In the Paradise Papers

Shayan S. Khan
Thursday, November 23rd, 2017

Queen Elizabeth II’s profile on the ICIJ online database, linking her offshore holdings. Image: Screenshot.


Tax avoidance/evasion in Bangladesh hardly required an offshore company in the 90s and 2000s. And that might also explain Bangladesh’s fairly light presence in the trove of Offshore Leaks.


The release of the Paradise Papers brings to 67, the number of Bangladeshi ‘Officers’ named in the International Consortium of Investigative Journalists’ database of offshore leaks, that commenced in 2013 with its first data-dump in April of that year hailed as “the biggest hit against international tax fraud of all times”.


That was the precursor to last year’s blockbuster Panama Papers, which made Mossack Fonseca a household name around the planet, and caused not one but two democratically elected prime ministers to step down from their job – Iceland’s Sigmundur Gunnlaugsson, followed more recently by Nawaz Sharif of Pakistan. Hence the hype and excitement informing airwaves and column inches, as the Washington-based ICIJ announced the latest trove of secretly obtained data it was unloading for public scrutiny.


But is there any actual evidence of wrongdoing? Can the authorities step in? Anything that will stand in court?


The Paradise Papers are some 13.4 million files or records relating to Appleby, one of a handful of major international “offshore legal service providers”, and their dealings with clients from around the world that were passed to German newspaper Süddeutsche Zeitung and then shared with the ICIJ. This batch is notable for the host of celebrities that one encounters trawling through the data, itself a dizzying task, from pop singer Bono to the British royal family, including Queen Elizabeth. Eleven Bangladesh-based ‘officers’ appear in the Paradise Papers – comprise the names of 10 individuals, and 1 firm.


Before we peruse the data, it is helpful to gain a grasp over how it is organised and what it relates to. ‘Officers’ in the ICIJ database, is the category for individuals named as directors, owners, shareholders or any other capacity, in the offshore companies whose data relating to ownership, management and registration for tax purposes have been leaked through breaches at a series of law firms and legal advisories used to register or act as agents in offshore havens – the latest being Appleby.


We must also understand that being named as an officer in an offshore firm does not mean, in and of itself, that an individual is guilty of impropriety, leave alone criminal activity such as tax evasion. The ICIJ is careful to post the following disclaimer for visitors to its online database:


“There are legitimate uses for offshore companies and trusts. We do not intend to suggest or imply that any people, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly.”

An offshore company is a firm registered or incorporated outside the country where it has its main offices and operations, or where its principal investors reside. They are often used for the purpose of financial, legal and taxation benefits.


Rightly or wrongly however, such companies have come to be associated with the financial shenanigans of the rich and famous – most commonly for tax evasion or avoidance, and ranging to money laundering and graft, even terror financing.


Offshore shell companies, that are holding companies registered offshore, can be used to disguise the ownership of assets. Apart from being tax havens, some offshore jurisdictions do not require that companies disclose the identity of officers and directors and there is no requirement for locally resident directors. This allows for individuals, or corporations for that matter, to control the ownership of assets without being personally identified with such ownership.


By parking their money or assets in such companies, individuals and companies can effectively avoid paying tax on those parts of their wealth and income. Corrupt politicians often receive their kickbacks in the form of ownership of assets, such as company shares, that they then conceal from authorities in their home jurisdictions by exercising their ownership from behind the cover of offshore shell companies.


BNP vice chairman Abdul Awal Mintoo has emerged as the most notable name from Bangladesh in the Paradise Papers. Indeed, he and his family members, including son Tabith Awal, who ran for the Dhaka North City Corporation mayor’s post in 2015, make up 5 of the 10 Bangladeshi individuals named as officers in offshore companies that had dealings with Appleby. The focus on Mintoo and his family owes to their forays into politics. As aspirants to public office, politicians are held to a different standard of public disclosure.


Previously, Awami League presidium member Kazi Zafarullah and his family’s names appeared in the Leaks for 2013, as officers of an offshore entity registered in the British Virgin Islands. No other Bangladeshi politician’s name is to be found in the ICIJ database.


Offshore, onboard


Mintoo, his wife and three sons’ names  appear in the Paradise Papers in  relation to their interests in NFM Energy Ltd, which was set up in August 1999 with its corporate address matching that of Mintoo’s Multimode Group in the capital’s Panthapath, but registered in Bermuda. Mintoo and his family members are named variously as president, shareholder, director, etc. There is just one little thing in favour of the association between them and NFM: they hardly tried to hide it.


The Multimode Group’s website, till late Saturday evening, had a page on NFM Energy. Various public profiles of  Mintoo (and Tabith as well) state his interest in NFM Energy, including one on the website of Pragati Life Insurance, in which he is a director. His LinkedIn profile lists him as managing director of the company (a position he never holds in the Paradise Papers).  The company is described as “one of the industry leaders in gas drilling exploration sharing interests and investments in Chevron Bangladesh Ltd. It is engaged in gas exploration of blocks 12, 13 and 14.”


This share in Chevron, descended from a share he received in Unocal Bangladesh before Unocal was globally acquired by Chevron, has long been common knowledge in Bangladeshi business circles. It is also seen as the source of Mintoo’s strong ties to the US, even though Chevron is said to have bought it back from him.


To the extent that the company never visibly operated on the local scene, and was probably just a vehicle for Mintoo’s unusual stake in a foreign investor’s local outfit, NFM does subscribe to the template of an offshore shell company. Critics will also point out that despite the visible openness around his ownership of the company, nowhere is it mentioned that NFM is actually registered in Bermuda.


At this stage however, more information would be needed to conclude whether there was any untoward activity Mintoo, Tabith or the rest of the family engaged in through their stake in NFM. The Paradise Papers contain no information relating to fund transfers into and out of NFM, or any of the other firms with Bangladeshi officers, from which an intention to dodge tax or launder money could be inferred.


The two prime ministerial resignations prompted by the Panama Papers both, in the end, related to non-disclosure.  Gunnlaugsson and Sharif both neglected to declare their offshore interests, although nothing was there to suggest they were benefiting financially from their involvement in the two firms. Yet non-disclosure, particularly for someone in public office, let alone the highest office in the land, is rightly viewed as a grave breach of trust.


But neither Mintoo nor Tabith have actually ever held public office. Thus far, the extent of their political activity has been confined to roles within the BNP.  Tabith lost the mayor’s race to Annisul Huq, while Mintoo has never garnered a nomination even. In his public profile on the Multimode website, it is stated that Tabith “sits on the board of all Multimode Group and associate concerns”.


In comments to the media on November 18, Mintoo denied transferring any money to NFM from Bangladesh. As things stand, there is no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Mintoo or his family.  Barring an investigation by a national regulator, such as the Bangladesh Bank’s Financial Intelligence Unit or the National Board of Revenue that is able to uncover a money trail and determine the extent of it, we may have to satisfy ourselves with taking that answer at face value.


Gaining in currency


Some lawyers however, are of the view that thanks to some admittedly archaic and bordering-on-draconian laws remaining on the books, simply setting up a commercial entity, like a trading company that entails the use of foreign exchange abroad, (forget about offshore locations for now), is enough to put an individual holding solely Bangladeshi citizenship in breach of the law here.


The Foreign Exchange Regulation (Amendment) Act of 2015 brought some changes to the original FERA of 1947, its provisions relating to Bangladeshis investing abroad remain highly restrictive, adjoining a role for Bangladesh Bank to provide case-by-case oversight and approval or otherwise.


The key provision standing in the way of Bangladeshis investing abroad is capital account convertibility, which the Taka is not. Which is why some of the leading corporates in the country that are eager to expand abroad are having to go through a painstaking process gaining ste-by-step approval of the central bank. It’s safe to say none of the offshore entities with Bangladeshi officers named in the offshore leaks database has subjected itself to that scrutiny.


It was only in 1994 that taka was made convertible for current account transactions – say trade-related payments. To guard against the spectre of capital flight, capital account convertibility, or CAC, eludes us to this day. As an economy grows or matures however, the general view among economists right across the spectrum is that it becomes inevitable.


Which in turn can make authorities reluctant to enforce the current limitations of the law as it stands in the books today, with the Bangladesh economy on the up. And it may just be what is keeping the authorities from throwing the book at the individuals from Bangladesh whose names are now public, in the offshore leaks.

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