THE Malaysian Government has to act without fear or favour to investigate those names cited in the Pandora Papers so as to find out the possible wrongdoing and corruption that is taking place.
The aim of the investigation is mainly to clear the names of the accused politicians.
In this regard, the Government should make it mandatory for all members of parliament (MPs) and state assemblymen to declare all their assets onshore and offshore.
This will enable the authorities to detect any new asset or property owned by MPs, especially those who hold high positions in political parties.
One way to overcome corruption and money laundering activities kept in the offshore accounts is by introducing a central registry for beneficial ownership of companies registered in Malaysia and those keeping funds in Labuan.
A beneficial owner of a company is the person who truly owns, enjoys and controls the company even though the property or equity is in another person’s name. This plays an important role in transparency of ownership.
Many financial criminals use shell companies to hide money and particulars of ownership through nominees which allow corrupt criminals to launder their ill-gotten wealth. The use of nominee directors and shareholders will help mask the beneficial owners of these companies.
Pandora Papers
On another note, the Pandora Papers serve as is another avenue for the Inland Revenue Board (IRB) to verify if the tax filings of the tax payers are consistent with information that is automatically exchanged and received through the Common Reporting Standards (CRS) by participating countries.
Developed by the Organisation for Economic Co-operation and Development (OECD) in 2014, CRS is intended to help the international community fight tax evasion.
Pandora Papers is a 2021 large scale investigative journalists’ project by the International Consortium of Investigative Journalists (ICIJ) located in Washington DC. ICIJ has connections with 140 media organisations in 117 countries.
The media acts as a bipartisan observer which reports to the public on the functioning of the democratic process. Within this framework, investigative journalism plays a crucial role in the fight against corruption.
It leaks of over 6.4 million documents, about three million images, more than one million e-mails and almost half-a-million spreadsheets.
The confidential documents reportedly incriminating hundreds of global wealthy elites, high-level officials, oligarchs and billionaires using shell companies to move wealth offshore, anonymously buy real estate or luxury goods for tax avoidance and corruption in their offshore accounts.
According to ICIJ, over 35% of former and current leaders are facing allegations of fraud, corruption money laundering and global tax evasion.
Among those named in the Pandora Papers were Malaysian businessmen and politicians such as former Finance Minister Tun Daim Zainuddin; current Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz; UMNO President Datuk Seri Ahmad Zahid Hamidi; Deputy Finance Minister Yamani Hafez Musa, former PKR party treasurer William Leong and his wife Alice Chan Ai Lee; Malaysia’s 50 Richest 2021 Tan Sri G. Gnanalingam and the parents of fugitive financier Jho Low.
Governments of Australia, Britain and Pakistan have launched investigations after the secret papers show how the elite shielded their wealth. However, the Malaysian Opposition leader failed to get for a parliamentary debate over the revelations of several current government officials from both political sides.
Offshore financial centres (OFCs) are estimated to hold up to US$36 tril in cash, gold, and securities, not including tangible assets such as real estate, art and jewels.
Dodging taxes
A few years ago, the Boston Consulting Group stated that Singapore held around one eighth of the global stock of total offshore wealth while the International Monetary Fund’s (IMF) reported an estimate of over 95% of all commercial banks in Singapore are affiliates of foreign banks which is a testament to its extreme dependence on foreign and offshore money.
The offshore service providers are located in the Cayman Islands, Switzerland, Hong Kong, the Bahamas, Luxembourg, Ireland, Singapore, Panama, Trinidad and Tobago and the Seychelles, to name a few.
The offshore countries offer the following services:
- Easy to set up companies
- Greater privacy, less regulations
- Strict banking secrecy laws that prevent revelation of real owners of companies
- None, low or only nominal taxation or corporate tax
- Protection against local, political or financial instability
Many financial criminals have used offshore companies as fronts for drug trafficking, money laundering, weapon smuggling monopolising industries, privatisation fraud and corrupting politicians and government officials.
An article in the Foreign Policy newsletter stated that money needed to pay for the pandemic is actually close at hand, hidden away in OFCs, more commonly known as tax havens.
Using the offshore entities outside the country is not illegal provided it is done for legitimate reasons. The offshore bank accounts in Malaysia are under the scrutiny of Labuan Financial Services Authority (FSA).
But the practice is commonly used to dodge taxes. The main issue is how certain individuals gained access to large sums of money and their sources of funds and wealth.
The United Nation (UN) Office for Drug Control and Crime Prevention stated that “the real issue, therefore, is not to issue blanket condemnations or make efforts to eliminate bank secrecy and offshore financial services, but to ensure that the legitimate uses of these facilities remain available, while making it much more difficult to use them directly for criminal activities or for laundering the proceeds of drug trafficking and other such forms of organised crime”.
The COVID-19 pandemic has unfolded many weaknesses in government ministries which we thought were our strengths. Whether it is with our B40 which is now B50, it is important for all taxpayers’ monies to remain within Malaysia to rebuild our country and not funnelled out to tax havens. – Oct 14, 2021
Datuk Seri Akhbar Satar is president of the Association of Certified Fraud Examiners Malaysia Chapter.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
