WASHINGTON: The “Panama Papers” have laid bare how readily bad actors can circumvent global sanctions via the maze of anonymous shell companies set up in banking havens, as documented in the massive leak.
Terror groups, drug cartels, and pariah countries like North Korea — not just tax evaders — use them to hide flows of money that would otherwise be blocked by sanctions, experts say.
“They are designed for concealment and so are as useful for getting around sanctions as they are for tax avoidance or money laundering,” said Pascal Saint-Amans, head of the Organization for Economic Cooperation and Development’s unit fighting tax havens.
That’s a problem as the United States, Europe and the United Nations increasingly reach for sanctions as their weapon of choice against global trouble-makers.
The United States in particular has made economic sanctions a key policy tool against countries like Iran, North Korea and Cuba, as well as extremist groups like Islamic State and Al Qaeda.
To implement its sanctions, the US Treasury publishes extensive blacklists of names of individuals and companies that banks and other companies are barred from dealing with.
The challenge is that with shell companies, it is often impossible to know the ultimate beneficiary behind it.
“They’re anonymous so you don’t know if it’s owned or controlled by somebody who’s on a sanctions list. That’s a real problem,” said Liz Confalone of the organization Global Financial Integrity.
According to the BBC, which has had access to the leaked Panama Papers — a law firm’s records of thousands of shell companies set up for wealthy and powerful people around the world — 33 US-blacklisted individuals and companies based in Iran, Zimbabwe and North Korea are tied to some of the companies. AFP