‘No dirty money in Panama’, minister claims

13th May 2016, Comments 0 comments

The Vice Finance Minister of Panama has denied that her country is a tax haven, pointing the finger of blame instead at banking centres such as Switzerland for allowing hidden assets to sluice through its system.

Panama has come under fire in recent weeks following leak of data from law firm Mossack Fonseca by the International Consortium of Investigative Journalists (ICIJ). The so-called Panama Papers scandal has shone light on the creation of secretive shell companies around the world.

Speaking at the St Gallen Symposium on Friday, Eyda Varela de Chinchilla – the number two at Panama’s finance ministry – attempted to use the data to turn the tables on detractors. Just 20% of the companies set up by Mossack Fonseca were established on Panamanian soil, she said.

“[The scandal] is more related to a law firm than to Panama,” she told students and business leaders at the University of St Gallen. “The Panama Papers has shown that most of the money is not in Panama. It was placed in Swiss banks or was taken to London.”

Varela de Chinchilla argued that Panama has shown itself to be a good global citizen by complying with Financial Action Task Force (FATF) and Organisation for Economic Cooperation and Development (OECD) transparency standards in recent years.

The reforms were achieved in “record time”, she insisted, lifting Panama off the OECD’s grey list of tax havens. “The [Mossack Fonseca] practices dated back to 40 years ago,” she said. “Panama’s success does not depend on irregular flows of money into our financial system.”

International criticism

But Valera de Chinchilla’s comments are at odds with the common perceptions around the world that Panama’s secretive financial system still helps tax evaders and money launderers hide their ill-gotten gains.

In February, the OECD decried Panama’s decision to pull out of the multilateral automatic exchange of tax information programme. At the start of 2018, Switzerland will join nearly 100 countries that will automatically share information with other countries. Panama, by contrast, will only pass on such data on demand.

“The Panama Papers revelations have shone the light on Panama’s culture and practice of secrecy,” OECD Secretary-General Angel Gurría stated in April. “Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities.”

“The consequences of Panama’s failure to meet the international tax transparency standards are now out there in full public view. Panama must put its house in order, by immediately implementing these standards.”

Questioned by the audience in St Gallen on Friday, Valera de Chinchilla declined to say whether Panama would meet those demands. The disagreement with the OECD boiled down to “communication issues”, she said.

Switzerland and the Panama Papers The ICIJ leaked data contains information on 214,000 offshore companies administrated at some point by Mossack Fonseca between 1977 and 2015, and more than 14,000 intermediaries (mostly law firms and financial advisors) that acted as middlemen to set up offshore companies. Hong Kong (4,902), the United Kingdom (2,106) and the United States (1,540) had the largest number of intermediaries that have dealt with the firm at some point. Switzerland played an important role with at least 1,339, and its intermediaries were particularly active. They helped set up more than 34,000 offshore companies with Mossack Fonseca alone. While the use of offshore entities is not in itself illegal, the revelations from the Panama Papers have already resulted in a raid by Swiss prosecutors on European football’s governing body UEFA and an official investigation by the authorities in Geneva.


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