The Malaysian Pandora Paradox

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Can Daim possibly be caught finally?
According to Greek mythology, Pandora's curiosity to open a box in her husband's care led to the release of emotional and physical curses casted upon mankind. Will Malaysian public or the implicated be cursed for revealing the evil content hidden in the Pandora paper?  
When news on the Pandora paper hit the street here on October 4th, Malaysians concern to the expose by the International Consortium of Investigative Journalists (ICIJ) is not sufficiently overwhelming

Among those exposed, Tun Daim Zainuddin featured prominently in the initial list of Malaysians found in the 12 million leaked documents. That got the public attention and Malaysiakini and Malay Mail featured him prominantly. 
As Minister of Finance, he was then concerned with Government's fiscal deficit due to leakages. Now he participate in the leakage. 
It is not a matter of will the curse be fallen on Malaysians. It already has, long before the revelation of Pandora paper. 
Pandora paper

Pandora paper is the latest confidential financial information leak by ICIJ, which is bigger than previous leaks. 
It is sourced from "14 offshore service providers whose documents make up the Pandora Papers data set operate in jurisdictions including Singapore, Switzerland, Panama, the United Arab Emirates, the British Virgin Islands and Vietnam" and "clients from more than 200 countries and territories", to quote from Singapore's The Straits Times

According to ICIJ, the journalistic collaboration "involves more than 600 journalists from 150 media outlets in 117 countries" including Washington Post and The Guardian. 

The data leak "exposes the offshore secrets of wealthy elites from more than 200 countries and territories. These are people who use tax and secrecy havens to buy property and hide assets; many avoid taxes and worse." 
"They include more than 330 politicians and 130 Forbes billionaires, as well as celebrities, fraudsters, drug dealers, royal family members and leaders of religious groups around the world," to quote ICIJ. 
According to a 2013 Malaysiakini report on the Washington-based Global Financial Integrity report from leak also obtained by ICIJ, more than 1,500 Malaysians including politicians owned secretive off-shore companies in Singapore and tax haven British Virgin Island. 
In 2010 alone, GFI reported RM200 billion of dirty money siphoned out of Malaysia. 
The Pandora paper estimated RM1.8 trillion of rich Malaysians' money parked in offshore accounts in tax haven outside the banking system and suspected of evading taxes

Setting up an offshore account is not sufficient ground to claim it is illicit money or money from corruption or crime. However, the leak exposed moral and ethical inconsistency of the powerful elites. 

There are grounds for suspicion behind their inconsistency. Despite the smoking gun, there are layers of secrecy to overcome and onerous effort to unravel the wrongdoings. 
It explains the Malaysian government's decades old fiscal predicament and lesser than entitled quality of life for rakyat. 
The wealthy took money out from income derived within the country and from the spending by rakyat, government and businesses.  
Taken out of the economy and tax not paid, public and Government are denied the revenue and benefit from the economy generated. According to The Guardian, the loss tax revenue costs governments anywhere between US$400 to US$800 billion annually. 
To poorer third world countries, the leaked amount is sufficient to impoverish the nation. Malaysian is in need of funding and talk is Government is estimated to be short by RM50 billion for 2022 budget.        
Daim
So far, 10 Malaysians were revealed in ICIJ's latest leak. Tengku Zafrol, William Leong, Zahid Hamidi and few others could explain to be related to their previous jobs or corporate positions. 
Najib and Mahathir denied having offshore accounts, but Gnanalingam name appeared and he is said to be another of Mahathir's non-Malay proxies.  
Daim featured prominently with Malaysiakini dedicated a report below:
  PANDORA PAPERS | When most boys boast ownership of gadgets and toys, Daim Zainudddin's youngest sons became owners of a British Virgin Islands (BVI) firm by the ages of nine and 12

Muhammed Amir Zainuddin Daim and Muhammed Amin Zainuddin Daim, born in 1995 and 1998 respectively, became shareholders of Newton Invest & Finance Limited (BVI) in 2007, which held properties in London worth £10 million at the time

According to documents obtained by the International Consortium of Investigative Journalists (ICIJ) and sighted by Malaysiakini, they are joint shareholders with their mother, Naimah Abdul Khalid, who is the former finance minister's third wife

By 2017, when the brothers were in their early twenties, they were owners of several offshore firms set up in tax havens, including Splendid International Ltd (BVI) which held London properties worth £12 million (about RM65 million at 2017 exchange rates)

Newton Invest & Finance Limited (BVI) and Splendid International (BVI) were among a list of trusts and companies linked to Daim, which were incorporated in tax havens, revealed the Pandora Papers, a trove of documents obtained by the ICIJ and sighted by Malaysiakini

An anonymous source shared with ICIJ 2.94 terabytes of confidential financial files, amounting to more than 11.9 million documents and other records, from 14 offshore service providers that set up and manage shell companies and trusts in tax havens around the globe

Owning offshore accounts, companies or trusts, however, does not necessarily mean one is engaged in anything illegal, nor is it illegal to set up offshore entities

Touted as the godfather of corporate Malaysia, who wields considerable influence in the political sphere, Daim has thus far not made it into the Forbes Malaysia's 50 richest list

This is perhaps because his business dealings have been largely a mystery, with corporate watchers occasionally picking up on some of his holdings by keeping a watch on activities involving his close family members or known business associates

One of those associates is Josephine Premla Sevaretnam, a former lawyer and deputy public prosecutor, who served alongside Daim in the service before holding key positions in his various ventures

This includes the Swiss bank ICB Banking Group, which Daim owned 74.4 percent, when it was listed on the London Alternative Investment Market in 2007

Josephine's name appears again in Newton Invest & Finance Limited (BVI) and Splendid International Ltd (BVI) as the business manager, based in Bryanston Square, London

An 800-by-200-foot garden square in upmarket Marylebone, London, Bryanston Square is an address that appears multiple times in searches involving Daim's children and property or company holdings in London

For instance, his Swiss-based British daughter Aslinda Daim-Pan, who took on her husband's surname, is director of the British company 8 Bryanston Square Freehold Limited, according to the UK's Companies House. The "property management" firm, however, only has £5 in assets, according to its last filings

Besides the two BVI firms, the brothers, now in their early to mid-twenties, and their mother are also shareholders in several other offshore companies which hold properties in London

The documents sighted by Malaysiakini state that the firms were either investment companies or property management companies, with the properties earning a rental income and purchased through a loan from Barclays in Knightsbridge, London

In the Pandora Papers alone, the companies and trusts held by Daim's children, wife or known business associates jointly held assets worth at least £25 million (about RM141 million)

When contacted, Daim said all taxes had been fully paid in every jurisdiction where he does business and where income was earned

He added that not all trusts linked to him in the Pandora Papers belong to him, some belong to his children, and he has no knowledge or control of them

"I've retired from business for some time already, and trusts are part of estate planning," he said

Singapore, gateway to tax havens
Daim is just one of several rich and powerful Malaysians holding assets in tax havens like the BVI, Jersey (part of the Channel Islands of the British Isles) or the Cook Islands

Others linked to offshore entities in these tax havens include Westport Holdings Bhd's G Gnanalingam, who made it onto the Forbes billionaires list this year, with a net worth of US$1.7 billion (RM7.12 billion)

According to the Pandora Papers, Gnanalingam owns BVI firm Paisley Marketing Limited, which as of 2016 held assets worth US$2 million held by Standard Chartered Bank, Singapore

When contacted, a representative of Westports told Malaysiakini the offshore company was legally set up using legitimate funds in 2008, to hold a life insurance policy and investments,
It was dissolved in 2020 after it was gifted to Gnanalingam's daughter, Shaline, the representative said

Tiong Ik King, the brother of timber and Chinese media tycoon Tiong Hiew King, is linked to the BVI-based Roxton Investments Ltd, with assets of US$20 million in 2017 (about RM86 million at exchange rates at the time)

A request for comment had been sent to Ik King

One running theme between these offshore companies held by rich and powerful Malaysians is that Singapore was used as a gateway to shift assets to tax havens

Holding property overseas or having offshore companies or accounts abroad is not illegal

Nor are owners of offshore firms or trusts obliged to declare these firms or trusts to the Inland Revenue Board as on paper, all funds transferred to the offshore entities should have already been taxed

In some instances, however, the practice of having offshore companies has been linked to tax evasion or avoidance. In other cases, it is an attempt to maintain secrecy for various reasons

Some national leaders have faced political pressure after being revealed as owners of offshore companies or trusts, with Iceland's prime minister Sigmundur Davíð Gunnlaugsson resigning after being exposed in the Panama Papers in 2016

Industry experts told Malaysiakini that up to about a decade ago when financial loopholes were abound internationally, offshore accounts and companies were indeed used for tax evasion or avoidance. These days, it is harder

"(Today) I will call it tax optimisation and wealth management (instead of tax evasion)," one tax consultant told the portal on condition of anonymity to avoid jeopardising his relationship with clients

"The days of using offshore trusts and companies to easily evade paying tax are gone (because) many countries have improved regulations on money laundering and illegal money activities

"Evading tax nowadays is a lot tougher than, let's say, 10 years ago," he said

Why Singapore?
But how is Singapore a gateway to Caribbean tax havens, and why is it a popular route for Malaysia's high net worth individuals wanting to move money out

The answer to that lies in the corporate services companies which are a common thread between the high net worth Malaysians featured in the Pandora Papers

The most commonly used Singapore-based companies in the Pandora Papers were Asiaciti Trust and Trident Trust, the latter of which has offices throughout the world

The setup is fairly straightforward - a person can engage a corporate services company in Singapore and state their intention to set up a trust or company in a tax haven, and the company handles all the paperwork

Incorporation documents and correspondence sighted by Malaysiakini showed that clients need only show proof of identity and residence, declare in a form the source of funding for the assets, complete other simple paperwork, plus fork out a small sum of several hundred US dollars to set up offshore entities

There is also an annual fee to keep the firm active and maintain its accounts

Besides going through normal procedures of setting up a company in a tax haven, the corporate services firm are obliged to conduct due diligence, among others, checking if the applicant is a politically exposed person or on any terrorism or wanted list

They need to then file a series of paperwork for the offshore jurisdiction, and the offshore company is born

Other due diligence conducted includes checking if taxes had already been paid on the funds transferred in the originating country

In the case of Newton Invest & Finance Limited (BVI), Daim's sons and wife were deemed not politically exposed

When contacted by ICIJ, Trident Trust, which had a role in setting up Newton Invest & Finance Limited (BVI), said it cannot comment on individual clients

"Trident Trust Group is a global provider of professional corporate, fund and trust administration services

"Each of Trident's trust and corporate services businesses is regulated in the jurisdiction in which it operates and is fully committed to compliance with all applicable regulations

"Trident routinely cooperates with any competent authority which requests information," it said

Singapore in top five countries for funnelling riches to low-tax regimes
Checks found the trend not only existing among Malaysia's rich and powerful but also across the region with high net individuals in countries like the Philippines and Thailand setting up offshore companies via Singapore

Singapore is not usually the final destination of the assets because it does not provide an attractive tax and asset protection package as some Caribbean nations, the tax consultant told Malaysiakini

"What Singapore (financial) companies can do is help create trusts in countries with better tax regimes," he said

And even though the money does not stay in Singapore, the management of the firms in the Caribbean fuels an industry in the little red dot

Research by the University of Amsterdam's Corpnet research group in 2017 reported that Singapore was among the top five countries in the world for channelling funds to countries with low (or even no) tax regimes such as Luxembourg, Cyprus and Jersey as well as the Caribbean islands such as the British Virgin Islands, Bermuda and the Bahamas

Singapore's wealth management and corporate services are also preferred in the region for their expertise, said Wayne Soo, an accountant with a Singapore-based corporate services firm

He said that the island nation also has various free-trade agreements with many countries, making it easier to provide such services

"There are a lot of international financial institutions such as Citibank, Credit Suisse, which are based in Singapore. Together with the free trade agreements, this is advantageous to Singapore," he added

Tax consultants in Malaysia whose clients want to set up offshore entities may recommend Hong Kong, as well, but recent political turmoil there has made Singapore more appealing

Soo said the market speculated that some US$40 billion (RM167.39 billion) flowed from Hong Kong to Singapore due to the turmoil, but this was never officially confirmed

"With regard to Malaysia, in view of the recent political issues, I will not be surprised if there are additional flows from Malaysia and other destinations, as the Monetary Authority of Singapore (MAS) had mentioned last year in one of their media conferences," he said

How offshore trusts can help shroud assets
Besides owning offshore companies, Daim also set up several trusts in the BVI, Samoa and the Cook Islands through the Singapore corporate services firm Asiaciti Trust

One of them is called ICB Financial Group Holdings Trust, likely after the Swiss Bank ICB Bank owned by Daim

The beneficiaries are his five children Asnida, 60, Aslinda, 47, Md Wira Dani, 43, Muhammad Amir Zainuddin, 26 and Muhammad Amin Zainuddin, 23. When it was set up in 2005, his youngest sons were aged 10 and 7

ICB Financial Group Holdings Trust is believed to have been closed in 2010, according to Asiaciti Trust records sighted

Secrecy is a top reason for setting up an offshore trust in places like the BVI, because details of the trust, including its assets and beneficiaries, are not listed, the tax consultant told Malaysiakini

"However, this is not to say there is perfect confidentiality. This is not like movies. If a government can show proof that illegal activities are involved, they can request information on a trust

"The country that the trust is based in will then determine whether to release the information. It does mean the information is not publicly or freely available," he said

Asset protection is also an attractive draw with most tax havens used to protect assets from seizures in instances of bankruptcy and divorce, the tax consultant said

"However, this does not prevent seizure if it can be proven that assets in question are illegal or the result of fraud

"A case must be lodged with the country where the trust is established. This can be a long drawn process

"If the person sets up a trust in Malaysia, then the trust is subject to local laws and government pressure," he added

Whether or not Malaysian authorities make a request for disclosure or seizure also depends on knowing these assets exist

When contacted, Daim maintains all his business dealings in every jurisdiction are legitimate, and he has accumulated wealth for more than 60 years since he started buying and selling in the 1960s

Meanwhile, the MAS said it does not tolerate abuse of its financial system for illicit activities, and it has a robust system to detect abuse, money laundering and tax evasion

"MAS will not hesitate to take regulatory and enforcement action against individuals and entities, regardless of nationality, if they have breached the laws and regulations administered by MAS."
This includes issuing a fine of SG$1.1 million to Asiaciti Trust for breaching anti-money laundering and counter-financing of terrorism (AML/CFT) practices regulations in July 2020 - a penalty Asiaciti has paid in full, it said

The Singapore Ministry of Finance and Inland Revenue Authority of Singapore (Iras) added that its tax regime is built to attract economic activities, but it does not condone abuse for tax avoidance

"Singapore thrives on being a well-regulated financial centre with a strong rule of law that provides a wide range of value-adding financial services

"We are committed to upholding international standards to combat cross-border tax evasion and money laundering," the MOF and Iras spokespersons said

Meanwhile, when contacted by ICIJ, Asiaciti Trust, the Singapore financial services firm, said it works with clients worldwide and is subject to strict regulation by authorities in every jurisdiction it operates

"We maintain a strong compliance programme, and each of our offices has passed third-party audits for AML/CFT practices in recent years

"However, no compliance programme is infallible – and when an issue is identified, we take the necessary steps with regard to the client engagement and make the appropriate notifications to regulatory agencies," it said

-----------------  Daim denied any shady dealings and described Malaysiakini of having "unending obsession" with him. 
He "contended that the reporting, which implies wrongdoing by innuendo and speculation, is "unprofessional" and an attempt to discredit him."  
Paradox 
Dato Seri Anwar Ibrahim seized on the opportunity to motion in Parliament for debate and the present and past Minister of Finance mentioned. 
The motion was expectedly rejected by Muhyiddin-appointed Dewan Rakyat Speaker, who was accused of acting as lawyer to those named in the Pandora paper.  
Pandora paper is not just information of shareholding in offshore company as Azhar Harun downplayed its implication. Art of the Matter has deviated from his strong view on money laundering three years ago. 
Resisting, opposing and blocking the unravelling of the Pandora paper could potentially backfire. 
The legal question and matter for investigation is where is the source of fund these Malaysians parked under dubious off the shelf off-shore companies.   
Pandora paper is certainly not absurd or contradictory, but claiming to have in hand more documents than the Speaker could access yet reluctant to divulge to MACC, Anwar could turn it into a Pandora paradox. 
More substantive materials and evidences needed than stories written by investigative journalists.     
As it is, Anwar seemed on track with the right narrative, calmer demeanour, and without past political theatrics. He is patient and does not whack anything on sight. 
Pandora paper could be the homerun issue for GE15, which 1MDB was for GE14. Anwar would not likely let go. 
One can expect him to raise it again come the tabling of Budget 2022. Talk is Minister of Finance is struggling with a RM50 billion deficit for 2022 budget to be tabled in November. 
It will gain traction with government rather spend RM11 billion for 5G to create five billionaires than raise RM12 billion for its coffer.  


Ibrahim Said is of the view nothing much can be done like other revelations earlier. 
Tax expert, Dr Veerenindeerjit Singh see it as usual business practise and nothing abnormal. It is best left to enforcement agencies such as Bank Negara, MACC, Police, and Inland Revenue to pursue and identify the mismatch. 
Prime Minister Dato Ismail Sabri is leaving to the authorities to investigate and assure no interference

MACC wish to speak to Anwar on the documents he claimed to have more. However, he began to waiver and rather speak in public than to investigator

Zahid and Najib supported the Pandora paper debate in Parliment. Since Anwar raised the Global Integrity Report 2012, Najib looked forward to hear what he knows

Legality of compiled information and news report by journalists vastly differ in relevence to evidence gathered by investigators. 
More so, ICIJ has taken 18 months to go through the leaked papers. The 600 journalist will need to thoroughly read through on average of 20,000 documents from the 1970s to 2020. 
It will be for a while

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