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Panama Shock and Hackers

Those stashing away unaccounted money in tax havens, should worry about hackers

Harish Gupta
Publish Date: Apr 25 2016 2:47PM | Updated Date: Apr 25 2016 2:47PM

Panama Shock and Hackers

Panama Papers’ leak has set the cat among the pigeons. And those stashing away unaccounted money in tax havens, should worry about hackers. Since these shadier than shady characters know no boundaries while unlocking codes of clandestine foreign bank accounts, writes Harish Gupta

Non-disclosure of funds held in clandestine accounts abroad, when revealed, can be explosive. So was it in the last decade when Lehman Brothers, the US bank, was found falsely claiming that its books were in the pink of health by having “sold” its sub-prime housing debts, known as “toxic” debts, to offshore companies in Cayman Island, a tax haven. With the lie detected it came clattering down and the worldwide recession of 2008 began.
But there is something more and different about the ‘Panama Papers’. It is not just the wagonloads of documents (11.5 million files) hacked out of the e-mail account of Mossack Fonseca, a shadowy financial firm in the Panama City. It is not even the huge number of 214,500 companies involved in it across 21 jurisdictions or countries; or the fact that an International Consortium of Investigative Journalists (ICIJ) have combed through the mass of papers for a year in a coordinated mission to connect the dots. The shock and awe triggered by the Panama Papers’ leak come from the quality and stature of the names involved in the dodgy game of stashing cash in offshore shell companies that are asked no questions as to their business, nor to the nature of transactions carried out through their accounts.
And what a super A-list of global stars caught in the typhoon of MF disclosures! Russian President Vladimir Putin, Chinese president and party chief Xi Jinping with seven of his colleagues in the politburo of the communist party, UK prime minister David Cameron, Ukraine’s president Petro Poroshenko, prime minister of Iceland Sigmundur David Gunnlaugsson (he has resigned), Pakistan prime minister Nawaz Sharief, ex-interim prime minister of Iraq Ayad Allawi, and Alaa Mubarak—son of ex-president of Egypt. There are twelve national leaders (so far) among 143 politicians or their close friends and relatives named in the papers. Besides, there are stars from the world of sports and cinema, like footballer Lionel Messi and late film director Stanley Kubrick, and even a pinch of the British royalty (Sarah Fergusson).
The Indian contingent till now, at 500, is none too small; there is every chance of it expanding with more names. The names of former superstar Amitabh Bachhan, with his daughter-in-law Aishwarya Rai and her parents, naturally grabbed maximum media attention but it is not the first time that the senior Bachhan has been reported to have dealings with tax-haven banks, either directly or through his brother. It began in the 1980s. The Indian businessmen featuring in the list, like Apollo Tyre’s Omkar Kanwar, the colourful Kolkata Marwari Sisir Bajoria who has of late converted himself to a BJP loyalist from being the late Jyoti Basu’s conduit to the city’s business community, and the old Garware family are interesting but not altogether unexpected. Also expected are the Indiabulls boss Sameer Gehlaut and the DLF real estate tsar KP Singh (and his clan of 10 owning four shell companies between them), both having track records in business that are not considered saintly at any rate, courtesy media reports.
There is one surprising name in the India list and it is that of Somendra Khosla. He is the man who set up a firm to receive commission as high as 15 percent, topped with “facilitation charges”, from De La Rue, the world’s largest maker of currency notes. The company has been the bulk supplier to the Reserve Bank of India of currency notes. Khosla’s shell company received substantial pay-offs of 500,000 pounds for RBI tenders in 2003 and again in 2005, the first during the AB Vajpayee regime and the other during UPA rule. If true, it shows the penetration of lobbies in areas that are exclusive to RBI, a constitutional body. The report has not been denied, either by the company or the recipient. It is not known if the company and its Indian powerful partner continued supplying currency notes later and making a killing. Where is the guarantee that the note paper supplier will not offer his expertise to ‘create’ unauthorised currency notes for the benefit of terrorists, traffickers and narcotic peddlers?
The promptness with which Prime Minister Narendra Modi and Finance Minister Arun Jaitley have set up a multi-agency group comprising several Government agencies for probing the Indian chapter of the Panama cases is welcome. But there has been no demonstrative action against hoarders of black money in India and abroad so far.
However, the “Panama Papers” call into question some of our basic ideas about how money is earned, saved, invested and spent. The belief so far is that the world is guided by rules, and, if there are deviations, they must be exceptions. But the lesson from Panama is that every high net-worth person has the licence to set his or her own rules, and, more importantly, there is no such thing as a financial boundary.
For the fat cats, it was no problem till banks in tax-havens continued to use their secrecy laws as protecting wall against prying eyes. But the privacy of unaccounted cash is now challenged by a group of techies who are also concerned citizens, and would no more come to terms with systems and institutions that promote gross inequalities of income and wealth. If there are those who deal in secret funds, there are hackers who have dealt a blow to the system earlier too. Be it HSBC papers, Iraq’s Oil for Food, the Liechtenstein papers etc. There may be a dozen Panama-type disclosures soon if reports are to be believed. Mossack Fonseca is one company in Panama. There are 300 such solicitors in Panama and there are 27 tax heavens. Plus the infamous Mauritius chain. The hackers have caused death to secrecy and those stashing monies abroad should worry as hackers know no boundaries. 
--The writer is Editor Lokmat group