Documents show law firm at centre of Panama Papers leak carried on doing business with companies after learning of their real owners
The law firm at the centre of the Panama Papers leak acted for an Iranian oil company that had been blacklisted by the U.S., the documents show.
Mossack Fonseca realized it was working for Petropars Ltd in 2010 only when another client accidentally fell foul of the U.S. sanctions that had been imposed on the energy firm, Britain’s Guardian reported on Thursday.
Petropars and the other client had been assigned the same PO box in the British Virgin Islands by Mossack Fonseca, and the address had been flagged by banks as linked to a blacklisted company.
The episode highlights the perils of giving the same address to thousands of shelf-companies – and the lack of rigour in Mossack Fonseca’s due diligence procedures.
This was acknowledged by the firm’s managing partner, Jürgen Mossack, who sent an angry email complaining about the lack of background checks, the documents show. “Everybody knows that there are United Nations sanctions against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC [the Office of Foreign Assets Control, the U.S. Treasury department that deals with sanctions] but out of principle.”
Mossack Fonseca discovered it had been acting for the Iranian firm when the head of its Geneva office requested that a client be given a new mailing address in the British Virgin Islands (BVI).
PO box 3136 in Road Town, Tortola, was shared by a multitude of other shelf companies on the law firm’s books, including Petropars.
Petropars had been designated by the U.S. Treasury in June that year as an oil company ultimately owned by the Iranian regime. With offices in Dubai and London, it played a key role in securing foreign investment for the South Pars natural gas field, The Guardian reported. The largest in the world, the field lies in the Persian gulf and is shared with Qatar.
Putting Petropars on the official OFAC sanctions list was intended to sap financial support for the Iranian regime’s nuclear and missile programs.
After a flurry of checks, Mossack Fonseca discovered it was acting for Petropars and two other companies in which it held stakes: Drilling Company International Limited and Venirogc Limited, a joint venture with Venezuela’s state-owned oil company PDVSA, which would itself be blacklisted by the U.S. the following year.
Three months after the blacklisting, Mossack Fonseca’s compliance team recommended resigning from Petropars and “all its associated companies.” By then, not only OFAC but the United Nations had issued sanctions against the Iranian regime.
Mossack Fonseca duly stood down and Petropars was recorded as inactive from May 2011, as were its two subsidiaries. But another Iranian company remained on the books.
Despite resolving to cut ties with Iran’s regime, Mossack Fonseca continued servicing an outfit called Petrocom. It shared the same London accountant as Petropars, and gave its address as Sepahbod Gharani Avenue in Tehran.
The relationship was managed through London, where a separately owned business holds the exclusive UK rights to market Mossack Fonseca’s services.
Mossack Fonseca in the BVI produced a certificate of good standing (often requested by banks or trading partners), stamped by the office of the Virgin Islands deputy governor on 14 September 2010; papers approving the appointment of a new chairman and managing director; and others for the creation of a joint venture.
Mossack Fonseca’s BVI office did carry out checks on the company. A request for the name of the ultimate beneficial owner of Petrocom elicited the following reply from Mossack Fonseca’s UK franchise: “I think we could assume that would be Mahmoud Ahmadinejad unless I’m mistaken.”
While the Iranian regime’s then-president was unlikely to have actually held shares in these offshore entities, the comment makes it clear Mossack Fonseca’s UK office knew it was continuing to act for state-owned companies, The Guardian report said.
In June 2013, the U.S. imposed sanctions on Petrocom’s parent OIIC, describing it as part of a network of 37 front companies set up to manage the Iranian leadership’s commercial holdings. OIIC was allegedly controlled by a holding company called Eiko, which stands for The Execution of Imam Khomeini’s Order, the report added.
“The purpose of this network is to generate and control massive, off-the-books investments, shielded from the view of the Iranian people and international regulators,” a U.S. Treasury press release stated.
The most recent data, from December 2015, shows Petrocom remains on the firm’s books. A certificate of good standing was issued as recently as April 2015.