The ‘ Mossack Fonseca Papers’ - PowerPoint Presentation

The ‘Mossack Fonseca Papers’ Implications for Financial Institutions, Funds and Corporations June 21, 2016

A Quick Recap The Panamanian government has strongly objected to the name “Panama Papers’’ (So I changed the presentation title) In fact, few Panamanians used Mossack Fonseca, and most Mossack Fonseca companies were formed outside Panama Panama emerged from the FATF Gray List in February 2016 In April 2016 the International Consortium of Investigative Journalists (ICIJ) began publishing a series of articles based upon their exploitation of a leak of approximately 11 million documents from Panamanian law firm Mossack Fonseca (MF).

A Quick Recap (continued) Mossack Fonseca specialized in offshore corporate formation, and had offices in Hong Kong, Switzerland, Isle of Man, Gibraltar, the United States and other locations. MF was one of the early entrants into the offshore industry in the British Virgin Islands. Initial articles were followed by the May release of names and link analysis of 214,000 Mossack Fonseca created or managed entities, as well as approximately 100,000 entities identified in the 2012 ICIJ Offshore Leaks investigation. Release contains limited financial transaction data (only data that was found in the Mossack Fonseca documents).

Where Things Get Interesting… Politician Offshore Entity Revelation of control/ownership. (Boring )

Where Things Get Interesting… Corporation Offshore Entity Revelation of control/ownership. (Boring )

Where Things Get Interesting… Politician Offshore Entity Revelations of control/ownership. ( Still Boring ) Corporation Offshore Entity

Where Things Get Interesting… Politician Offshore Entity Getting Interesting! Corporation Offshore Entity $$$$$$

The money movement between offshore entities is the piece known only to the banks, funds, law firms, corporations and now… the government. Recent revelations about MF corporations that were used to evade Cuba sanctions are an example. But sometimes all the details of a politicians transactions don’t need to be known, enough information exists in the public domain to convince the public of the existence of illicit activity. The Transaction Details are the Pieces of the Puzzle that are Falling Into Place Now

ICELAND Interview of Prime Minister Sigmundur Davíð Gunnlaugsson on April 3, 2016

ICELAND Prime Minister Gunnlaugsson resigned on April 5, 2016. Mossack Fonseca documents show that he sold his half of the company to his prtner for $1 on 12/31/2009, a day before a new law would have required that he disclose ownership. The company named in the interview, Wintris Inc., lost millions in the 2008 crash. Wintris is claiming over $4 million from failed Icelandic banks. As prime minister since 2013, Mr. Gunnlaugsson was key in brokering a deal for the banks’ creditors.

U.S. Corporate Transparency Issues U.S. does not lead the world in corporate control/beneficial ownership transparency States such as Delaware, Nevada and Wyoming lead other states in numbers of shell/shelf companies, but all states have some. While FATCA has significant global impact, the U.S. stands with Bahrain and Panama in refusing to sign up to the OECD automated data exchange. Nauru and Vanuatu have signed. Note: The U.S. is pursuing Intergovernmental Agreements (IGAs) with individual FATCA signatory nations. Someone in this room has a client or customer with the address of 2710 Thomes Ave in Cheyenne, WY. (If you don’t remember why that address is significant, Google it)

Anyone Know What Island This Is?

NIUE The nation of Niue, in the South Pacific, has a population of approximately 1950 people. Niue allowed incorporation of companies with Cyrillic and Chinese characters (STC anyone?) Asia time zone Signed exclusive agreement with MF in 1994 By 2001 MF fees comprised approximately 60% of Niue’s budget In 2001, in part due to US pressure, FATF blacklisted Niue and they kicked MF out Source: Organized Crime Corruption and Reporting Project

Search for Banks with Low BO (Thresholds) Documents from the MF leak show how the firm hunted for banks that would ask the fewest questions, allow accounts for PEPs with limited KYC at onboarding, or who did not request beneficial ownership information on client companies. Writing to wealthy Floridian William Ponsoldt , a Mossack Fonseca staff member stated that he had found a bank, BSI Bank Ltd. Singapore, that did not require a W-8 form. Source: New York Times and ICIJ

Are You Familiar With Elliott Management?Do you know how they tie to MF?

U.S. Administration Response to MF Papers Media Barrage Finalization of long awaited CDD ruleProposal to Hill for BO legislation Change to IRS regulation requiring foreign single owner LPs (‘disregarded entities’) operating in the U.S. to obtain an EIN Also watch the Proposed RIA rule…

What to Watch For Fundaciones de Interés Privado (Panama) Continued Regulator interest in institutional exposure to the MF Papers A slow, steady drip of disclosed PEP transactions involving offshore entities Increased questioning by banks and broker-dealers about BO and control of offshore entities transacting through them (even as non-client counterparties)

Daniel Wager Managing Director, Duff & Phelps Financial Crime & Regulatory Consulting daniel.wager@duffandphelps.com