Latem Trading, a company based in Slovakia, was part of a sophisticated worldwide system for hiding and laundering money. This stems from information from the Panama Papers that was leaked last year from the Mossack Fonseca law firm.
The case of the 50-year-old Spanish lawyer Cristina Simón Amian illustrates how Latem Trading helped hide money and transfer it untaxed from foreign accounts through Slovak bank Privatbanka, owned by the Penta investment group. Sme unveiled her story in cooperation with the Czech Centre for Investigative Journalism.
Latem Trading hasn’t been a profitable company in the long run, based on its official published books. Despite that Privatbanka did not find the hundred-thousand-euro transactions on its account suspicious and therefore did not report them to the financial police.
The Sme daily’s information suggests that Latem Trading is now facing a tax audit, right after the financial administration gets hold of documents from Panama Papers from the German authorities who received them from local journalists.
Berlin Agreement a cause for concern
For bankers from all around the world, Wednesday October 29, 2014 was not an ordinary day. On that day, 51 countries signed an agreement in Berlin on automatic exchange of information about bank account owners.
The agreement meant an end to banking secrecy, because it introduced a new online system for tax authorities to find out how much anyone keeps in foreign banks.
Switzerland, a defender of banking secrecy until then, signed the agreement less than one month later as well.
At that time, Spanish citizen Cristina Simón Amian had USD500,000 that she inherited from her father, deposited in her account in a Swiss bank. She had not paid inheritance tax on the money in her homeland, and now was in danger of losing it. She was worried that Spanish tax authorities might find the money and confiscate part of it.
This is clear from the correspondence and the documents that point to the attempt to legalise the money.
In early summer 2015 Cristina Simón Amian turned to Mossack Fonseca.
“Since our client did not declare the account to the Spanish tax authority,” lawyer Gerardo Nunez of Mossack Fonseca wrote in his email to Michael van Beest, a partner with the Infintax financial services company in Holland. “The Swiss bank wants to terminate the account before the end of the year, and will only transfer the money to another bank located in a country that is a signatory to the Berlin Agreement.”
The Swiss were pushing for closing the account too, as the bank was facing sanctions if it still had clients with untaxed money on their account after January 1, 2016.
Gerardo, you are on fire
Cristina Simón Amian was interested in using Mossack Fonseca’s escrow services (where a third party holds funds on behalf of other transacting parties), but there was a problem – Mossack Fonseco’s escrow accounts were in Panama and the Bahamas, and neither country had signed the Berlin Agreement. So could Infintax help out by providing one of its European accounts, allowing the Swiss money to be safely stored there, and then forwarded to Cristina Simón Amian as soon as she opened her own bank account?
According to Nunez’s proposal, Infintax should have accepted half a million dollars from Simón Amian from Switzerland and later transfer it to Panama to the account of the company that would be established especially for the client.
“Dear Gerardo, you are on fire,” responded van Beest from Infintax. “Yes, we still have a bank account in Bratislava that we can use for this, no problem.”
As established by later correspondence, the “bank account” referred to was with the Slovak bank Privatbanka, founded by Penta Group, and the escrow agent for Cristina Simón Amian was designated as Latem Trading s.r.o. based in Bratislava. Latem Trading was officially supposed to have the money only deposited on its account and wouldn’t have to report it in its books, which would prevent them from attracting the attention of tax authorities. Subsequently, they would transfer the money on the account of the Panama-based company that would be established for Simón Amian.
As it turns out, the transaction may never have taken place.
“I have received an answer from the Swiss bank, that they will not accept a transfer (of the money) to Latem,” Simón Amian wrote on July 20, 2015, to the lawyers in Panama. It is not clear from the available correspondence and documents why the Swiss have not authorised the transfer.
It was probably due to the fact that the account in Privatbanka did not belong directly to Simón Amian but rather to Latem Trading. The Swiss bank had earlier specified the condition that the money would only be transferred to an account belonging to Simón Amian.
In the end Simón Amian laundered the money in another way, with the help of Mossack Fonseca. She received an official residence permit in Panama, established a company Sandoline Commerce Inc. there and had the inherited untaxed money transferred to its account. The actual transfer is not clear from the available documents and correspondence. But the case of Simón Amian was highlighted by a Mossack Fonseca manager as an example of good international cooperation within the company.
Cristina Simon did not reply to emailed questions, and when contacted at her law office, claimed not to speak English. She did not react to the voicemail that the Sme daily left on her phone in Spanish.
Latem Trading surfaced in connection with the Panama Papers also two weeks ago. According to the Czech Centre for Investigative Journalism, the company was part of a close network of companies through which Mossack Fonseca systematically laundered or hid money for its clients from all around the world. The service is officially known as escrow service.
“These services were mainly meant to clear the traces after money transfers,” the centre’s director Pavla Holcová explained. To do that, Latem Trading used fictitious business transactions.
“Money was laundered through escrow and it was not in one’s forces to find what a fictitious and what a real money transfer was,” Holcová said.
Proposing an international scheme of money transfers, best through several states, and the preparation of fake invoices and contracts was part of escrow services.
“The befriended banks were important too, they did not pay much attention to checking on Mossack Fonseca’s clients,” Holcová said.
Escrow service contracts are just one way money was laundered through Latem Trading. Another model was described last week by the Aktuality.sk news portal.
In October 2014, Ecuadorian businessman Marco Vallejo turned to Mossack Fonseca to help him transfer and legalise USD100,000 from his construction company Jimex. He said he wanted to avoid taxation.
Last year the corporate income tax in Ecuador was 22 percent, while Mossack Fonseca requested 8 percent as payment for its services.
The lawyers of the company in this case turned to their colleagues from the Dutch company Infintax who further recommended Latem Trading. Vallejo approved the simple scheme with three involved subjects.
Latem Trading issued an invoice for his company for the amount of USD108,000, for providing advisory services. The suspicious thing about the invoice is that it is dated November 14, 2014, but the e-mails show that Latem Trading only issued it five months after that.
Vallejo paid the money to an account in Privatbanka on behalf of Jimex. Subsequently, Latem Trading ordered consultancy services from Vallejo, thus creating a fictitious reason to send the money back to him.
Vallejo admitted to the transaction to Aktuality.sk and wrote that he was ashamed of it and that it only happened once. He explained that it is hard to run a business in Ecuador and that the authoritarian government is trying to ruin the private sector in the country.
Privatbanka did not report
Based on the law on protection from legalising income from criminal activities, banks are obliged to report suspicious transfers to the police. In this case Privatbanka did not consider the transaction suspicious.
Police say they did not have any information about the transactions of Latem Trading that sent the money to Vallejo.
According to its statement of finances since 2009, Latem Trading has negligible income, last year it returned its first significant revenue of €26,000.
Why didn’t the bank find it suspicious that such a company is receiving high amounts on its account?
“Statement of finances is not part of any documentation about the clients in the bank if they use the account only for payments,” Marek Hvozdara, member of the Privatbanka supervisory board told journalists. The bank only requests such documents if the client asks for a loan.
The bank did not want to talk about a concrete company, but they admitted that they launched internal inspection after the documents from Panama Papers were published.
Financial police did not respond whether they launched investigation of Privatbanka due to the suspicious transfers of Latem Trading as described in the Panama Papers.
According to the information of Sme, Latem Trading is facing a tax audit. It is not clear why the company does not have the money from the Ecuadorian businessman included in its books.
As for the payment from Latem Trading to Vallejo for consultancy services to his account in the British Virgin Islands, Alica Orda Oravcova from the Slovak Chamber of Tax Consultants says that it is also necessary to check on the duty to pay 35-percent tax. This tax was introduced in 2013 by the previous government of Robert Fico for transfers to tax havens. For the British Virgin Islands it applies only in 2014, because in 2015 the country was excluded from the list of tax havens after they started exchanging information with Slovak tax authorities.
Officially, Slovak tax authorities do not comment on concrete companies.
“We are waiting for our German colleagues to deliver the documents from Panama Papers, then we will act,” tax administration spokesperson Patricia Macikova told Sme.
A Dutch owner
Latem Trading was founded as Vertigo Trading in 2007, but since 2009 had been wholly-owned by a Dutch company, Poelen Holding B.V., owned by Gustaaf David Poelen.
Poelen’s social media profile portrays him as the founder and co-owner of Infintax since 2002 with Michael van Beest.
Poelen also worked for the PriceWaterhouseCoopers advisory firm from 1988 to 2001,
and led the tax department of its Bratislava office. Poelen only worked for the PwC as a rank-and-file employee, the copmany noted in its reaction to the media reports that labelled Poelen the head of its tax department in Bratislava, which he wrote about himself on social networks.
Furthermore, Penta cooperated with Poelen’s company Infintax that was proposing schemes for Mossack Fonseca clients.
“Penta cooperated with Infintax company in the area of founding and administration of Dutch companies,” the group confirmed. It, however, stressed that their cooperation with Infintax is not connected with any of its activities described in the Panama Papers. Privatbanka refuses the claim that the dubious transfers of Latem Trading would be tolerated due to the relation between Poelen and Penta.
Poelen did not respond to written questions or telephone messages left with his Dutch office. In his earlier statement for the Slovak media he claimed that Mossack Fonseca is his “former business partner”, although the most recent information suggests that his Infintax company cooperated with Mossack Fonseca until recently.
The Dutch authorities have already started checking Infintax.
As of October 2015 Latem Trading does not have an account in Privatbanka. The bank closed the account following cleansing between July and October 2015, and it wasn’t connected with the transaction that the company was doing through the bank, but it was a business decision of the bank.
“At that time we closed accounts of several clients who only used them for payments and were not interesting to us from the viewpoint of revenues,” Privatbanka director Ľuboš Ševčík confirmed.
The bank also closed the accounts of seven other companies close to the owner of Latem Trading, Poelen.
After the stories on Panama Papers were published, the bank tried to pick suspicious transactions and reported them to the financial intelligence service, according to Ševčík. It is about 30 to 50 transactions altogether for now.
The bank will also submit all the data concerning all the transactions on the accounts of Poelen’s companies.
Privatbanka has kept silent about the accounts of companies mentioned in the Panama Papers due to banking secrecy, but now they have decided to break part of the secrecy to be able to defend themselves from the suspicions that they have been benevolent towards Poelen and did not report his transactions to the financial police on purpose, Ševčík said.