Records on tens of thousands of largely secrecy-clad companies registered in the Bahamas, including thousands with ties to Canada, have been divulged en masse as one of the world's premier tax havens becomes the first to suffer a mass data leak since the Panama Papers.
The leaked data exposes the holdings of a number of current and former global cabinet ministers, and represents a black eye for a Caribbean country that, despite its modest size and population, has become a major magnet for international money flows and enjoys a cozy financial relationship with Canada.
The documents were leaked to the German newspaper Sueddeutsche Zeitung — the same media outlet that received the massive Panama Papers leak — and shared with the Washington-based International Consortium of Investigative Journalists (ICIJ), whose exclusive Canadian partners are CBC/Radio-Canada and the Toronto Star.
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The records consist of ground-level data on offshore companies registered in the Bahamas: the names, creation dates, addresses and, in some cases, directors and owners of nearly 175,000 corporations, trusts and foundations set up between 1990 and this year. While those records could previously be accessed one at a time by paying a $10 fee each, the ICIJ has now made them freely available in bulk in a publicly searchable online database — a step that global transparency and anti-corruption advocates have long said is essential to pull back the curtain on the shadowy world of offshore finance.
"Corporate registries are incredibly important," said Debra LaPrevotte, a former FBI special agent whose work included tracing billions of dollars in bribes and corruption proceeds hidden in tax havens for politicians from Ukraine, Nigeria and Bangladesh.
"Offshore companies are often used as intermediaries to facilitate money laundering... thus the corporate registry documents, which might identify the beneficial owners, are part of the evidence."
Revelations from the leaked data include:
- The European Union's former commissioner for competition and digital matters, Neelie Kroes of the Netherlands, was a director of a Bahamas company called Mint Holdings Ltd. but failed to declare it in her mandatory disclosures of personal financial interests. Her lawyer and a former business partner both said it was a "clerical oversight," that she had always acted in good faith, and the company had effectively fizzled out a decade earlier but lawyers had forgotten to strike her name.
- Colombia's former mines and energy minister, Carlos Caballero Argaez, held a stake in a Miami apartment through a Bahamas corporation for "tax purposes." In an interview with the ICIJ, Caballero Argaez said he and others chose the Bahamas on lawyers' advice; he denied any conflict of interest.
'Switzerland of the West'
For nearly a century, the Bahamas, which once billed itself as the Switzerland of the West, has been on the radar of tax officials around the world.
In 2000, the Paris-based Organization for Economic Co-operation and Development, the world's leading tax policy forum, placed the Bahamas on a blacklist of countries that aid tax dodging. After the Bahamas hurriedly introduced nine new laws, the OECD removed it from the blacklist the following year.
In 2009, though, the OECD put the Bahamas back on a "grey list" — a less severe category that nonetheless signified non-conformity with international standards. And in June 2015, the European Union listed the Bahamas and 30 other countries as unco-operative tax havens.
In many money-laundering and tax probes that lead investigators to the Bahamas, they run up against a wall. Bahamian law requires the names of directors, who have complete power over offshore companies, to be filed with the national registry. Yet for a great bulk of those companies, the directors on file are mere "nominees" — front people or firms that serve on paper as a corporation's administrators in order to disguise the real operators.
Even when the true directors' names are available in the corporate registry, they cannot be searched individually or without pre-existing knowledge of the Bahamian company's name. That makes it difficult to check whether a public official or corporate executive is linked to companies chartered in the Bahamas. (Numerous provincial corporate registries in Canada present the same obstacle).
"This is a pocket for a complete lack of transparency. There needs to be a light shone on it," Richard Leblanc, a professor of law, governance and ethics at York University in Toronto, said in an interview with the Star.
Bahamian authorities told the ICIJ that the country honours its international obligations and co-operates with international authorities. The Bahamas "does not tolerate dirty money," authorities said, noting it "has in many areas been rated as 'largely compliant' with international standards."
Incentives for Canadians
According to the latest figures from Statistics Canada, nearly $33 billion in declared Canadian funds were parked in the Bahamas as of the end of last year — or $82,500 for every woman, man and child there — making it the No. 6 foreign destination for Canadian money, ahead of China, Brazil and Germany combined.
Because of a special tax deal between Ottawa and the Bahamas, and the country's zero per cent corporate tax rate, Canadian companies operating there can earn profits and bring them home tax free, completely legally — a major incentive to set up a subsidiary in the Caribbean archipelago to serve as a hub for international operations.
For individuals, it is not illegal to set up an offshore shell company or keep funds in a country like the Bahamas, but any profits from the money must be reported for tax purposes, as well as any assets over $100,000. Offshore jurisdictions also often have strict confidentiality rules for bank accounts and shell companies that make it easier to hide assets from tax authorities or to launder money.
Nicholas Shaxson, author of Treasure Islands: Tax Havens and the Men Who Stole the World, said that as the world's governments have recently pushed tax havens to share banking and financial information with national tax agencies concerned about offshore evasion by citizens, the Bahamas has pushed back.
"They are saying, 'While everyone else is being transparent, your secrets are safe with us,'" Shaxson said. "Bahamas has also long taken an attitude of selective non-compliance with its own laws, and it is now pushing out this message with a nudge, nudge, wink, wink."
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