Earlier this year the Panama Papers, some 11.5 million documents leaked from the Panamanian offshore law firm Mossack Fonseca, shed light on the secretive world of offshore structures and those that use them. In the mainstream media the leaks served as the means to name and shame prominent figures that used (misused) these structures for their own personal gain. However, there was also some good to come out the leaks. SuperyachtNews speaks exclusively with Anthony Galea, managing director of Vistra Malta, about the positive effect of the Panama papers and the necessity of offshore structures.
“My group has a very strong presence in South East Asia, particularly in China, Hong Kong and Singapore,” starts Galea. “In South East Asia they set up a lot of offshore structures, because that is the way that business is done over there. So they were not as affected as we were in Europe.”
The problem, Galea explains, was that within the world of offshore corporate services there were companies fighting each other on pricing. Vistra, for example, would charge €500 to set up a company, whereas other, less reputable, companies would charge €200 and completely ignore the need for minimum standards of due diligence, compliance and administration. As a result of the Panama Papers, and subsequent pressure from various authorities, the industry has been forced to clean up its act and many of the cheap, less reputable, firms have since gone out of business.
“The argument is this,” continues Galea. “It is not all bad news because the Panama Papers has narrowed the gap between legitimate corporate service providers and potential owners. Developing superyachting markets that use offshore structures, such as Latin America and South East Asia, will now be serviced by diligent, compliant companies that understand the superyacht market.”
Galea also notes that the secrecy exposed by the Panama Papers is even more necessary in developing markets than it is in Europe. The real revelation of the Panama Papers was that senior individuals in public positions of power, who had a moral responsibility to their citizens or nations, had been misleading them. Secrecy is not, in and of itself, a corrupt practice, sometimes it is a requirement.
“There is always a balance that has to be reached between privacy and transparency, but it is a hard position to gain and maintain” Galea says. “Now, after the Panama Papers, the balance seems to be being lost in favour of transparency. Politicians cannot be seen to be protecting the ultra-wealthy when there are, in Europe for example, companies that are still laying people off, but the truth is that sometimes the ultra-wealthy need secrecy for the protection of themselves and their family.”
To take a crude example, it is not uncommon for Latin American or African footballers that become successful to move their whole families to Europe once they have been signed by one of the big clubs. This is not just to improve living conditions and so on, it is because the family members of the footballers are in legitimate danger once it is known that they are related to a wealthy individual. The same can be said of the ultra-wealthy superyacht client base.
“When you are a wealthy individual coming from certain nations then people may try an abduct your family in order to get a ransom from you,” continues Galea. “In these instances the need for secrecy takes on a very different connotation. No respectable corporate service provider wants to get involved with a terrorist, money launderer or any other criminal and while becoming more transparent through systems like the common reporting standard may help catch some of these individuals, becoming more transparent may also put off people entering this market for a variety of legitimate reasons.”