One of the more prescient authors I know is Ryan Hubbs, a senior manager of fraud investigation and dispute services at EY, who in 2014 wrote an article for Fraud Magazine entitled, “Shell Games." In this piece, Hubbs wrote about how criminals use shell corporations to launder money and perpetuate frauds such as violations of the Foreign Corrupt Practices Act. He explained what shell companies are and how certified fraud examiners could assist companies in internal investigations around these issues. His prescience was foretelling the release of the Panama Papers.
This prescience is also seen in an article on Monday in the New York Times, entitled, “Documents Show How Wealthy Hid Millions Abroad." In this piece it detailed how the Panamanian law firm Mossack Fonseca offered a how-to guide of sorts on skirting or evading United States tax and financial disclosure laws to many of its American clients. Some of these services included, “locating an individual from a “tax-convenient” jurisdiction to be the straw man owner of an offshore account, concealing the true American owner, or encouraging one client it knew was a United States resident to use his foreign passports to open accounts offshore, again to avoid scrutiny from regulators, the documents show.” The reason was that if “the compliance department at one foreign bank contacted by Mossack Fonseca on behalf of its clients started to ask too many questions about who owned the account, the firm simply turned to other, less inquisitive banks.”
Hubbs detailed these same types of steps in his 2014 article. Hubbs wrote that while tax evasion was one reason for setting up shell companies, it was only one of myriad reasons. Businesses need to know who they are doing business with going forward. He wrote, “If your organization is engaging in any type of transaction in today's economy, shell companies should be a concern. They're the financial and deception vehicle of choice for some of the most corrupt, dangerous, and ruthless individuals and entities in the world. Arms dealers, drug cartels, corrupt politicians, scammers, terrorists, and cyber-criminals are just a few of the frequent users of shells.”
The continued fallout from the Panama Papers will resonate for some time to come. I suggest you read Hubbs article to find out what you can do now.