Disclose unlawful monetary streams | IAS TARGET IAS Target

Disclose unlawful monetary streams

13 Oct 2021

Category : Economical Issue

Topic: Disclose unlawful monetary streams

The Pandora Papers

As per the newly published Pandora Papers, a huge number of illegal activities have been exposed from all over the world. The Investigation was conducted by over 600 journalists from more than 115 countries. As per the analysis, a total of 12 million documents were found which included illicit financial flows, and were helping the rich to hide their illegal income and activities.
As per laws of tax, some of the activities were legal but could not be justified. Some files were showing the date of 1970, but they were actually created between the years 1996 to 2020. The data included 130 billionaires listed by the Forbes, over 330 politicians, celebrities, members of the royal families and even some religious leaders.

History of leaked data

The files which indicated the manipulation by the rich have been missing from the financial institution since the year 2008. In 2017, the paradise papers were illegally published by law firms older than 100 years. In the year 2016, the server of Panamanian Financial Firm was hacked in order to obtain the Panama Papers. The British Virgin Island was prominently pointed out throughout the investigation. In 2014, the documents from “Luxembourg Leaks” appeared.
In the year 2008, one of the former employees of LGT Bank of Liechtenstein provided some information to the tax authorities. The data also included indians names which was later accepted by the indian government, after being pressurized by the supreme court. A confidential information was obtained by Herve Falciani in the same year, related to bank accounts of HSBC Bank. The data was later shown to the finance minister of France, Christine Lagarde who forwarded it to numerous governments including India.
A huge number of illegal flows of finances have a direct link to New York City and London, which are considered as the world’s biggest financial centers and are allowing various financial institutes to operate easily. The data also shows that the financial institutes are responsible for inflow and outflow of the funds through tax havens of wealthy and powerful people. An investigation was conducted into the London Interbank Offered Rate in the year 2012. As a result, various leading banks were fined for manipulating the data including Barclays, UBS, Rabobank and also the Royal Bank of Scotland.

The modus operandi

The International Financial architecture and illegal flows of finances have been exposed through the current as well earlier leake papers. The Leaked papers of Panama have exposed the tax havens and Pandora papers have also confirmed the pattern. The Tax haven allows the rich to hide the actual source of the assets that means the one who actually owns it. The Financial Firms are helping the rich in doing so as they can easily afford this.
The Layering process allows inflow or outflow of funds from one tax haven to another. In this way, the previous company is liquidated. The cash flows through various tax havens to and reaches the destination where it is supposed to reach. Sometimes due to the removal of trails, the authorities find it difficult to track down the fund flow.
It has been noticed that most of the rich people do such type of manipulation to avoid paying taxes even though the source of income is legal. Various well known personalities were exposed by the Panama Papers which includes politicians, billionaires, celebrities, athletes and even small as well big business.
The papers have revealed that not only rich people but even citizens of the country move funds to avoid taxes even if they have to pay low taxes. Since the last 3 decades, the capital has become highly mobile due to tax havens, which led to reduction of tax rates from various countries. As a result, the government is going through scarcity of resources which indirectly impacts the poor community.

The specificity of the Papers

The Pandora Papers are different from previous cases and it does not contain just one tax haven, but records of 14 offshore services. The data has exposed the flow of funds of more than 330 politicians and public officials from more than 90 countries. The paper contains 35 current as former leaders of the country, some famous personalities like Sachin Tendulkar, Shakira, the Presidents of Ukraine, kenya, and Ecuador as well former British Prime Minister Tony Blair as also present Russian President Vladmir Putin. It also includes some names of billionaires from the United States.
The Funds are moved away from the nation so as to avoid them from the reach of governments as well creditors. Though many fraudsters are imprisoned, they are still liable to large amounts of credits even after having so much funds abroad.
The Pandora Papers has not exposed all the activities as some of the documents are still hidden. Each country is liable to conduct the investigation in order to prove what sort of activities were conducted and what laws were broken. In the United Kingdom, the financial laws are very much favourable for the rich, that's why it is most preferred by many of the Indian fraudsters. Many Indian rich people have properties in the United Kingdom as the government does not ask about the sources of funds, which helped the U.K by enrichment of 100 billion USD.

India’s investigations

Many of the Indians have either become the non-resident Indians or their relatives NRI so that they can operate shell companies and stay away from the reach of Indian tax authorities. India’s Supreme Court has been monitoring through a special investigation team and has not been able track down any sources since 2014. The data related to the sources of black money has been missing which could indicate that the organised sector are the real culprit and some of their part is involved in generation of black income. As per the new development, the agreement was made between 140 countries to levy at least 15% tax on corporate firms. Another step can be reducing the secrecy in banking and tobin tax transactions which neither of the countries have agreed upon.