Offshore tax haven specialist David Marchant unpacks the headline grabbing #PanamaPapers | Fin24
In partnership with

Offshore tax haven specialist David Marchant unpacks the headline grabbing #PanamaPapers

Apr 08 2016 19:47

There are few better positioned to explain the relevance of the #PanamaPapers scandal than offshore tax haven specialist David Marchant. Just over a year ago, the editor exposed now collapsed Belvedere, a global Ponzi scheme masterminded by South Africans Cobus Kellermann and David Cosgrove.

In this interview with’s Alec Hogg, Marchant unpacks the relevance of 11.5m mostly top secret client documents leaked from the files of Panama-headquartered law firm Mossack Fonseca. Marchant explains why the information keeps making international headlines and suggests what we’ve seen so far is only the start.

Alec Hogg: It’s a privilege as always, to have an opportunity to chat to David Marchant, the proprietor and editor of You might remember (about a year ago), that David was very instrumental in bringing the Belvedere Group of companies to book. That whole organisation, which was put together by two South Africans, has since collapsed, losing billions of Dollars for those who trusted them. David, the big story of the moment is the Panama Papers. Have you been following it?

David Marchant: Yes. That lead was coordinated by the International Consortium of Investigative Journalists and I know the guy who hedged that. He’s spoken at one of our conferences before and in fact, has agreed to speak on the Panama papers at our next conference in Miami in three weeks’ time. They might actually be making a big announcement regarding the data at our event so yes; I’ve been following it like everyone else around the world.

It appears that they took a year to process the data – 11.5 million documents, emails, copies of passports etcetera. Is everything out in the open?

Well, no. Everything’s not out in the open and actually, the potential big announcement that they might be making at our event when the head (Gerard Ryall) speaks, will concern access/possible access to the information. It’s all somewhat up in the air at the moment. When it comes to a leak of that size, it’s almost a case of ‘be careful what you wish for’.

Can you imagine receiving over 11 million records (the task to sort those records, to organise them, and to make sense of them) is an immense undertaking.

This firm, Mossack Fonseca that is headquartered in Panama and has 38 offices around the world: have you come across them before?

Yes, if you search our database at for Mossack Fonseca, you’ll see several mentions of them there, particularly in documents. Listen, any big law firm in Panama is going to be engaged in wholesale suspect activity on behalf of clients.

Frankly, it’s not much different to any big law firm anywhere in the world. It’s just the nature of law firms. They are typically unethical and will typically, do business with anyone. That’s just the reality, whether it’s on shore or offshore, whether it’s South Africa or Panama, or the United Kingdom or the United States.

David, Panama does have a bad reputation, though. Why would that be?

Yes. Well, it’s pretty much an anything goes/lawless type of jurisdiction. In the late 1990’s, I exposed an American who was running a criminal enterprise in Panama. I was sitting at my desk in Miami and the Panama Consul-General in Miami served me with a criminal defamation action in Spanish that I basically tossed to one side, never had translated, and treated it with the utter contempt it deserved.

The person whom I exposed was just a blatant criminal, laundering the proceeds of all sorts of criminal activity such as narcotics traffickers, investment fraudsters, and tax evaders. We published a lot of evidence and the Panamanian authorities protected him.

Anyway, the US arrested him at traffic lights in Nicaragua (or the Nicaraguans did on behalf of the US). He was flown to the US and he’s now serving 17 years in prison after being convicted of money laundering and tax fraud but the Panamanians protected him and it became clear to me then that this is a pretty Mickey Mouse financial jurisdiction.

That’s the modus operandi from the Panamanian authorities, which I guess would promote this kind of behaviour. The Panama Papers have been making news headlines all over the world. They continue to reverberate. Is this the biggest exposé that we’ve seen, of this type?

Without a doubt. Over 11 million client records. Listen, for a foreign national not living in this case in Panama, to have an account there… It’s not proof of wrongdoing by any means, but it’s certainly suspicious or even highly suspicious.

Why would somebody living in South Africa, England, or the United States who isn’t doing business or living in Panama, have an account in Panama? It defies common sense so there must be a reason and that reason is (more often than not) to conceal something they’re not particularly proud of and that could be tax avoidance, which is legal.

It could be tax evasion, which is illegal. It could be bribery payments. It could be concealment of assets from creditors. There are a number of reasons.

If you consider that the information has now come into the public domain then clearly, it must be almost like robbing a bank vault or that you have someone on the inside who helped you to do it. How did all of this come to light?

I’m not sure. The company (Mossack Fonseca) itself claims that the information was hacked from their system so it’s unclear whether that’s true – whether the information was hacked – which, quite frankly, is despicable or it was leaked and whether you consider that to be despicable or not is just a matter of opinion. It raises all sorts of ethical questions really.

I’ve been blackmailed by a hacker over the last month or so. I strongly believe it’s a ‘he’. I won’t use an expletive, but I was very crude in my response to him…basically saying, “Get lost. Publish whatever evidence you have.”

If that information was hacked, what are the ethics in terms of publishing that? If it was leaked, that’s a bit more palatable because it creates the impression of somebody on the inside who was disgusted at what they saw and for the public good, leaked the information. If it was hacked…

None of us would like to be hacked. It’s not a pleasant experience. However, if the law firm was engaged in willy-nilly nefarious activity and the negative consequences of what they were doing affected dozens if not hundreds of companies around the world, is it justified under those circumstances? It’s difficult to answer that question.

I guess the people from Anonymous would have one perspective it but if they can hack their records, what about everybody else’s?

My blackmailer who’s probably the world’s worst blackmailer because it hasn’t worked to any extent, claims to be part of Anonymous. He’s posted videos with the Anonymous mask threatening my clients and me.

What about the big banks? They’ve been accused of being complicit in this. Do big banks take those kinds of risks?

When I started doing what I did, I was a lot more naïve than I am now. Offshore Alerts has been in operation for 19 years and it’s been quite an eye-opening experience. The more I do my job, the more I learn that there’s almost no such thing as a reputable company involved in international finance.

Whether it’s a bank, a law firm, or an auditor, they’ll pretty much accept anyone as a client and they’ll pretty much do anything for those clients. It’s almost a case of ‘the bigger the company, the more criminal activity they’ve helped to facilitate’ and that’s one of the reasons they became big.

They didn’t become big by turning down business. They became big by accepting pretty much any business that came along. In the case of lawyers, they try to justify it by saying, “Well, everybody deserves the right to our counsel. It’s a fundamental right.”

Okay, you can argue that all you want but at the end of the day, you’ve got to look at yourself in the mirror and answer it to yourself. That’s the ultimate accountability – the mirror. They’ll accept anyone as a client, whether it’s a bank, a law firm, or an accounting firm. That’s just the reality.

This isn’t a Panama problem, an on shore problem, or an offshore problem. It’s a ‘people’ problem. People are – in the main part – motivated by self-interest. Most people like to accumulate wealth. If you’re an attorney, you accumulate wealth by embracing pretty much any client and when it comes to illegal acts, the clients will pay a premium.

I used to know what the percentage was. If you helped to launder the proceeds of narcotics trafficking, the premium was 20% of what you laundered. Presumably, for terrorism-related activities, it’s even higher against the lower-risk criminal activities. It’s less than 20%. There’s a whole fee structure based on the type of crime that you’re helping to facilitate.

The underworld is also a big business, isn’t it? It works along business principles in certain respects.

It’s huge. If you took away the criminal element from the financial system, it would collapse.

Oh David, surely not.

Big companies/big banks would start laying off people left, right, and centre. Law firms would start laying off people left, right, and centre.

That’s your experience in the offshore haven. Are they primarily crooked?

Well, I’m loathe to tar the offshore world with a broad brush. As I said, this isn’t an offshore or on shore problem. It is a people problem. Big countries like the United States routinely rail against offshore financial standards and yet the US is one of the biggest offshore centres in the world (if not the biggest).

The type of activity that the US berates the offshore world for…the United States offers those same products and services to clients who are overseas from the United States, particularly Eastern Europe. Delaware for example, (as a jurisdiction) routinely helps Eastern Europeans launder the proceeds of criminal activity – routinely. This is not an offshore problem. It’s a people problem.

What about the African connection here? I’d like to get into a bit of specifics on the South African President’s nephew but generally, Africans are complaining because a lot of the money leaves this country – the illicit offshore flows – and much of it ends up in secret entities in offshore centres (or that’s the belief). Is that really as significant as it is perceived?

Absolutely. It’s quite interesting. No matter how poor a country is…no matter how poor an African country is, the leader (whomever it is at any given time) always seems to accrue massive personal wealth and clearly, to the detriment of the country.

There are very few leaders who have the interests of their country at heart, as opposed to their own personal interest and really, that’s why Nelson Mandela is such a hero.

He is an example of what a leader should be (or he was) and there are very few people like that. That’s somebody who was clearly motivated by love of his country and that, in my experience, is extremely rare and it’s one of the reasons he was one of the most-beloved figures in history.

Take Bongo from Gabon as a good example. Here he was a Post Office worker who became one of the richest men in the world. How would he use a firm like Mossack Fonseca and offshore centres to accumulate wealth in this way?

Okay. Let’s say you’re the leader of an African country and there are plenty of opportunities to make money through corruption. You know how to get the money from corruption and you want to conceal or protect that money, and so you go to law firms. You go to accounting firms and you basically tell them what’s going on and what you need.

You need to create the appearance that this money is legitimate and you also need to avoid your name being attached to these assets. The types of services that law firms would typically offer include nominee shareholding. They’ll set up corporations. Their attorneys will serve as the nominee shareholders of the corporations – the nominee officers and directors of the corporations – to protect the true beneficial owner.

Then, if an investigator strongly suspects that let’s say a company in Panama is linked to let’s say an African leader and they approach the law firm, the law firm will tell them to get lost.

It used to be that jurisdictions would also tell the investigator to get lost but ten years or so ago, pretty much every country that wanted to remain as a viable financial jurisdiction were forced to pass through the legal gateways that would allow investigative authorities to get access to the true beneficial owners of companies.

However, even when there are legal gateways law firms will just lie and say no, this person is not the true beneficial owner it’s somebody else and I’ve had direct experience of that.

A Cayman Islands law firm presented me with a falsified share register for a company and over the course of three years I obtained a true record of the share register and then compared it with a falsified version that I had received from the law firm and exposed the law firm.

Do you know what the reaction of the Cayman was? Nobody cared, nothing happened to the law firm, nothing happened to the managing partner of the law firm who directly falsified this share register.

That’s why this is such a big deal because the inside workings of the law firm of that nature has now been exposed or is being exposed to the world.

Well, you know the thing with this leak is it just confirms what most of us suspected. We all have opinions about this, that, and the other but it’s always nice every now and again to get proof that confirms that what you actually strongly suspected was accurate.

The South African point I mentioned a little earlier, Khulubuse Clive Zuma, the nephew of Jacob Zuma has been named in these papers for two firms that he had a company called Caprikat and a company called Foxwhelp. Inside those firms are huge oil tracts or oil-bearing land tracts in the DRC, which were granted to him, taken away from an international London Stock Exchange listed company, Tullow, and then given to these two companies. Many people suspected it but through, Mossack Fonseca, it’s now been named. You’ve now seen that this is the evidence. What would happen from here if you were say in the enforcement police or tax authorities in South Africa and given that this is a South African national?

That’s an interesting question because I’m not sure that leaked or certainly hacked information would be admissible in a court of law. However, now that the South African authorities know this information is out there they can make a request to Panama to officially obtain it in a legal manner but Panama is notorious for not cooperating with foreign agencies.

However, there’s so much negative publicity around at the moment that they might feel embarrassed enough to cooperate or to pass laws, maybe even retroactive laws that would assist them, but I doubt it.

Panama is lawless, therefore, I would expect a lot of talk from their government about doing the right thing and then when all of this dies down, as it inevitably will, nothing will materially change. It’s a cultural problem in Panama and it takes many generations for a culture to change.

Read also: Khulubuse on key #PanamaPapers allegations: “Not at liberty to comment…

The exposure in the media, the public naming and shaming is a very big part of perhaps bringing these miscreants to book.

There’s nothing more powerful than the media, there really isn’t. I learned that in my very first job in journalism when somebody I reported about in a court case approached me afterwards and he basically said that he didn’t care about the punishment that the court handed down, he just cared about having his name in the paper. I was 19 years old at the time and that lesson which I learned that day, I’ve never forgotten.

Here in South Africa we have a new finance minister or reappointed finance minister who is highly respected around the world, Pravin Gordhan. He has also though, in his budget speech offered amnesty, and this is the umpteenth amnesty in South Africa, but to those who have taken money offshore into tax havens that, if they come clean, this time round they’ll be okay, but if he finds out about it clearly they’ll be in big trouble. If you were sitting in the shoes of someone who had done that and we know a lot of this did happen and probably still is happening in South Africa, is there enough going on in the world in exposing these accounts to make you really nervous?

With that, if they’re a normal human being, yes they will be nervous. Whether they’re nervous enough to repatriate money under an amnesty agreement remains to be seen. It’s very difficult in my experience for these crooks to give up their misappropriated millions, tens of million, hundreds of millions, and in some cases billions, very, very difficult.

We see in the Panama Papers, it was named the 29 billionaires from the Forbes 500 have been fingered in these papers. Of those 29 and we don’t have the actual numbers yet, is it likely that some of them have been doing this illegally, given that it’s Panama?

Yes, it depends how he became a billionaire. You don’t create wealth offshore. You preserve it. If you became a billionaire legitimately, I would say it’s likely maybe probable that your offshore accounts are legal, that you took out these accounts for legitimate purposes.

Read also: #PanamaPapers: Solidarity asks Aurora liquidators to freeze Khulubuse’s offshore assets

Yes, but why would you go to Panama given that it has such a bad reputation? Would there not be a different centre that could achieve the same thing, perhaps with less risk?

People get bad advice. A lot of people don’t know the difference between Panama, the Cayman Islands, Bermuda, and Nevis. There was a case not too long ago where two American brothers who were both billionaires who made their money legitimately. They decided to go offshore and unbelievably the person they hired to give them advice was a guy called Keith King, against whom there was an arrest warrant in South Africa for suspected fraud and forgery.

We had exposed this. These billionaire brothers who had the money to get the best advice you could possibly get, hired this ridiculous character who had fled South Africa and at that time was living in Nevis, which is a Caribbean island. That’s the person they relied upon for advice on setting up their offshore structures and these billionaires are now… I think one’s dead and I think the other is essentially bankrupt. He might even be formally bankrupt as a result of not taking proper advice.

Why would legitimate billionaires have structures in Panama? Maybe because they hired the wrong people to advise them and the offshore world, there’s a whole hierarchy. They’re not all the same. There are offshore jurisdictions that have pretty good reputations and then there are others that have awful reputations.

David, at the beginning of this discussion, you told us that at your next big conference in Miami, you have the head of the International Consortium of Investigative Journalists, what is he going to tell you about Panama Papers and tell you and the audience at that get-together?

Only he knows what he’s actually going to say but obviously questions that will be asked is what this information leaked or hacked? He will explain the project from inception to the culmination, which we’re now reading about. There will be questions about will the information be available to the public because in the past when they’ve handled leaks. The ICIJ has handled some big leaks in the past. They’ve eventually put out a database that the public can access from their website for free and I suspect that a similar thing will take place with the Panama Papers. Hopefully that might be one of the big things that comes out of his participation in our conference, that we might get an indication as to when we can all go online as we like to do and pry into the affairs of these very wealthy people, because if for no other reason it’s highly entertaining.

It’s also highly damaging for a lot of politicians around the world. We’ve seen the first one fall, the Icelandic Prime Minister. There are suggestions that the whole Operation Car Wash corruption in Brazil will also be heavily affected by this. Then we’ve heard that right in the middle of all of it is none other than Vladimir Putin. Are these realistic exposés or realistic expectations that there’s that much dirt that it will influence world history?

That’s a difficult one because you’d be quite surprised that even when there’s evidence of corruption in many countries, it really doesn’t have much material effect. Did anyone doubt before these leaks that Vladimir Putin is corrupt? I don’t think so. The guy is clearly corrupt.

You have the case of Sergei Magnitsky, an attorney who was basically killed by the Russian authorities while in prison for exposing an extremely crude fraud against, ultimately the Russian people by people who are associated with Putin. Putin’s a dictator. Is anything going to happen to him? No, absolutely not. Is anything going to happen to his cronies? No absolutely not.

In more mature countries, yes things will happen, such as the Icelandic Prime Minister resigning. It really depends on the country. Yes, it will affect world history. Maybe if it leads to lead to a huge clampdown on offshore financial standards, maybe like the closure of some of them, particularly the British ones because Britain already have the legal authority to take over its overseas territories, virtually overnight.

I’m not kidding you. Britain already has a law that they could issue in what’s known as an ordering council to immediately take over the Cayman Islands for example, or the British Virgin Islands. If Britain was to do that, yes I think you could say this leak had a meaningful impact on world history.

It would be interesting to see what happens in Brazil over this, but the other big scandal that is going around the world is FIFA. Was there anything in the Mossack Fonseca Papers that is going to make life more difficult for the FIFA executives?

I think the relatively new FIFA president has been revealed, I believe had an offshore account that was used to sell, I believe television rights to a company which literally immediately resold those rights for double or triple what they paid.

FIFA is a criminal organisation. I’ve been saying this for a long time. I can’t see how it can survive. You can’t reform the mafia because at the end of the day it’s still the mafia and FIFA is a mafia group, it’s organised crime. You can’t reform something like that. You just have to kill it and then something will rise up and take its place.

The South Africans who were involved or alleged to have given $10m in bribes to FIFA to bring the World Cup to this country actually had no option because they were dealing with the mafia.

It’s like Lance Armstrong in cycling. Yes, did he dope? Yes. Is he despicable human being because of his general actions? Yes, of course he is, but he was undoubtedly riding against other people who were doping and it’s the same with winning the World Cup. It’s really a contest in bribery, who offers the most money, and who gets their bribing tactics correct. That’s just the nature of the beast.

Let’s hope that it won’t be.

Yes, it probably should have been held in Africa anyway to expand the sport but unfortunately, bribes were needed. There’s no doubt that South Africa has bribed their way to winning the World Cup but other countries clearly were offering similar bribes. The United States obtained the Salt Lake City Winter Games through bribery. The United States has as many problems as anywhere else.

It’s a bad old world that we’re in but David Marchant is trying to make it and helping to make it better. He’s the proprietor of, David as always, a privilege talking with you. Thank you.

Also with you Alec and don’t forget it’s a people problem. That’s it.

* For more in-depth business news, visit or simply sign up for the daily newsletter.

biznews  |  panama papers  |  offshore investment


Company Snapshot

BizNews Premium
Learn More