Records leaked in the now-infamous Panama Papers scandal have revealed how corrupt entrepreneurs and government officials across Africa have actively used shell companies and bribes to hide profits made from natural resource extraction. According to an analysis of the records published by the International Consortium of Investigative Journalists, the practice is pervasive and widespread. From oil ministers in Nigeria to the owners of diamond mines in Sierra Leone, officials and entrepreneurs have been cycling money through shell companies and then using the funds to buy everything from opulent mansions in Beverly Hills to private yachts and luxury jets.
This reflects a much larger problem in Africa in which the benefits of the exploitation of mineral wealth on the continent bypass public coffers and are illicitly channeled into the pockets of corrupt officials. All in all, the International Consortium of Investigative Journalists have identified a staggering 37 companies within the Panama Papers that have been named in court actions or government investigations pertaining to natural resources in Africa. In total, the firm’s files contain over 1,400 companies whose names reference mining, minerals, oil, petrol, or gas. In addition, offshore companies were formed in order to own, hold, or do business with petroleum, natural gas, and mining operations in 44 of the 54 countries on the continent.
Experts say that Mossack Fonseca, like many firms offering offshore services, wasn’t diligent about investigating clients or where their money was coming from. While investigations were conducted at times, they were often belated and incomplete. But this isn’t really remarkable in the world of offshore finance. “There’s often no gatekeeper to prevent illicit money from entering the financial system,” Heather Lowe, a lawyer at Washington-based anticorruption group Global Financial Integrity, told the New York Times. Lowe explained that the offshore middlemen that form these companies often have no idea what they will be used for. If they ask for too much information, they might be forced to turn away business, particularly if they discover that the offshore company will be used for some kind of illicit means.
So, what did Mossack Fonesca have to say about this? “Our firm, like many firms, provides worldwide registered agent services for our professional clients (e.g., lawyers, banks, and trusts) who are intermediaries,” it said in response to the report published by the International Consortium of Investigative Journalists. “As a registered agent, we merely help incorporate companies, and before we agree to work with a client in any way, we conduct a thorough due-diligence process, one that in every case meets and quite often exceeds all relevant local rules, regulations, and standards to which we and others are bound. Filing legal paperwork to help incorporate a company is a very different thing from establishing a business link with or directing in any way the companies so formed. We only incorporate companies, which just about everyone acknowledges is important, and something that’s critical in ensuring the global economy functions efficiently.” In other words, the firm didn’t investigate what the companies being formed were going to be used for. And at the end of the day, it isn’t necessarily the firm’s responsibility to do so.
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