Guarding details

Special Report

Niue’s mountain of evidence

By Michael Field

Peleni Talagi has a strange kind of job. She sits alone in one of Niue’s few office buildings - the

Commercial Building opposite the

Fale Fono - and guards files. Thousands of them, all the property of the law firm Mossack Fonseca and Co of Panama City. Ms Peleni Talagi is Mossack Fonseca’s solitary Niuean employee although the company now brings in about NZ$ 1 million to Niue a year, thanks to those very files.

Niue has given the Panamanian law firm a 20year-long exclusive deal to run tax haven banking and the creation of “international business companies” (IBCs). This from the latest International Narcotics Control Strategy Repent published by the US State Department ‘’Niue’s thriving offshore financial sector has been linked with the laundering of criminal proceeds from Russia and South America, especially through the use of its International Business Companies.”

Enter steel-eyed and angry Jurgen Mossack, a 52-year-old German, who has made his fortune with partner Ramon Fonseca in Panama with IBCs. He wants to correct stories he says are hurting Niue. First some of tire basics.

EBCs are everywhere. Hong Kong is the mother-lode with 474,500 IBCs registered, followed by Panama (350,000) and the British Virgin Islands (304,000). Niue and the Cook Islands have around 6000 IBCs each, Samoa 4000 and Vanuatu 2500.

IBCs are not the same as tax haven banks - of which Nauru, for example, has a daunting 400 “banks”, all registered to one post office box.

People set up IBCs primarily to hid or, as it is more politely described, “shelter” their money, from fire local taxman. You can set up an IBC in any country that does it and with the certificate of incorporation go along to the local bank and open up a bank account in the IBC’s name. As a foreign registered company it will be exempt from local taxes, usually.

The money does not go to the country the company is registered in. Niue gets US$l5O for every IBC registered in its jurisdictioa Mossack Fonseca on their web page describe the advantages of Niue’s IBCs as “total secrecy and anonymity” along with no requirements to disclose beneficial owners and to file annual returns, “complete business privacy and confidentiality” and “company name can be incorporated in Chinese characters as well as Cyrillic script and in accepted language forms along with a romanized version”. Cyrillic is Russian.

The US State Department again: “These features make Niuean IBCs ideal mechanisms for money laundering schemes.” Mossack had not seen the latest US report, although he had seen tire earlier reports which made similar allegations.

“The State Department report is, frankly, wrong,” he says. So are the New Zealand authorities who are looking closely at Niue Much uses the New Zealand dollar.

“We have to accept that their is no money laundering going on in Niue, or even through Niue,” Mossack says. “Any IBCs registered in Niue are used in the Far East, in Hong Kong or Singapore, to open bank accounts. Are they a threat to New Zealand or the New Zealand dollar?

I cannot see it, I don’t see a connection.”

Russian Mafia proceeds or South American drug money was not going through Niue, and Mossack noted that while it was claimed US$7O billion Russian money had gone through Nauru accounts, the actual money had gone through the Bank of New Yoik in Manhattan. Mossack says “absolutely and categorically” there is no money laundering in Niue, and nor was there a drug connection. His Niuean operation was being singled out because of the Panamanian connection. “There is where a certain discrimination factor comes into it,” he said.

“Why is some body who is based in Panama any different, any worse, than somebody based in the United States or Europe... Panama is a country like any other, it is an on-shore country, it is not an island in the middle of no where.”

Panama is not a squeaky clean state; its once brutal dictator General Manuel Noriega is serving time in a US jail fix his drug connections. He was toppled from office by a US military invasion in 1989, Operation Just Cause. Mossack says it was Noriega’s behaviour, and the stigma attached to Panama, which first led his company to set up in the British Virgin Islands (BVI) and the Bahamas.

“We needed to find a place where one could have tire same advantages of Panama without the stigma attached to the regime at the time.” His firm has had 23 years in the business of forming IBCs, trusts and foundations as well as ship registration, an enormous business in Panama.

Unlike many similar operations, Mossack

says they do not register companies over the Internet. But all the same he says he does not know who the clients are, although most of the clients come via mainstream institutions.

He says it is these agents he used the example of ‘ ’the number one Swiss bank” - who do the due diligence on the people forming the IBCs. People coming direct to them to set up companies are checked through the usual credit agencies which, Mossack says, provide “a lot of very useful information”. So he was confident he knew the kind of people setting up in Niue. “You can never be 100 per cent sure about anything.

There is always going to be one that will slip through the net Due diligence is something that has to be done and is done, but it is not always 100 per cent reliable... Even for a local company... if somebody is going to commit fraud, they commit fraud.” There is no risk to Niue.

“No money passes through Niue, there are no facilities there. Those bank licenses that may have been issued are likely to banks that need to operate through larger international banks... They are policed “As far as the IBCs are concerned the fact that nearly incorporated 6000 companies no major scandal has erupted as far as Niue is concerned speaks for itself.”

He admits he has no idea how much money is turned over through Niue IBCs - he has no way of knowing at all. BVI had become a tremendous success but a problem too; it was very difficult to find a name for a company that was not already taken. And Mossack Fonseca wanted a place in an Asia-Pacific time zone.

“We thought of several jurisdictions which had tried to be clean, no scandals attached to them, which had to be part of the British Commonwealth, so as to offer similar advantages to the BVI. We found that Niue was that one place.” They had looked at the Cook Islands and Vanuatu - but the competition was already there.

“We figured that if we had the exclusivity we would avoid the price wars because in off shore jurisdictions there is a lot of competition going on.

If we had a jurisdiction that was small and we had it from the beginning, we could offer people a stable environment, a stable price... It was a marketing tool.”

Niue has a problem with its solitary once-a week Royal Tongan Airlines service, but it has the advantage too that it is just as hard to get out and according to the lawyer “there is no prospect” of anybody finding out what information Peleni Talagi guards. “Niue is a traditional tax haven, there is no more to it than that” ■