Domestic Violence Meets Tax Optimization in Panama

Old Buildings in Panama City (Picture Shutterstock)

Old Buildings in Panama City (Picture Shutterstock)

Offshore company structures are not illegal in Panama. However, up to now the practice has displayed a somewhat disconcerting double standard, as illustrated by an example in which Swiss banks were also implicated.

The Morgan & Morgan Group offers legal, trust and financial services worldwide. A Panamanian success story, its client base includes medium-sized enterprises, large corporations, and financial intermediaries. The group also provides «cross-generational support» to high net worth families and individuals.

The roots of the Morgan & Morgan Group go back to 1923, when Eduardo Morgan Alvarez opened a small law firm in the Panamanian city of David. Under the leadership of its founder – described by Morgan & Morgan as a British-Panamanian attorney, politician, newspaper publisher, and diplomat – and his two sons, the firm developed into the biggest legal practice in Central America, establishing a presence on the international stage in the 1990s.

 

Voluntary Work Hours

Today, the Morgan & Morgan Group employs more than 800 people on three continents. The group claims its leadership style is influenced by its rich tradition, embodying values such as stability, continuity, and social responsibility.

On the group website, attention is drawn to the company’s social engagement, in the form of free legal aid in Panama. Since the launch of the pro bono programme in 2011, more than 1,000 hours of voluntary work have been completed on behalf of people without means – primarily in the form of legal assistance in remote areas of Panama.

Free Legal Advice For Women

Laudable as this program may be, the general impression is of unsavoury business practices, especially looking at the track record of Morgan & Morgan’s Swiss subsidiary MMG Panazur in Zurich.

Present in the Swiss financial market since 1980, MMG Panazur is one of Europe’s leading providers of corporate services from different jurisdictions.

Concealing Funds From the Tax Authorities

As reported by the «Sonntagsblick» (article in German) newspaper last weekend, Zurich-based MMG Panazur plays a major role in setting up letterbox companies in Panama. The newspaper reported that UBS bank employees helped their clients to hide money from the tax authorities through Panama companies for years.

«My UBS team bought hundreds, if not thousands, of letterbox companies in Panama for clients,» «Sonntagsblick» quotes a former UBS banker as saying. «Definitely 90 per cent of clients were using this to conceal funds from the tax authorities.»

The current CEO of MMG Panazur, Daniel Tribaldos, responded briefly to the allegations: «We declare that we are subject to Swiss regulation and we have always observed the relevant laws.» According to the company, MMG Panazur charged 1,000 francs to open a Panama company. Meanwhile, UBS clients paid the bank 4,000 francs for the privilege.

Indirect Confirmation?

UBS declined to comment to «Sonntagsblick» on statements made by former employees. «The fact is that we were one of the first banks to proactively take the decision in 2010, to end cooperation with such providers,» a UBS spokeswoman said, which was interpreted by the newspaper as indirect confirmation that UBS did business with MMG Panazur.

«This procedure was carried out in several steps and is complete,» the spokeswoman added. Things look very different today: «We have zero interest in money that has not been taxed or comes from illegal sources.»

Disconcerting Discrepancy

The business model has changed at MMG Panazur too. They don’t sell letterbox firms any more to other financial services operators – but directly to clients, according to «Sonntagsblick».

In this case it is not about what motives lay behind the creation of off-shore companies in Panama, but simply about the disconcerting mismatch between social commitment for victims of violence on the one hand, and the provision of legal structures that leave the door open to tax evasion on the other hand.

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