Link for the curious: http://www.bloomberg.com/news/articles/2016-04-04/world-leaders-hid-wealth-via-shell-companies-report-alleges
A possible worldwide oil corruption scandal could be revealed in the near future by what are being called the "Panama Papers". A panama-based law firm held files that were leaked and which show involvement in a number of shell corporations by world politicians, criminals, and celebrities. Vladimir Putin has already been tied to a number of the upwards of 200,000 offshore shell companies.
The leaked files were uncovered by the International Consortium of Investigative Journalists, who say they have obtained more than 11.5 million records of these shell companies. It has already been reported that 12 current or former world leaders as well as 128 politicians and celebrities have been linked to the leak.
Since the financial crisis, the United States has put greater emphasis on offshore banking practices, as they are often found in conjunction with corruption and tax/trading fraud. There is a prediction that this latest scandal will draw together nations in order to put an end to this dark and often illegal practice.
In an already heavily-watched market, this latest scandal may spell trouble for the oil market, as well as markets as a whole. Dropping prices have made oil a highly-publicized market, and this news is sure to cause some sort of disruption.
It seems that when companies in the US try to take their business abroad corruption seems to always be present as an option for them to do business. It makes economic sense for these companies to want to go abroad and expand their business, but it is sad that these companies have chosen to also get involved in corruption. It will be interesting to see how the industry is affected by this and how it will be handled. As you stated, while the oil industry already has a lot of eyes focused on it, I cannot see this going positively in the future for Shell.
ReplyDeleteAshely you may be a little miss informed. Potentially consulting the first sentence of the article will clear things up a bit: “Leaked files from a Panama law firm that creates shell companies show that politicians, criminals and celebrities worldwide have used banks and shadow companies to hide their finances, according to a series of reports by the International Consortium of Investigative Journalists.” So this has very little to do with companies moving abroad, but rather, companies either creating nonexistent companies to hide money or just plain out hiding money from the U.S. Henceforth, the idea is more discretely firms are trying to be fraudulent and can only do so by going abroad (or even simpler: they are committing the fraud first in many cases).
DeleteIt will be interesting to see if this ends up causing a shock to the oil market. The U.S. needs to crack down on offshore banking practices as they take away revenue from the country.
ReplyDeleteWith this evidence being uncovered it'll be interesting to see how the oil market will react and whether we will see a fluctuation in prices. The US might need to get involved again to enforce tighter laws to avoid these type of situations. It'll be interesting to see what happens in the coming weeks and whether oil companies can rally and remain attractive in price and supply.
ReplyDeleteI agree with Hope, I believe the US should crack down on offshore banking practices. However, this proves difficult due to all the open loop holes in the system of corporate finance. There will have to be fiscal policy to over see this and regulate it better.
ReplyDeleteI also agree with Hope. I have a feeling this is going to affect the market. I think its going to be interesting to see all the big companies that are involved with panama papers and I want to know what the government will do about this.
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