Island officials licensed law firm at centre of Panama Papers leak although it repeatedly could not fulfil legal obligation to name companies’ real owners • Panama Papers: global reaction to leak

The British Virgin Islands continued to license Mossack Fonseca, the law firm at the centre of an unprecedented leak of confidential information, despite knowing it was repeatedly unable to find out who owned the companies on its books.

Registered agents such as the Panamanian law firm have a legal obligation to provide company information on request to the authorities on the islands, a British overseas territory.

But analysis spanning a decade and more than 600 official law enforcement requests from the BVI Financial Investigation Agency (FIA) shows that in multiple cases Mossack Fonseca had no idea for whom it was acting.



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Between 2005 and 2008, in more than 100 requests studied by the Guardian, the firm was only able to name a company’s true owner five times.

Even after laws were strengthened in 2008, it was still unable to name its companies’ beneficial owners in more than 70 of about 500 official requests for information.

Performance improved in 2015. A name was given in response to all but one of about 90 requests in the Panama Papers leak – a huge cache of documents from the Panamanian law firm that helped rich clients exploit secret offshore tax regimes.

The former Ukrainian prime minister Yulia Tymoshenko was among the clients whose identity remained hidden from regulators. There were also failings around companies belonging to Alaa Mubarak, son of the former Egyptian president Hosni Mubarak, and Gennady Timchenko, who is under sanctions for lending financial support to Vladimir Putin.

There is nothing to suggest in this context that any beneficial owners breached BVI rules or were aware of FIA inquiries. But Mossack Fonseca cannot do business in the BVI without a government licence. For the last 10 years, the analysis suggests, the BVI has been licensing the firm even though it knew it was not fulfilling its legal obligations.

Brodrick Penn, permanent secretary in the office of the BVI premier, Orlando Smith, said: “The BVI has a widely recognised, robust regulatory and compliance regime. We continue to play a constructive role in the furtherance of international transparency, information exchange and anti-money-laundering initiatives at the highest level.

“As a matter of policy and law we do not comment on individual cases. The BVI actively investigates issues of non-compliance and works with foreign competent authorities to detect, prevent and prosecute illegal activities, ensuring that our laws are enforced and action taken transparently when we identify wrongdoing.”

Mossack Fonseca said: “We routinely comply with requests from authorities investigating companies or individuals for whom we are providing services. We conduct due diligence on clients at the outset of a potential engagement and on an ongoing basis. In all of the cases you cite, due diligence was carried out at all times according to the laws and regulations in place in the relevant jurisdiction.”

David Cameron has personally urged the BVI and other tax havens under UK sovereignty to combat money laundering and introduce central registers of beneficial owners, and to make these publicly available. So far, only Montserrat has indicated it will do so.

Smith resisted introducing a central register at government level. Instead, the BVI this year began requiring registered agents such as Mossack Fonseca to keep a record of basic information including the name, address, and date of birth of beneficial owners.

Facebook Twitter Pinterest The building in Panama City where the Mossack Fonseca law firm is based. Photograph: Eduardo Grimaldo/AFP/Getty Images

Difficulties in identifying beneficial owners can frustrate international criminal investigations, campaigners say. Requests for names are usually prompted by approaches from law enforcement agencies, such as the FBI in the US or Britain’s Serious Fraud Office. Rapid information sharing is crucial in tracking and freezing the assets of criminals, and when compiling sanctions lists.

In 2008, BVI money-laundering rules were tightened. Company agents have been under a legal obligation to reply to government requests for information “without delay”. Mossack Fonseca signed agreements with clients that promised information on beneficial owners would be supplied within 24 hours.

In the cases examined by the Guardian, the company took nine days on average to respond. In one case, it was three months.

Secrecy helps keep the BVI economy afloat. Incorporation fees generate just over 50% of government revenues. The country says more than 950,000 offshore companies were incorporated there. Mossack Fonseca acted for at least 113,000. A further 3,000 were set up in other UK jurisdictions, including British Anguilla, Jersey, the Isle of Man and the UK itself.

Mossack Fonseca often appears not to have stored information on beneficial owners. It mainly used a loophole in the legislation that allows company agents to rely on an “introducer” to carry out due diligence.

If approached by the FIA, the firm would ask the introducer to supply the names of owners. In some instances, Mossack Fonseca was unable to give a name as the introducer would ignore or refuse requests for help.

In February 2012, Mossack Fonseca resigned from a company reportedly linked to Tymoshenko after failing to elicit the name of the owner from its introducer, a bank. Court documents filed later that month show Bassington Ltd belonged to Tymoshenko, who has denied any wrongdoing in connection with the company.

Facebook Twitter Pinterest Former Ukrainian prime minister Yulia Tymoshenko. Photograph: Sergei Supinsky/AFP/Getty Images

In several instances, Mossack Fonseca appears to have unintentionally provided names of beneficial owners that are incorrect, or likely to be incorrect. In 2013, it named Reinhold Orther as owner of four companies. This appears to have been a misspelling of Reinhold Ortner, a Liechtenstein-based nominee director already linked to multiple companies on its books.

Two years later, one of the companies in question, Southport Management Services Limited, was hit with sanctions by the US treasury over its connection to its actual beneficial owner, Timchenko, due to his alleged support for Putin. Timchenko has dismissed claims that he is close to the Russian president as “outrageous”.

Ortner said that while he had acted as a director for the company in question he had never been its beneficial owner.

‘Beyond reproach’

In 2014, Mossack Fonseca claimed to the BVI that a woman called Brenda Cocksedge was the beneficial owner of Baryk Investments Limited. The Guardian named Cocksedge as a nominee director – an individual who provides their name in order to obscure the true individuals running a company – of more than 700 offshore companies globally the previous year.

Mossack Fonseca appears only to have been fined twice by the BVI Financial Services Commission for due diligence failures, in one instance concerning a company ultimately owned by Alaa Mubarak.

It said the fines were imposed on registered agents such as itself when intermediaries failed to comply with obligations to disclose when clients had been convicted or sanctioned. It said: “We are responsible members of the global financial and business community. For 40 years Mossack Fonseca has operated beyond reproach in our home country and in other jurisdictions where we have operations.”

Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins