Action needed on Pandora Papers

The Malaysian Government has to act without fear and favour to investigate those names cited in the Pandora Papers to find out the possible wrongdoing and corruption that is taking place. The aim of the investigation is mainly to clear their names.

The Government should make it mandatory for all members of parliament (MPs) and ADUN to declare all their assets onshore and offshore. This will enable the authorities to detect any new asset or property owned by members of parliament especially those who hold high positions in political parties.

One way to overcome corruption and money laundering activities kept in the off shore accounts is by introducing a central registry for beneficial ownership of companies registered in Malaysia and those keeping funds in Labuan.

A beneficial owner of a company is the person who truly owns, enjoys and controls the company even though the title to some form of property or security is in another’s name. It plays an important about transparency of ownership

Many financial criminals use shell companies to hide money and particulars of ownership through nominees which allows corrupt criminals to launder and avoid their ill-gotten wealth. The use of nominee directors and shareholders will help mask the beneficial owners of these companies.

On another note, the Pandora Papers is another avenue in which the Inland Revenue Board can look into to see if the tax filings of the tax payers are consistent with the information that is automatically exchanged and received through the Common Reporting Standards (CRS) by participating countries. The objective of CRS, developed by the Organisation for Economic Co-operation and Development in 2014, was to help the international community fight tax evasion.

Pandora Papers is the 2021 large scale investigative journalists’ project by International Consortium of Investigative Journalists (ICIJ) located in Washington DC. ICIJ which has been working with 140 media organizations 117 countries.

The media acts as a bipartisan observer which reports to the public on the functioning of the democratic process. Within this framework, investigative journalism plays a crucial role in the fight against corruption.

Its leaks of over 6.4 million documents, about three million images, more than one million emails and almost half-a-million spreadsheets.

The confidential documents reportedly incriminating hundreds of global wealthy elites, high-level officials, oligarchs and billionaires using shell companies to move wealth offshore, anonymously buy real estate or luxury goods for tax avoidance and corruption in their offshore accounts.

According to ICIJ, over 35% of former and current leaders are facing allegations of fraud, corruption money laundering and global tax evasion.

Among those named in the Pandora Papers were Malaysian businessmen, politicians such as former minister of finance Daim Zainuddin, the current minister of finance Tengku Zafrul Abdul Aziz, the UMNO President Ahmad Zahid Hamidi, deputy finance minister Yamani Hafez Musa, former People’s Justice party treasurer William Leong and his wife Alice Chan Lee, the Malaysia’s 50 Richest 2021 G. Gnanalingam and the parents of fugitive financier Jho Low.

Pandora Papers also revealed owners of more than 1,500 United Kingdom properties, Qatar’s ruling family, the current finance minister of Pakistan, Sir Philip and Lady Green, the King of Jordan, the Czech Republic Prime Minister, and the Kenyan President.

Governments of Australia, Britain and Pakistan have launched investigations after the secret papers show how the elite shielded their wealth. Malaysia’s opposition leader failed to get for a parliamentary debate over the revelations of several current government officials from both political sides.

Offshore financial centers(OFCs) are estimated to hold up to US$36 trillion in cash, gold, and securities, not including tangible assets such as real estate, art, and jewels.

A few years ago, the Boston Consulting Group stated that Singapore held around one eighth of the global stock of total offshore wealth while International Monetary Fund’s (IMF) reported an estimate of over 95 per cent of all commercial banks in Singapore are affiliates of foreign banks which is a testament to its extreme dependence on foreign and offshore money.

The offshore service providers are located in the Cayman Islands, Switzerland, Hong Kong, the Bahamas, Luxembourg, Ireland, Singapore, Panama, Trinidad and Tobago and the Seychelles to name a few.

The offshore countries offer the following services: -

1. easy to set up companies

2. greater privacy, less regulations

3. strict banking secrecy their laws prevent to identify real owners of companies

4. there is no, low or only nominal taxation or corporate tax

5. protection against local, political, or financial instability

An article in the Guardian, the discussion of offshore centres can get bogged down in technicalities, but the best definition comes from expert Nicholas Shaxson who sums them up as: “You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.” In so doing, you rob your own society of cash for hospitals, schools, roads…"

Many financial criminals have used offshore companies as fronts for drug trafficking, money laundering, weapon smuggling monopolizing industries, privatization fraud and corrupting politicians and government officials.

An article in the Foreign Policy stated that money needed to pay for the pandemic is actually close at hand, hidden away in OFCs, more commonly known as tax havens.

Using the offshore entities outside the country is not illegal provided it is done for legitimate reasons. The offshore bank accounts in Malaysia are under the scrutiny of Labuan Financial Services Authority (FSA).

But the practice is commonly used to dodge taxes. The main issue is how they got the large sums of money and their other sources of funds and wealth.

UN Office for Drug Control and Crime Prevention stated that ‘the real issue, therefore, is not to issue blanket condemnations or make efforts to eliminate bank secrecy and offshore financial services, but to ensure that the legitimate uses of these facilities remain available, while making it much more difficult to use them directly for criminal activities or for laundering the proceeds of drug trafficking and other such forms of organised crime’.

The COVID-19 pandemic have unfolded many weaknesses in government ministries which we though were our strengths. With our B40 now B50, it is important for all tax payers monies to remain within Malaysia and not funnelled out to tax havens to rebuild Malaysians. Be patriotic and Malaysians for Malaysians.

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* Datuk Seri Akhbar Satar is the President Association of Certified Fraud Examiners Malaysia Chapter.