Panama trail

May 01, 2016


The writer is a business strategist and entrepreneur.
The writer is a business strategist and entrepreneur.

WHAT can we expect from a ‘forensic audit’ and how much exactly does Prime Minister Nawaz Sharif have to worry about? We have known for a very long time how heads of state, politicians and oligarchs who steal money, hide it in the names of their relatives or close family in offshore havens. So quite obviously when the veil was removed from three companies registered in the names of the progeny of the prime minister of Pakistan, one could not help but draw that parallel.

Even then, no company keeps any significant record or information about its activities in these tax havens, other than registration information.

Step one of the forensic audit would require identifying the bank accounts associated with these companies. But owning shell companies or bank accounts in tax havens such as Panama, Cayman Islands, British Virgin Islands and the UK’s Channel Islands is legal under the laws of these jurisdictions.

Establishing wrongdoing through a ‘forensic audit’ will not be an easy task.

This means that even if, by some stretch of the imagination, the soon to be constituted commission were to get hold of the bank account numbers, the banks will invoke secrecy laws and will not divulge any information.

To get past that one would need to get a court order from a court within their jurisdictions. To get that court order you would need to show serious wrongdoing in whichever jurisdiction the offshore companies were operating in and for which prosecution would need to show solid evidence beyond a shadow of doubt. In the case of the Sharif offspring for example, merely owning property through an offshore company does not constitute any wrongdoing under the UK’s jurisdiction.

Similarly, any other nefarious activities that may have been carried out by these companies — say in the UK, Saudi Arabia, Pakistan or any other country — would have to be proven in that jurisdiction. That is a detailed process of investigation and would involve an extended process of discovery. And how does one even begin the process of discovery without a bank statement that would indicate what transactions have been conducted, where, when and with whom?

To which one may allege, with exasperation, that the wealth has been acquired by ‘unlawful means’. Unlawful means where? In the UK or Pakistan?

So step two of the forensic audit will inevitably end up in a Pakistani court, with the prosecution needing to present proof, not allegations, that the money owed its origin to ‘corruption’. And the burden of proof would be on the prosecution, which would have to provide evidence of malfeasance, not on the Sharif progeny to prove their innocence. For purposes of that trial the Panama leaks become almost irrelevant.

But let’s take a leap of faith here and suppose the commission was to get a court judgement from a Pakistani court that serious wrongdoing had been done. The simplest thing would be to get an international warrant for the arrest of the ‘convicted’ to be brought back to Pakistan. Then supposing the commission were to continue probing the Panama leaks, with a view to recovering the ‘stolen’ assets, step three would require it to establish that the stolen proceeds had been transferred to that bank account in a tax haven that belongs to a company registered in Panama which is owned by the Sharif progeny.

This needs a solid money trail to be established. It will call for bank statements from several banks, which may belong to varied entities that may be resident across different jurisdictions.

With all the means at its disposal even the US Internal Revenue Service has struggled with investigating its own citizens for tax fraud and siphoning off money to offshore tax havens. The US justice department finds it even more difficult to have US laws applied extra-territorially. In other words, merely proving that an individual is rotten is not enough. One has to demonstrate exactly how stolen money may have found its way into the offshore company’s account.

This brings to mind Paulo Coelho’s epic novel, The Alchemist — a story of a young shepherd who sets off across a continent to discover a treasure, only to return home and discover that what he sought lay buried in his own backyard. Many in Pakistan appear to believe that somehow a clue to a huge treasure has been found that lies buried in Panama. If only it is ‘properly investigated’ we’ll finally have ‘proof’ of all the ‘corruption’ of which we have known for a very long time.

Like the young shepherd in Coelho’s book, many are keen to go on that trail, which after a long journey will bring them back home as the key to that supposed ‘treasure’ would appear to be buried right here in Pakistan.

The writer is a business strategist and entrepreneur.

Published in Dawn, May 1st, 2016