It is not illegal to set up a shell company in an offshore tax haven. Numerous providers can be found online, praising the advantages of a letter-box corporation. But what are the legal benefits?
Shell companies in Panama and other tax havens advertize their services on their web pages quite openly: it just takes $900 (790 euros) to set up a "regular Panama corporation" hiring 'Panama Offshore Worldwide' as a service provider. All you need are the names, addresses and passport copies of three directors.
The anonymous version costs $1,200, with an additional $650 annual administration fee. In contrast to the "regular Panama corporation" Panama Offshore Worldwide provides three "nominee directors."
According to the website, "this type of corporation is a good choice if your objective is to save taxes or protect your assets. The actual owner of this corporation is not registered in any public records." The website also emphasizes that "strict secrecy laws" guarantee that the key personnel "cannot be revealed and is protected by law bearing criminal consequences for the bank officials if they attempt to release any private information."
Nominees to hide and protect wealth
Tax-dodgers' nightmare: the Panama Papers are most likely the biggest leak in the history of journalism
A "Panama Foundation is recommended for asset protection and is especially suitable for inheritance cases," the website adds. For a fee of $1,300 the client gets maximum anonymity while avoiding a suspicious paper trail.
A combined foundation-cum- letter-box company costs you $2,400 and is especially useful when personal wealth needs to kept separated from operating capital.
The combination of an anonymous solution with a Panama Foundation "forms a good basis for distancing accumulated assets from the operating capital." This, the Panama firm boasts, "will give us the time to keep your assets out of touch, save you legal fees and make your opponent's lawyers a little richer while we wreak havoc in their predatorial (sic!) attempts."
The fees of Panama Offshore Worldwide are similar to the ones of other providers, which offer their services on the web. Clients can even book a "virtual office" with a "prestigious business address" in Panama. "Live phone answering, mail and parcel receiving" are part of the packages offered on the website of Panama Offshore Systems - available for $190 per month.
Interviews turned down
Despite their openness on the web, all service providers contacted by DW refused to answer questions regarding the Panama Papers. Likewise, German banks' representatives didn't want to be quoted. Their anxiety to be considered henchmen of criminals was obvious.
According to the research of "Süddeutsche Zeitung," 28 German financial insitutions emerge in the Panama Papers, while 500 banks surface worldwide. Until now, we've only heard prepared statement from them.
A Deutsche Bank representative said the lender was "aware of the consequences of the matter," pointing out that "guidelines, procedures and systems" would ensure that Deutsche Bank "complied with all substantial rules and regulations regarding the identification of the client and the fight against money laundering." The statements of other banks linked to the Panama Papers were similar. The bottom line - did not do anything illegal.
What is the target group?
There are businesses and people, who can benefit from an offshore company in Panama in a legal way, a German banker explains. Wealthy individuals in Latin America, for example, have used shell companies to hide their assets so as to avoid being targeted by kidnappers, the source told DW on terms of anonymity. Collectors, who purchase works of art by auction, were also regular clients in offshore company schemes, he added.
Another banker explained that yachts and real estate could also be sold a lot easier avoiding time-consuming bureaucracy, when a boat or a villa was owned by an offshore company. All the owner had to do was to sell the entire shell company.
Another bank source pointed out that members of wealthy famillies often lived in different parts of the world. This was very common "in upper-class circles," the banker added. To manage the family's assets via a Panama Foundation would secure the estate in the case of an inheritance, "reducing the complexity of dealing with different national legislation."
Long history of a tax haven
As long as the owner has paid all required taxes, none of this is illegal. The owners of the assets are responsible to observe the law. Even Panama has legislation targeting tax evasion. According to the OECD, this is not the case in other tax havens like Trinidad and Tobago or Vanuatu.
"The history of Panama as a tax haven started in 1919 when it began to register foreign ships to help Standard Oil escape US taxes and regulations. Offshore finance followed in 1927 when Wall Street interests helped Panama introduce lax company incorporation laws, which let anyone set up tax-free, anonymous corporations, with few questions asked," a survey of the Norwegian Institute for Research in Economics and Business Administration (SNF) concludes.
"Offshore financial transactions were added in 1927 when Wall Street firms assisted the country in implementing limp legislation to set up companies in Panama. Since then, any person could incorporate tax-exempt, anonymous companies, with no questions being asked", the paper reads.
Plenty of question marks
Today, shell companies can be set up in EU countries like Luxembourg, on the British Crown dependencies Guersey and Jersey, the Isle of Man and also on the British Virgin Islands in the Caribbean.
As offshore companies and the transactions linked to them are not all illegal, but make it easier to hide illegal operations, international agreements are important.
It remains to be seen whether the Panama Papers will reveal more than reports about the dirty deals of politicians in Russia, Saudi Arabia or Iceland.
However "Süddeutsche Zeitung" will not make the data from Panama available to the public, nor will the paper share them with law enforcement agencies.