Defense lawyer and co-chairwoman of the Israel Bar Association’s committee on money-laundering law Yael Grossman is split on how to view the massive event which occurred this past week with the revelation of the Panama Papers.
A cooperative of media outlets around the world unveiled 11.5 million records covering 204,000 offshore entities connected to groups and prominent leaders in 200 countries and territories, including 12 current or former heads of state. The records revealed shadowy transactions, some of which likely violated tax and money-laundering laws.
A number of prominent Israelis and Israeli banks were named.
Grossman said, “No doubt this will have a massive impact on everyone close to the issue,” noting that since the UBS multi-billion-dollar tax evasion scandal in 2008 “there is a clear trend in the world to reduce the secrecy privilege of banks and reduce the ability of people to use offshore accounts.”
She continued, “Lately even in Israel, banks won’t open accounts if you don’t prove you pay taxes on the accounts.”
For whoever had missed this trend, the Panama Papers have shown everyone “the significance of this trend – that not only banks in countries like the US, and in the OECD aren’t ready to accept money if you can’t prove their legitimacy,” but also in smaller countries which had been havens for shadowy transactions are closing their doors, she said.
Possibly most important, she stated that the Panama Papers “exposed the method which was the foundation of the sub-methods to avoid taxes.”
In other words, global authorities now have a map or a key for unlocking all sorts of corporate structures built to hide dirty money. This means “this kind of company and lawyers who create straw companies, directors who are straw men for the real people behind the money, all of this is exposed,” slowing down people trying to “avoid tax and avoid detection of money which stems from crime.”
From one perspective, as a concerned citizen, she said she obviously “wants society not to be involved in crime and that the move is good, because it’s a fact that the system of concealment helps for performing crimes.”
On the other hand, as a citizen who prizes the right to privacy, she said “society could pay a big price because all of the financial dealings are now public, and most of it was legal and about law-abiding people – which is overlooked by the authorities.”
Homing in on what she called another shortcoming of the massive disclosure, Grossman contended that “crime will not disappear, criminals will find other ways, they will just get more sophisticated.
Whoever thinks this will stop people from” breaking financial laws does not realize that trying to cut corners to make money, sometimes legal ones, “is part of human nature.”
The Israel Bar Association Committee’s other co-chairman on money-laundering, defense lawyer Gil Dachoach, sounded similar themes to those of Grossman.
Emphasizing the positives of the Panama Papers, he said, “This is a revolution. The information that came out had supreme value. A large group that wanted to conceal money in far off places” may now be busted by global law enforcement.
He said that just avoiding Israel, Switzerland and other regulated countries, by going to more off-the-beaten-track countries like Panama was no longer enough as, “the long arm of the Interpol will get there, the global Internet and globalization are making it easy to get to places without having to travel there. It’s very hard to stop this and go back.”
On the other hand, Dachoach said where the disclosures harmed the secrecy privilege of law-abiding citizens, since lawyers offices have a secrecy privilege, that would be a bad development.
One point he emphasized was that he doubted there would be many indictments in Israel from the disclosure, arguing “it’s not easy to bring evidence to Israel from Panama and maybe the evidence was obtained violating the secrecy privilege by hacking into the lawyers’ computers, which could make it the fruit of a poisonous tree” – meaning courts might refuse to consider the evidence, no matter what it proves, if it was obtained illegally.
On the Israeli government side, the police, the Money Laundering and Terror Financing Prohibition Authority, the Tax Authority, the Securities Authority, the Justice Ministry, the Shin Bet and other agencies are all involved in fighting off-shore and other global money-laundering and tax evasion schemes.The Jerusalem Post
has learned that Israeli law enforcement in large measure rejects some of how Grossman and Dachoach frame the issue, including that crime will find other ways to expand and that the cost to privacy may be as significant as the gains in catching criminals.
Many officials say such arguments offend the intelligence as these crimes hurt Israel and conceal other crimes, and therefore big global disclosures and crackdowns are positive and needed.
Regarding the idea that Panama or other countries that bust offshore accounts might not cooperate with Israel, officials would probably respond that there is a global trend of all countries cooperating and being less patient with those trying to evade tax and other financial regulations by playing jurisdictional games of moving money across borders to confuse authorities.
It is becoming harder for the real power brokers to hide behind straw people even in foreign lands.
The Panama Papers also probably would not knock authorities out of their chairs, as they would argue they are used to handling such issues, including prior and current massive cases against major Israeli banks, which is their job.
has learned authorities would likely not rush to an estimate of how many criminal investigations will be opened in Israel because of the Panama disclosures, viewing it as too early in the game to say – though there is expectation of some cases being opened.
Ultimately, there is no question that the Panama Papers are a massive event which will likely drag into criminal investigations a number of prominent Israelis, groups and possibly banks.
From that perspective, law enforcement has some big wins ahead that will increase the costs of doing business for global criminal networks.
But as Grossman said, human nature gravitates toward cutting corners in order to make more money and often reaches the heights of creativity just as new obstacles are placed in its way.