What are they, how do they work and what do they mean to companies administering offshore firms
There is evidence in the Panama Papers that at least 22 people placed on sanctions blacklists by the US and the EU were connected to companies on the books of Mossack Fonseca, either as shareholders, directors or recipients. At least 17 of these people had sanctions imposed while Mossack Fonseca was acting for their companies. Some 24 companies named in sanctions lists are also found in the files.
What are sanctions ?
Imposed by individual countries or multinational bodies such as the United Nation, economic sanctions have been used as a response to Russias annexation of Crimea, government violence against civilians in Syria, nuclear programmes in North Korea and Iran, and political repression in Zimbabwe. This normally involves withdrawal of customary trade and fiscal relations for foreign and security policy intents. Most sanctions are targeted, outlawing trade with lists of individuals who may have supported a particular regime, or companies in key industries such as limbs or oil and gas. Sanctions regimes can enforce travel outlaws, asset freezes or arms embargos.
What were Mossack Fonsecas legal obligations on sanctions ?
They varied. US Treasury sanctions apply only to US citizens and industries. The Mossack Fonseca network incorporated companies in Nevada and Wyoming, so US sanctions would apply to entities there but not, for example, in Panama.
In the Seychelles, a popular jurisdiction with the firms clients, merely UN sanctions apply. In the British Virgin Islands( BVI ), EU sanctions tend to apply.
Once individuals and companies have been blacklisted by the EU, the sanctions are adopted by the UK. Then, employing an instrument known as an order in council, the UK normally extends them to its overseas territories including the BVI.
Did Mossack Fonseca have a sanctions policy ?
The company told the Guardian: We have never knowingly let the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria, and other countries or individuals sanctioned by the United Sates or European union. Once these types of situations are identified, we routinely discontinue the provision of our services.
It also claims that it apprises the issuing authority when it detects entities on its volumes that are subject to sanctions, although it must do so confidentially to avoid alerting company owners. The firm says intermediaries were responsible for advising when their clients, the ultimate owners of companies, were blacklisted. It also says it regularly monitors sanctions lists.
Should companies under sanction be automatically struck off ?
No. Such companies can continue to operate under government licence, for example while a person is contesting inclusion on a blacklist. Investigators sometimes request that companies are kept going to help with their investigations. Resignation could alert clients too early that they are under scrutiny.
Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins
Read more: www.theguardian.com