Raids result from leak of Panama papers

Mossack Fonseca has about 40 offices globally, located in Gibraltar, the Isle of Man, Jersey, Geneva and China, including some countries identified as tax havens by the European Commission.

Consequently the number of agencies worldwide who have begun investigations into the business affairs of Mossack Fonseca is increasing daily.

Ramon Fonseca (founding partner) told Reuters that his firm, which specialises in setting up offshore companies, had broken no laws, that that no documents had been destroyed and all its operations were legal. 

The Mossack Fonseca website provides a statement refuting suggestions of illegality:

“Recent media reports have portrayed an inaccurate view of the services that we provide and, despite our efforts to correct the record, misrepresented the nature of our work and its role in global financial markets.”

Intellectual property prosecutors are reported to have visited Mossack Fonseca to investigate the firm’s claim that its computers were hacked before the leak, on 11 April 2016. The founding partner asserts that this is the only crime that has been committed.

However, Panama’s Attorney General raided the offices of the Mossack Fonseca late on 12 April 2016 to search for any evidence of illicit activities including money laundering and financing terrorism. This search was under the command of the prosecutor Javier Caravallo, a specialist in organised crime and money laundering.

Last Friday, 8 April 2016  El Salvadorean authorities, under Attorney General Douglas Melendez, raided the Mossack Fonseca offices. Approximately 20 computers and a quantity of documents were reported to have been confiscated, and seven employees questioned but not detained. The authorities decided to conduct the raid when they saw staff removing the law firm’s sign from outside the building.

In Peru, a team of 20 from Peru’s tax agency searched and seized all accounting documents belonging to Monica Ycaza Clerc, who represents the global law firm Mossack Fonseca in Lima. Authorities said the seizure was part of an investigation into tax evasion and fraud involving the law firm and Peruvian taxpayers. The National Customs and Tax Administration has created a team to verify whether any tax evasion cases it had been investigating in the past year, correlate with companies and individuals mentioned in the files.

Caroline Lucas MP raised the point in Prime Minister’s Question Time (at 12:27:30) that authorities have raided offices in Panama, El Salvador and Peru but there had been no search and seizure at the London offices of the firm. She raised the concern that documents may have been shredded or computers wiped.

The Prime Minister responded by saying that a  joint taskforce of the NCA and HMRC had been set up to conduct an investigation and that it would be inappropriate to interfere with the operational independence  of the prosecuting authorities. For more on the Joint taskforce, see Legal update, UK Government launches cross-government taskforce on Panama papers.

The NCA has experienced some local difficulty in respect of legality of search warrants recently. It was asked to explain the situation at the Central Criminal Court and admitted that some agents responsible for applying for warrants and production orders were not properly trained and submitted applications without seeking advice from lawyers. The court was also told that in some instances agents were found to have failed to disclose relevant information to courts about the nature of their operations when asking for permission to search properties, seize evidence and install covert listening devices which made the authorisation received unlawful. For more, see National Crime Agency review on warrant procedures Legal update, NCA review on warrant procedures. The report on the review was published on 12 April 2016, see Legal update, Report on review of NCA warrants published.

If the London offices are raided, all those firms who have been asked to comply with the investigation by the SRA and FCA may find themselves unable to act.

Practical Law Morag Rea

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