Panama files put pressure on European governments to act

LONDON

European governments are beginning to respond to the so-called Panama Papers, which appear to expose wrongdoings by thousands of rich and powerful people across the globe.

The papers, a vast collection of documents leaked from Mossack Fonseca, a law firm based in the Central American country, have cast light on the financial arrangements of relatives of the leaders of Britain and Iceland, as well as the superstar footballer Lionel Messi and friends of Russian President Vladimir Putin.

German Chancellor Angela Merkel called for more transparency in offshore businesses and criticized banks for setting up shell companies abroad for tax evasion.

She said several German banks had paid fines in recent years for such practices.

“Of course, we will examine now whether criminal law is sufficient here. But addressing this whole problem is an issue of transparency….and this is of greatest importance,” Merkel said at a press conference in Berlin on Tuesday, following her informal meeting with the heads of IMF, World Bank, Organisation for Economic Co-operation and Development (OECD), International Labour Organization and World Trade Organization.

Angel Gurria, OECD Secretary-General, sharply criticized Panama on Tuesday for failing to comply with international tax transparency standards.

During a joint press conference with Merkel and global economy leaders, Gurria called on G20 countries to increase political pressure over Panama to commit itself to transparency standards and share information with partners.

German daily Suddeutsche Zeitung reported Tuesday that at least 28 German banks, including UBS Deutschland, Deutsche Bank and Commerzbank had set up around 1,200 shell companies in the last 25 years using Mossack Fonseca.

German Justice Minister Heiko Maas warned banks Tuesday of possible legal consequences for escaping national law.

“No one can escape from the national law and investigative authorities permanently,” Maas told a press conference in Berlin. “Who has done anything wrong there, will have to answer to German court,” he said.

Maas said the government intends to expand the existing money laundering law and introduce a national transparency register. “We have to achieve more transparency,” he added.

Meanwhile, Ukrainian President Petro Poroshenko faces a parliamentary inquiry after papers revealed he had moved his candy-making business offshore during the height of his country’s conflict with Russian-backed separatists.

In Iceland, Prime Minister Sigmundur David Gunnlaugsson remains under pressure to resign over documents showing his wife owned an offshore company with claims on the country’s collapsed banks – a potential major conflict of interest.

There was also pressure in Britain on Prime Minister David Cameron, who had previously called for measures to stop “the super-rich elite dodging taxes.” The papers revealed his late father had set up offshore company in 1982 that had not paid the U.K. tax for more than 30 years, The Times reported.

France launched an official investigation into the Panama files after the documents revealed around 1,000 names of French taxpayers.

French financial prosecutors announced a preliminary investigation for "aggravated laundering tax evasion” since the alleged crime "likely involves French taxpayers."

In Spain, world-famous footballer Lionel Messi was named in the scandal; Oscar-winning director, Pedro Almodovar and Pilar de Borbon, the aunt of the Spanish king, were also mentioned.

Messi, who has already been dealing with charges of tax evasion, denied any wrongdoing and even threatened to sue the media outlet who published the information for defamation. This threat was against El Confidencial, a digital daily which contributed to the Panama investigation.

El Confidencial claimed in an article Sunday that Messi “set up a tax fraud network” through an offshore company, Mega Star Enterprises, the day after he was indicted for dodging taxes by Spanish authorities in June 2013.

Messi is expected to appear in court alongside his father on May 31 to defend separate charges of allegedly defrauding Spain of 4.1 million euros ($4.62m) in tax revenue from 2007-09.

The Panama files containing over 11 million leaked documents from law firm Mossack Fonseca were obtained by Germany’s Suddeutsche Zeitung newspaper, which shared them with other publications around the world through the Washington-based International Consortium of Investigative Journalists. In statements made to several media outlets since the leaks were published, Mossack Fonseca too denied any wrongdoing.

-- Additional reporting by Alyssa McMurtry