Leaks detail Cambodian ties to clandestine world of offshore banking

“The reason why somebody would do it, in my opinion, is not to avoid tax, for the simple reason that personal tax is pretty much nonexistent except for salary and property tax.

“It is because an individual would want to hide the fact that he is wealthy. And, if there are any ill-gotten gains, or you want to hide your visibility, then you would use an offshore company to do that.”

A report last December by US non-profit Global Financial Integrity found $15 billion was illegally laundered out of Cambodia between 2004 and 2013, most of it utilising offshore companies to mask the transactions.

 

Leaked documents have revealed the intricate, secretive webs of offshore companies that some of Cambodia's business elite may be using to conceal their wealth. Hong Menea

Leaks detail Cambodian ties to clandestine world of offshore banking

Phnom Penh Post | 21 April 2016

In 2001, a man with the same name and address as Tuol Kork-based computer salesman Thai Tino established the first of several shell companies incorporated in the British Virgin Islands.

According to a leak of offshore business records, the first company, Wealth Path Group Incorporated, was a shareholder in the second, Tech Label Corp, which was in turn a shareholder in the third, Team Players Investment Ltd. “Thai Tino” was listed as director of all three.

Why “Thai Tino” established the companies is unknown, and computer salesman Tino denies having anything to do with them.

“Maybe some wrong information,” he told the Post in a recent interview.

The recent Panama Papers leak of records from the world’s fourth-largest offshore law firm, Mossack Fonseca, provided a fascinating glimpse into the shadowy world of offshore shell companies.

However, only one Cambodian – Justice Minister Ang Vong Vathana, who denied having interests in any offshore companies – has so far been outed by that leak.

But an earlier leak of similar documents in 2013, also published by the International Consortium of Investigative Journalists, sheds additional light on the phenomenon.

It contained documents listing 11 individuals with Cambodian addresses, along with dozens of businesses tied to everything from the Cambodian telecoms market to the automotive and hospitality industries – some with ties to government.

Shell companies in tax havens such as the British Virgin Islands have a shady reputation – they are best known as a way to hide or launder money – and few seem willing to own up to using them.

While involvement in such companies is not illegal, per se, critics say their almost-ironclad secrecy is problematic in itself.

And while the offshore companies do have legitimate legal uses, such as tax minimisation, industry insiders say that in most cases, those benefits would not apply for the majority of Cambodian firms.

Examination of the businesses listed in the 2013 leak provides a peek at the intricate webs of commerce upon which some of the Kingdom’s biggest business deals play out, and the nesting doll-like structures of the offshore companies-within-companies incorporated by wealthy individuals.

* * *

As the Kiasrithanakorn family’s onshore presence in Cambodia grew, so did their offshore one.

Members of the Thai family have attached their names to everything from Laotian zoos to American college scholarship endowments.

The empire took its first steps into Cambodia in the early 1990s, opening the country’s first Honda dealership.

Over the next two decades, the Kiasrithanakorns expanded their Cambodian presence, establishing a string of hotels and an automotive parts factory, along with further motorbike and truck dealerships.

At the time of the 2013 leak, five family members were registered as shareholders and directors of eight interlocking offshore companies mirroring their onshore business interests.

One industry insider said there was nothing unusual in a business empire as large as the Kiasrithanakorns’ spreading paper ownership of their various companies between multiple individuals.

“It’s a matter of logistics,” the insider explained. “If one family member was listed as director of all companies, they’d spend all day dealing with paperwork.”

And while those with knowledge of the Cambodian business environment say there is little reason for Cambodian companies to do business offshore, another insider said that one instance in which it may make sense is when their interests span several countries, as with the Kiasrithanakorns.

Members of the Kiasrithanakorn family did not respond to requests for comment as of press time.

* * *

Another of those named in the 2013 leak was Satish Lal Acharya, a Singaporean businessman who owned and operated multiple offshore companies while repeatedly appearing on the periphery of high-profile telecommunications dealings in the mid-2000s.

In December 2006, Acharya became one of two directors and shareholders in a British Virgin Islands-registered company named Leading Faith Incorporated.

Acharya’s co-director was Sreang Tito, a rags-to-riches Cambodian businessman who reportedly got his start in the mid-1990s sneaking across the Vietnamese border disguised as a peasant farmer to smuggle computer parts back to Phnom Penh.

The same year Acharya founded Leading Faith, he also founded a Cambodian telco company called Applifone, eventually divesting and leaving Applifone’s chairmanship to a man named Raj Bahadur Singh – a Nepalese politician and playboy married to the daughter of Nepal’s deposed king.

Singh was also the owner of Lacell Private, an onshore Cambodian company listed with the Ministry of Commerce. The leaked papers reveal that Acharya’s Leading Faith owned shares in another BVI-registered company, Lacell Holding Inc, formed in September 2007, of which Acharya (but not Tito) was a director.

Despite the owners’ shared history at Applifone, it is unclear whether there were tangible links between Singh’s Lacell Private and Acharya’s Lacell Holding.

Applifone was later absorbed by telco company Smart, which at one point, according to one business insider, was owned at least in part by Acharya.

Neither Acharya nor Singh were reachable for comment. Thomas Hundt, the current CEO of Smart, said via email that “in general we are not commenting on questions involving individuals either related or not related to our company”.

However, he did say that Singh was no longer involved with Applifone at the time of its purchase and that the owner of Smart at the time of its merger with Hello was a company called Timeturns Holdings.

* * *

The name of Thai Tino, the Phnom Penh computer salesman, is attached to three offshore companies, though this week he denied any knowledge of them. Of the companies, only the British Virgin Islands-incorporated Tech Label Corp had another human shareholder, Paisarn Boonthaveepat, president of Thai food distribution giant PSB Co Ltd.

Despite Tech Label being established in 2001, Boonthaveepat’s business interests didn’t appear to intersect with the tech world until 2010, when the food distribution magnate became founding chairman of electronics marketer Digital Entertainment Export Co Ltd.

Tino is also the Thai Commerce Ministry’s honorary trade adviser in Cambodia. Both Tino himself and the Thai embassy confirmed he is in possession of the title, although the embassy could not explain how that came to be.

And despite Tino’s insistence that he has never heard of either Tech Label Corp or Boonthaveepat, the address listed for him as trade adviser matches exactly that given in the offshore business records for the Tino listed as Tech Label’s director.

Attempts to contact Boonthaveepat were unsuccessful, and his receptionist hung up on reporters when reached by phone.

* * *

Phil Robertson, deputy director of Human Rights Watch’s Asia Division, said that in the Cambodian context, the use of offshore companies raises troubling questions.

“Given the failure in rule of law in everything from human rights to land seizures, it’s not surprising that there’s a significant number of Cambodians hiding money offshore,” he said. “The big question is where is that money coming from?”

But while questions as to why Cambodian businesses would choose to operate offshore companies are near-impossible to answer definitively given the secrecy inherent in the enterprises, business insiders the Post spoke to said that few of the legitimate reasons for incorporating offshore companies made sense in Cambodia.

“[In Cambodia], it’s not tax positive to do business with offshore companies,” said Phnom Penh-based investment adviser Anthony Galliano. “The reason why somebody would do it, in my opinion, is not to avoid tax, for the simple reason that personal tax is pretty much nonexistent except for salary and property tax.

“It is because an individual would want to hide the fact that he is wealthy. And, if there are any ill-gotten gains, or you want to hide your visibility, then you would use an offshore company to do that.”

As difficult as it is to establish the legitimate reasons for incorporating an offshore company, it is perhaps even more difficult to definitively establish nefarious ones, though offshore businesses have long been associated with unscrupulous and criminal activity, including money laundering.

A report last December by US non-profit Global Financial Integrity found $15 billion was illegally laundered out of Cambodia between 2004 and 2013, most of it utilising offshore companies to mask the transactions.

Transparency International Cambodia’s executive director Preap Kol said in an email that too little is being done to encourage Cambodian companies to lay their ownership structures out in the open.

Regarding laundering specifically, he said, while legislation exists to prevent it, he worried too little was being done to enforce it.

“Without adequate information or due to the lack of transparency regarding mechanisms and reports of their work, it is difficult to assess whether the Government is doing enough to combat the massive outflow of the capital,” Kol said.