Of Panama, Pandora papers and diversion of our collective wealth

Last month, a report titled Pandora papers hit the media! The report contained names of individuals who chose to move their investment to locations outside Nigeria called tax havens. The locations were scattered around the Caribbean. Amongst the names were politicians, businessmen, clergy, etc. It came with its disappointment with many querying why certain highly respected names were on the list. The first part of this article looked at offshore investment in tax havens. It reviewed the reasons why people do it, demystified the misrepresentation that there is no tax, pointed out a few challenges and gave a few recommendations on what the federal government should do to curb it while underscoring its disservice to the Nigerian populace.

This second part will attempt to look at the sources through which the information and activities of these individuals that had confirmation for secrecy and anonymity are broken and made public. These sources called Papers or Reports or Leaks have over the years removed the veil of anonymity or secrecy of owners of investments in tax havens. While studying the various papers, this article shall also discuss the strategic importance of the Papers and how they can help to shape the Nigerian economy.

In 1815, when Switzerland’s neutrality was established at the Vienna Congress, many people saw an opportunity for offshore investment. This was the window many needed to blindfold their local regulation for want of protecting their investment. Bloomberg puts it that out of the world’s richest 200 people with a combined net worth of $2.9 trillion, more than 30 percent of them have their presence in an offshore scheme. In 1934, Switzerland established the banking secrecy laws which entitled it to hold information of its customers without being under any obligation to divulge it. There was the Euromarkets agreement in 1957 between Bank of England and English banks that entitled UK banks to carry out unregulated deals provided they were in foreign currency and for non-British clients only. While this created a new industry that elevated to prominence many of the former British colonies, the largest of them all was Switzerland as records have it that in 2011, it was in the custody of about $2.1 trillion in private wealth. The provision of instruments for elite banking, avoiding double taxation, and an easy goldmine with a blind eye, were enough motivations for patronage. Despite the early wins, attention has shifted to other parts of the world thus bringing tax havens under 3 broad categories: British Empire-based tax havens, European havens, and South America havens.

The near-bankruptcy of Cyprus, holding about $31 billion of Russian deposit, which led to the leak of 120,000 individuals and companies operating in the British Virgin Islands and Singapore, removed the secrecy lid that was supposed to be a major attraction and in no time successive leaks have been reported and categorized as “Papers” revealing more and more information of the secret investments of people around the world. The leak has been aided by Trust companies, international law firms and journalists.

The Pandora Papers came with a bang this year 2021! It is touted to be the largest of all leaks involving records from 14 offshore services firms from around the world.  A document in the Pandora Papers shows that banks around the world helped their customers set up at least 3,926 offshore companies with the assistance of Alemán, Cordero, Galindo & Lee, a Panamanian law firm led by a former ambassador to the U.S. The document shows that the firm – also known as Alcogal – set up at least 312 companies in the British Virgin Islands for clients of the American financial services giant Morgan Stanley. Not less than ten Nigerians were involved here.

The Paradise Papers came in 2017 and had records from several dozen jurisdictions held by the global offshore law firm Appleby, which is headquartered in Bermuda, as well as a Singapore-based offshore services provider. The leak also included the corporate registries from 19 countries and territories. It involved about 120,000 investors and were leaked to the same German journalists who had previously been involved in an earlier leak. Only one Nigerian was named here.

The Panama Papers occurred in 2016 and had records from 21 offshore jurisdictions held by a single Panama-based global law firm, Mossack Fonseca. Journalists from the German newspaper, Süddeutsche Zeitung, received the leak from an anonymous source who called themselves John Doe. The German reporters shared the records with the ICIJ and its global media partners. A total of about 110 Nigerians were named in this report.

Before the Panama leaks, there were three earlier leaks of HSBC Geneva in 2009, HSBC Jersey in 2012 and Offshore Leaks in 2013. While the HSBC Geneva had records on clients of HSBC’s private bank in Geneva with at least 106,000 account-holders from more than 200 countries totalling $255 billion and leaked by an ex-staff, the Jersey version had records on British account holders at global bank HSBC’s branch in the Channel Island of Jersey with at least 4,388 clients, with accounts totalling $1.1 billion. The 2013 Offshore leaks had records on 10 different offshore tax havens that came mostly from two firms with more than 100,000 people’s closely guarded investment information, leaked by an Australian-based Irish journalist, Gerard Ryle. There were no records of Nigerians on these leaks.

While some Nigerian investors have either defended the genuineness and rationale for their decision to invest in tax havens or blatantly denied any knowledge of such, others have claimed ignorance as to its implication and absolved themselves, claiming joint ownership.

The government of Nigeria has not been known to take any decisive or publicly known step to recover the lost revenue arising from the action of the fingered individuals like in other climes. For instance, the USA recovered $780m in 2010 from the Union Bank of Switzerland (UBS), inclusive of its commitment to identify about 19000 US tax evaders who have accounts with it.

On another occasion, HSBC was held complicit for aiding two US citizens in a multimillion-dollar tax evasion scheme, the two men were arrested and indicted for tax evasion. The Canadian and Quebec governments recovered $28.4m in tax from 264 citizens and $34.4m from 88 citizens respectively from citizens from the 2009 leak, and another $29m from the 2016 leaks. The United Kingdom government assessed about 170 HSBC customers and recovered $34 million in 2012.

Revenue lost is the collective wealth of the citizens of Nigeria that should have been deployed to infrastructural and other developments. These have been denied the country. Posterity, therefore, beckons on the Federal Government to recover revenue lost by the activities of these individuals and close the ever deficit Nigerian budget. God Bless Nigeria!

Adolphus Aletor, FCA, MCIB, a banker and finance analyst, is the managing director/CEO, Rigo Microfinance Bank; he can be reached on +2348033410380 (WhatsApp only) or jiyere@yahoo.com