to Germany. On the basis of the documents, they are now carrying out raids.

·        The various groups of officials are operating with selections of firm’s records. Süddeutsche Zeitung has all of the data in the internal Mossack Fonseca documents at its disposal, more than 80 Gigabytes. Full evaluiation of the data is nowhere near complete.

There’s more:

Thousands of shell companies, registered in the Seychelles, the Bahamas, the British Virgin Islands or in Panama, built by Mossack Fonseca Group, ordered and paid for by Banks, wealth managers and lawyers from dozens of countries, can be found in the secret data on the USB sticks.

…

Clearly, Mossack Fonseca has a problem.

Onlookers can only agree.

It’s a spectacular disaster. If, like Mossack Fonseca, your entire business model is predicated on secrecy and deniablity, a massive data leak, including gigabytes of emails, is the one thing that could kill you stone dead.

Mossack Fonseca are likely to find out if it’s that bad in the coming months. HSBC and other banks, such as Credit Suisse and Commerzbank (summarizing the German: big tax investigation sparked by the Mossack Fonseca leak), will also have a problem.