Return to blog

An Open Letter to Panamanian President JC Varela - The Panama Papers

Mr. President –

Your country is a cesspool of financial crime, and your insistence otherwise, is total BS!

Look at what’s been going on for years.

In mid-2000, the so-called world’s money laundering watchdog, the Financial Action Task Force (FATF) published its “report on Non-Co-operative Countries and Territories,” adding 15 jurisdictions to its blacklist — Russia, Liechtenstein, Israel, Lebanon, the Bahamas, the Cayman Islands, Cook Islands, Dominica, the Marshall Islands, Nauru, Niue (a phony offshore operation set up by sleazebag Panamanian lawyers Mossack and Fonseca), the Philippines, St. Kitts and Nevis, Saint Vincent and the Grenadines — and Panama.

Your country feigned shock and horror.

Several years later, the Organization for Economic Co-Operation and Development (OECD) piled on, describing Panama as an “uncooperative” tax haven.

Granted, whenever the FATF and the OECD bare their teeth, their dentures fall out.

But the response from Panama’s head of the financial analysis unit was not, “You’re right” (Because they were.) Or, “We agree, we need to change.” (Because you did then, and still do.)  But rather, “Panama cannot afford to have a bad reputation.”

Clearly he was wrong because that’s exactly what Panama has had ever since.

In the wake of the #PanamaPapers, you merely echo the same baloney, trying to convince the world that you and Panama have “zero tolerance” for financial crimes.

Coming from the country that brought the world General Noriega, the statement is laughable and, categorically, untrue.  You have colossal tolerance. You know, damn well, that modern Panama was built on, and is sustained by, dirty money.

Sure, I understand why you’re so desperate to pull the wool over the world’s eyes. Not only does your economy depend on it, but for the past 40 years, Panama has managed to fool just about everyone, including and especially the FATF and the OECD. That said, considering how easy it is to fool the FATF and the OECD, the fact that Panama was included on any of their lists is down to your nation’s naked venality.

The FATF and the OECD claimed Panama was uncooperative, so Panama did what Panama has always done – pretended to be cooperative. It works for the Swiss, why shouldn’t sleight of hand work for you?

Street corner whore that Panama is, you guys simply bought yourselves a bright new and shiny white wedding dress and, blushing on cue, said, look at us. Foolishly, the FATF and the OECD still believe in Tooth Fairies and Easter Bunnies. They removed your country from the black list. It was beyond their limited imagination that Panama would pass a few new codes that no one ever intended to enforce. That nothing changed. That nothing would change.

Secret banking. Phony shell companies. Lawyers out of control. Company formation agents out of control. And the Colon Free Trade Zone, the world’s largest pawn shop/fence, which is regulated by people who don’t believe in regulation because it would cost too many Panamanians too much money.

Face it, Panama is not a country, it’s a business.

And, in spite of  the bright new and shiny white wedding dress, practiced blushes and a few licks of fresh war paint, Panama is still the local street corner whore.

What could it matter to your law firms, and your financial institutions and your company formation agents that the offshore world has been aiding and abetting the war on drugs for more than 40 years? Or that the offshore world is the bulwark of transnational organized crime? Or that the offshore world is a haven for fraud-money, corporate corruption money, political corruption money and evaded taxes?

For that matter, what could it matter to anyone in Panama that the Free Zone is still a swamp where financial viruses breed ferociously, exactly the way mosquitoes did in the swamps that became the Canal.

The lawyers at the heart of this most recent fiasco, Jurgen Mossack and Ramon Fonseca, have maintained their innocence. In 40 years, they point out, they have never been prosecuted for anything. Your close personal pal, Fonseca, has even likened the firm to kitchen knife makers. He says, as such, they cannot be held responsible if  some woman uses their knife to kill her husband.

What unadulterated crap.

How about the people who built the gas chambers and made the Zyklon B and sold it to the Nazis? Do they have a right to claim, but we weren’t the ones who murdered 6 million people?

Sorry Mr. President, but for the past 40 years, your country has been that financial cesspool. And yet, you shamefully insist that everything is all right, and that will get even better because you have “zero tolerance,” for financial crime.

Amigo, talk is cheap.

Until your judiciary indicts Mossack and Fonseca and everyone else in Panama who has, knowingly, unknowingly or otherwise – it doesn’t matter – aided and abetted financial crimes around the world, your legacy will be that of previous tinpot Panamanian politicians – just another stooge put in office to look the other way.

/ JR



In the weeks following the release of “Secrecy for Sale” – the eBook version of the International Consortium of Investigative Journalists’ (ICIJ) brilliant look at tax evasion and the role of the offshore world – the Internet, Facebook and Twitter (especially Twitter) went semi-hysterical with accusations that the world’s tax havens are the devil incarnate and need to be shut down, immediately.

The ICIJ calls itself “the global muckraker” and for good reason. A collection of high standard investigative journalists brought together under the umbrella of the Center for Public Integrity – in this case, 86 journalists from 46 nations – have produced a textbook example of what painstakingly solid reporting should be. They worked their way through 2.5 million files to reveal more than 120,000 offshore companies and trusts used by tax evaders, criminals, corrupt officials, and the so-called “mega-rich” to hide money. They documented cash transfers and links between shell companies and the individuals who own and control them.

The report, which is essential reading for anyone interested in the sorry state of the world today, is available in PDF form here:

The authors of the report list these key findings:

*** Government officials and their families and associates in Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia and other countries have embraced the use of covert companies and bank accounts.

*** The mega-rich use complex offshore structures to own mansions, yachts, art masterpieces and other assets, gaining tax advantages and anonymity not available to average people.

*** Many of the world’s top’s banks – including UBS, Clariden (Really? A world top bank? Instead, try its owner, Credit Suisse) and Deutsche Bank – have aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways.

*** A well-paid industry of accountants, middlemen and other operatives has helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct.

*** Ponzi schemers and other large-scale fraudsters routinely use offshore havens to pull off their shell games and move their ill-gotten gains.

As a result of those findings, and many others in the report, some governments are taking action.

However, knowing what I do about the offshore world – having first dived deep into it 20 years ago when I wrote THE LAUNDRYMEN and still writing and speaking about it – I would have stressed these points:

*** Government officials, their families and their associates from all over the world (not just Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia,  and others)  have actively used covert companies and bank accounts to hide their own tax evasion, corruption and illicitly obtained assets.

*** The mega-rich, alongside hoards of middle class citizens, use complex offshore structures to acquire and hide assets, gaining tax advantages and anonymity that is in fact, easily available to average people. It may be expensive, but it’s there if they look for it. This is not just a sport for the mega-rich.

*** All of the world’s top banks (not just many, but all) provide their customers with “private banking” products, many of which include secrecy-cloaked companies throughout the offshore world. Not all of them actively aid and abet tax evasion, but they all have experts available for their clients looking for tax avoidance schemes and, in some cases, knowingly aid and abet the abuse of those tax avoidance schemes.

*** A well-paid industry of accountants, middlemen and other operatives – known in the money laundering world as “gate keepers”, which includes bankers, lawyers, accountants, company formation agents and brokers – help offshore patrons shroud their identities and business interests, and may also provide shelter to money laundering or other misconduct. But not all of their activities are illegal and, in most cases, are absolutely legal.

*** Ponzi schemers and other large-scale fraudsters – along with drug traffickers, despots, corrupt government officials, corrupt corporate officials, money launderers and tax cheats –  routinely use offshore havens to pull off their shell games and move ill-gotten gains.

That’s my way of saying that, had the ICIJ journalists had the time and the specialized knowledge to look deeper,  they would have uncovered an even more sinister world.

My real argument is not with the group’s reporting, although I find some of it over-simplistic and, at times, slightly emotional – ie, the use of terms like “mega-rich” – I have no trouble condemning the sale of sovereignty to reap profits from money laundering, drug trafficking, public corruption, corporate corruption, fraud, illicit arms dealing and other illegalities. Nor do I make allowances for tax evasion and tax avoidance abuse.

But, the subtitle of the eBook is, “Inside the Global Offshore Money Maze,” and there-in lies the problem I have with it.

Because that subtitle so blatantly points at a symptom of a very real and very serious problem, too many people have decided the symptom is the problem.

Hence the semi-hysteria.

And responses, as described in stories with headlines like these:

*** IRS Taking Aim at Offshore Tax Havens

*** Tax, Globalization and the Caribbean

*** Clock Ticks on Swiss Banking Secrecy

*** EU Seeks To Broaden Information-Sharing Amid Tax Evasion Fight

*** Caribbean Bank Accounts Are Next IRS Target

*** U.K. Under pressure to clean up tax havens

*** Switzerland Under Siege As Tax Row Escalates

*** Offshore Agonies Over Rich Clients in Tax Evasion Clampdown

Knowing what I know about dirty money and the offshore world, I state categorically, the offshore world is a problem.

But it is not THE problem.

There are  many jurisdictions around the world – actually, more than a third of those sitting as member states in the United Nations – that offer shell companies for sale, allowing anyone to operate with near-invisibility behind nominee directors, and to use that shell company to open, manage and benefit from financial accounts that are equally opaque. What’s more, you don’t have to go offshore to be offshore, you find this nonsense in Delaware and Nevada.

Anonymity is, after all, a commodity like any other.

Even for the average middle class tax evader – not just the “mega-rich” but, say, some dentist from Nebraska – once he puts money into a shell company account, a credit card attached to it means he can spend that money anywhere in the world without the IRS knowing anything about it.

Or, he can arrange a back-to-back loan with a friendly bank, giving him use of those funds through a series of false transactions which make it appear as if he’s legitimately borrowed the money.

As a result of blatant chicanery – in which, undeniably, some offshore jurisdictions are complicit – there are cases to answer. But reports of those cases, together with the semi-hysteria generated by those headlines – and from sub-heads like the ICIJ’s – is being used to justify calls for draconian action against tax havens. Fair tax campaigners and muck-raking NGOs are rallying their troops with righteous indignation and demanding that tax havens be put out of business.

Shut down the British Virgin Islands.

Require all banks to inspect every international wire transfer.

Take the Cayman Islands to court.


I am hardly an apologist for the offshore world. Not after THE LAUNDRYMEN, THE MERGER, THE SINK, and THE TAKEDOWN, plus countless articles and hundreds and hundreds of speeches and media appearances where I unashamedly share that righteous indignation.

However, these campaigners, as well intentioned as they are, clumsily get in the way of their own cause by ignoring certain facts of the real world.

Fact of the Real World 1: You cannot shut down a tax haven if that tax haven is a sovereign country, without declaring some kind of financial war.

Fact of the Real World 2: Financial war is out of the question. It is not an option. It is also, probably, illegal.

Fact of the Real World 3: Even if you could, somehow, put six tax havens out of business on a Tuesday afternoon, by Wednesday morning there would be six new ones to pick up the slack. All you accomplish is moving the money somewhere else. Like water rolling downhill, money will always seek the course of least resistance.

Fact of the Real World 4: Remember the story of the Little Dutch Boy who saved the Netherlands from a flood by putting his finger in the dyke? In this case, there aren’t enough fingers and toes in all of Holland to keep dirty money out of the offshore world.

and, Fact of the Real World 5: Tax havens aren’t the real problem, anyway.

In an effort to do look like they’re actually doing something, the US Congress – which does not always know the difference between a Fact Of The Real World and Gun Boat Diplomacy – has come up with the Foreign Account Tax Compliance Act (FATCA). Congress hopes it can force foreign, sovereign governments, into reporting the presence of US tax liable persons. Some people believe it can work. I believe it is stillborn.

At the same time, the nations of the European Union are on a campaign of their own, looking in particular to Switzerland to come clean on its traditional secret banking, while pressuring member states Liechtenstein, Luxembourg and Austria to do away with their variations on the same theme.

That’s fine. Except that both the Americans and the Europeans have opted for typical, politically driven, short term solutions that could, at best, temporarily cure the symptoms.

No amount of aspirin can replace root canal surgery.

That’s why targeting the offshore world is an ass-backwards approach. And, as such, it is destined to fail.

The right approach is… go after the money!

I’m not saying, disregard the shell companies and funny bank accounts on sale offshore. I’m not saying ignore efforts which might encourage transparency. Instead, I am saying, attack aggressively the idiotic tax loopholes and tax avoidance laws in the home countries that create the market offshore for those shell companies and bank accounts.

I am saying, the real war on dirty money starts at home.

Take for example, something as basic as “transfer pricing.”

The Acme Widget Company of Main Street USA buys 5-cents worth of product in the Third World, spends another 5-cents on manufacturing and transportation, then sells their widgets in the States to wholesalers for $2 each. But instead of paying tax on $1.90 profit, it sets up a company in Tax Haven A and sells the product first to a shell company there, Widgets Offshore Inc, for $1.89. It then pencil whips paperwork to show that the widgets have been imported from that company for $1.89 and, after distribution costs, makes a loss on each widget sold.

Therefore, no tax is due in the US.

In principle, tax should be paid somewhere along the line by Widgets Offshore Inc, like where the profits are, in Tax Haven A. Except that Tax Haven A is a tax haven which, by definition, doesn’t tax profits on shell companies.

On top of that, if the company directors are really smart, and/or have really smart accountants – and, yes, they are invariably smart enough to hire the smartest accountants – then a Widgets R Us Hedge Fund has been set up in Tax Haven B, so that through another pencil whipping exercise, profits can be transferred from Widgets Offshore Inc , then distributed in Tax Haven B. The Widgets R Us Hedge Fund pays out long term capital gains or various types of investment dividends, or in the form of loans against future investment income, all of which qualify for rates in the home country considerably lower than regular income.

This is how Mitt Romney, for example, was able to pay an effective tax rate of under 10% on millions of dollars of revenue earned offshore, while the average American secretary was probably paying something closer to 30%.

This is how some of the largest corporations in the world pay little, or even nothing, on gigantic revenue flows, all pencil whipped to show that they have been earned offshore. Those companies allegedly include: General Electric, Boeing, Exxon Mobil, Verizon, Kraft Foods, Citigroup, Dow Chemical, IBM, Chevron, FedEx, Honeywell, Apple, Pfizer, Merck, Google, and Microsoft.

It goes without saying that the offshore connection is nothing more than a tax dodge.

But is that the fault of the offshore world? Or is it the fault of the governments who have established tax codes which allow this?

That Enron could open 3500 shell companies in the Caymans to mask the company’s fraudulent activities is hardly the fault of the Cayman Islands Financial Authority. The blame must go directly to US tax policies that permit such sleight of hand.

Putting an end to it is easy. Eliminate the accounting tricks, and force companies to pay tax in the country where they are doing business. That has the added benefit of cutting off the cash flow and reinvestment to the offshore havens. With little or no money generated in the havens for providing the vehicle to avoid/evade taxes somewhere else, there are fewer of those vehicles on sale offshore.

Same with individuals. Eliminate the funny tax loopholes that permit people to abuse tax avoidance methods, and there is no real benefit to any citizen to have a secret Swiss bank account, and hedge funds in the Caymans, and family trusts in Bermuda.

That the dentist from Nebraska has money hidden in a Bahamian bank which he accesses with a debit card whenever he vacations in Paris, is not the fault of anyone in the Bahamas. That’s criminal tax evasion in the US and if he gets caught, he deserves to go to jail. In theory, FATCA is supposed to smoke him out. But if he sets up the accounts with a real understanding of the situation, not even his Bahamian bankers will know who owns the money. In the end, it is only the real possibility of pulling teeth in prison that can discourage him.

Not surprisingly, there are some jurisdictions that seem happy to tell the US what it can do with FATCA. Because there’s money to be made helping people get around rules and regulations, there are incentives to cheat the system. In Switzerland, for example, some bankers are advising their American clients that while FATCA could somehow, eventually, require them to report on accounts – which, frankly, is not going to happen – there is nothing in the law that could even remotely require them to report on cash held in safe deposit boxes.

Cheating is hardly something new, and Switzerland has been doing it, unashamedly, since before World War II. Sure, they talk a good game, saying anything and everything they need to in order to make the world think they’re still virgins. But not even the PR-hack-filled Swiss Bankers Association can dress them up in enough white to disguise the fact that they are street corner whores.

Everything anyone wants to know about the $2.1 trillion business that has become Swiss banking secrecy is in this eBook: Jeffrey Robinson’s Criminal Intent: The Swiss Wash Whiter:

Amazon Kindle:

Smashwords (iBooks, Kobo, Sony Reader, etc):

That the Swiss will never give up secret banking is yet another Fact of the Real World. Frankly, why would they even entertain the possibility of killing the goose the lays golden eggs? Any politician who dared to press the case for transparency, would be summarily voted out of office. No member of the Swiss Parliament would be foolish enough to commit political suicide just because some foreign government decides it’s a good idea. Nor would any mender of the ruling Council of Ministers. But even if such a thought could somehow, unthinkably, survive those two places,  financial transparency is so incompatible with the Swiss and their traditions, it would go to a referendum. And the last time the Swiss people were asked about financial transparency, they voted it down by a margin of 3 to 1.

So much for the bullshit put out by the Swiss Bankers Association.

Not far behind Switzerland are the Cayman Islands and the Bahamas. More geese. More golden eggs. More bullshit. We want to comply. We do comply. We will comply. No they don’t. No they don’t. No they won’t.

What then of the rest of the offshore world? Well, frankly, there is some hope, and I have expressed it in my “Ultimate White List.”

At a major keynote speech in April 2013 to a financial crimes gathering in Antigua, I argued that it is actually in the interest of some offshore havens to refuse, categorically, dodgy business because there are sufficient profits to be made by seeking out legitimate business.

Finally, I suggest THE SINK puts the offshore world into perspective. No hysteria, just the history of how it happened, why it happened, and what it really represents today:


In 1994, when Jeffrey Robinson, author of THE LAUNDRYMEN, first brought to the world’s attention the problems of dirty money — revealing how otherwise legitimate lawyers, bankers, accountants and even governments were helping drug traffickers hide the proceeds of their crimes — he labeled money laundering the world’s third largest business, estimating that at any given time there was around $300 Billion circling the globe, looking to get clean. Now, following in the footsteps of two previous international bestsellers — The Laundrymen and The Merger — Jeffrey Robinson brings the story of dirty money full circle, back to the offshore islands in paradise where the business of crime does its banking.

He calculates that the dirty money business has doubled in under ten years and has become so sophisticated that law enforcement and concerned governments flounder in its wake. He lays blame on the offshore world.

In tracking the route it takes, Robinson shows how dirty money — for the most part, the proceeds of fraud and drugs — drives much of the world’s economy, how a few people have tried to do something about it, and how an unlikely cabal of powerful forces — politicians, government agents, major corporations, criminals, and terrorists — are intent on maintaining the status quo.

In this eye-opening tour de force of investigative journalism, Robinson reveals the state of the art of business-as-crime worldwide. He lifts the lid on the lawyers, bankers, accountants, company formation agents, CEOs, and despots who have created — and who actively sustain — a world of window-dressing regulations where criminals and corporate giants live side by side, and by the same rules, beyond the reach of governments and the law.

Here’s what the critics said at the time:

Robinson is an expert story teller whose clear, lively prose is lent force by a sharp sense of irony… rich in history and awash in the colorful villains who invented and refined money-laundering.” — Globe and Mail

“A lively anecdotal guide to the laundry business and related scams extending from cable piracy to internet casinos, pyramid selling, telemarketing fraud, disguised loans, kickbacks, false end-user certificates for everything from cigarettes to arms, to something called death-spiralling, a scheme devised to run a company’s share price into the ground while selling to mug punters. But for human ingenuity at its most calculated, Modern Jihad comes up with the example of opium- addicted camels being used to carry unaccompanied contraband across the Iranian desert, travelling from one fix to the next. — The Guardian

 “A frightening read for those believe in the sanctity and security of the banking system.” — Nick Leeson, Management Today

“Robinson explains carefully and engagingly how and why money is hidden behind the names of non-existent corporations in barely plausible countries.” — Time Out

 “This is a book to give western governments nightmares… the whole black finance system has been allowed to infiltrate legitimate economies and banks to such an extent that it is virtually indestructible.” — The Director

Amazon Kindle:

Smashwords (iBooks, Kobo, Sony Reader, etc):

 I welcome comments on Twitter: @writingfactory


Extraordinary problems demand extraordinary solutions.

Today, throughout the Caribbean, the lethal cocktail of dirty money and drug trafficking is combining to create new levels of violence and gun crimes. It undermines tourism, public safety, economic independence and political will, therefore effecting the very fabric of these paradise islands.

The subject was discussed at length over two days with the Heads of Financial Intelligence Units in the English-speaking Caribbean. The summit was hosted by the Office of National Drugs and Money Laundering Control Policy (ONDCP) in Antigua and funded by the Department for International Development’s Caribbean Criminal Assets Recovery Programme (CCARP)

In my keynote address to the delegates, I suggested that there was room in the offshore world for totally transparent jurisdictions, along the lines of the Channel Island of Guernsey.

There, my friend Geoffrey Rowland, who served as Bailiff of Guernsey from 2005 to 2012, instituted a regime that drove out dirty money and corporate corruption, in favor of one that would reward honest businesses with a sort of Good Housekeeping Seal of Approval.

As attorney general, he’d been approached by a competent law enforcement authority, asking for information about a business licensed in Guernsey. Sick and tired of having dishonest businesses tarnish his birthright, and rather than allow that business to hide behind previously constructed offshore duckblinds, he fully complied with the inquiry. Next, he announced that Guernsey would turn itself into a transparent offshore entity by complying with any and all inquiries from competent law enforcement authorities. As a direct result, the dirty money fled to less stringent, less dangerous jurisdictions, while the businesses that remained could brag that they had nothing to hide and were worthy of their clients’ trust.

Years later, Geoff told me that Guernsey made more money as a transparent financial center than they ever did as a typically opaque offshore entity.

I related this in my address to the delegates in Antigua, and suggested that transparency sells. I said that, according to Gresham’s law, bad money drives out good. However, transparent business drives out bad money and good money, looking for status, moves in to replace it.

My Ultimate White List costs nothing, adds no bureaucracy to any government and, what’s more, can be implemented and maintained with the infrastructure already in place in most offshore jurisdictions. All it takes is the will to implement it, a press release to announce it and a few financial investigators with handcuffs to enforce it.

With that in mind, here is what I suggest offshore jurisdictions bang on their front door, like Luther’s 95 Theses.

1 – We are a sovereign state of absolute transparency. That means, we accept the fact that there is no legitimate argument whatsoever in favor of anonymity.

2 – We do not sell bearer shares. All anonymous shell companies, trusts and IBCs are immediately invalid. Former holders will have to reapply to own the new form of IBC.

3 – The new, fully transparent IBC provides that beneficial owners must have a stake in the island. Among other things, beneficial owners employ a local company formation agent, a local lawyer, locally accredited accountants, local nominee directors and have a local office. No companies in the jurisdiction have been or can be formed by foreign company formation agents, nor are foreign based nominee directors permitted. Furthermore, all of these new IBCs have a banking relationship on the island, and meet fair but serious capital requirements. Only Class A (onshore) and Class B (offshore) banks are permitted and in both cases, the treasury is physically present on the island.

4 – No licenses are granted for online gambling. Sports betting, with reputable firms, is considered on an ad hoc basis but, then, only as long as their servers are on the island. These companies have also hired local directors for oversight and meet fair but serious capital requirements.

5 – Local directors are held responsible for failing to take sufficient steps to prevent money laundering, fraud, mis-invoicing, and/or other crimes. We demand strict requirements for enhanced due diligence and violators are subject to prosecution.

6 – Inquiries by competent law enforcement or judicial authorities are answered and fully met.

7 – We maintain an active and up to date database of beneficial owners. There is a second, active and up to date database of shareholders. Both databases are publicly available. That’s because we believe that corporations and corporate rights and privileges are granted by the state. It is only right and proper that the public knows to whom the state has, in their name, given those rights and privileges.

8 – All locally licensed entities file reports, similar to SEC form 8K, to announce major events that regulators should know about. Failure to do will result in an immediate revocation of the company’s license.

9 – No activities, even subsidiary activities, take place in FATF and/or CFATF blacklisted jurisdictions.

10 – Subsequent to a court order, assets of companies suspected of illegal activities are frozen. In the event of conviction, all assets are confiscated and civil proceedings begin immediately to assess damages.