In part one of our Fishrot Files mini-series we read about the experiences of whistle-blower Jóhannes Stefánsson, the former MD of the Namibian branch of Icelandic fishing company Samherji. After Stefánsson’s 2016 departure from the company, he handed over a cache of 30 000 revealing documents to Al Jazeera and WikiLeaks. The latter has made the documents publicly available.
Part two is based on a recent presentation Stefánsson gave at the fourth Making Transparency Possible Conference, held online in Oslo on 21 October with the theme of Follow the Money. In the presentation he unpacked the numerous methods Samherji used to get money out of Namibia.
Samherji’s operations revolved around tax evasion and money-laundering, the WikiLeaks documents or Fishrot Files show. The company allegedly secured access to Namibian horse mackerel quotas by bribing politicians and businessmen between 2012 and 2018 and moving profits out of the country, depriving Namibia of valuable tax revenue.
The amount flagged as suspicious by Namibia’s Financial Intelligent Centre, in connection with the Fishrot saga, is reported to be around US$650-million, or R10-billion.
Six Namibian suspects known as the Sharks – former fisheries minister Bernhard Esau, former justice minister Sacky Shanghala, Esau’s son-in-law Tamson Hatuikulipi, his cousin James Hatuikulipi, and businessmen Ricardo Gustavo, both former Investec executives, and investment administrator Pius Mwatelulo – have been in custody since November 2019. A seventh, former CEO of the National Fishing Corporation, Mike Nghipunya, was arrested in February 2020. The charges against them range from fraud and money laundering to improperly using their office for personal gain, and contravening the country’s Anti-Corruption Act.
There are six current and former Samherji employees who also have the status of suspects, said Stefánsson.
“Heading Samherji in Namibia, it was impossible to navigate the system to obtain quotas without having to go through the ‘sharks’ if we wanted quotas,” Stefánsson said in a December 2019 interview with IntraFish.
Like Stefánsson’s former employer, the implicated officials deny any wrongdoing. A detailed online feature published by Icelandic television investigative news programme Kveikur, which helped to break the story, reveals that Shanghala denies receiving funds from Samherji. The former minister said that James Hatuikulipi had overseen all his finances during his tenure.
The same online feature mentions Tamson Hatuikulipi as saying there was nothing unusual in the large consultation fees paid to companies connected to him.
But a spokesperson for Namibia’s ministry of finance confirmed to investigative journalism outfit Finance Uncovered in July 2020 that it was investigating the tax affairs of “Samherji, its affiliates and all companies, as well as individuals, implicated in [the] Fishrot saga.”
In January this year Reuters reported that the embattled fishing company was closing its Namibian operation.
How Fishrot played out
Namibian government officials and Samherji executives laundered money to tax havens and some of the fishing company’s operations in other countries in a tax avoidance scheme. It also paid US$10-million (R154-million) in bribes to certain Namibian officials and businessmen.
From 2014 Stefánsson started to suspect that the company he worked for was only in it for themselves, and that neither Namibia nor Africa would benefit from its operations. He left Samherji in 2016, taking with him on his laptop a trove of incriminating documents which he later handed over to WikiLeaks, which then approached Al Jazeera.
Finance Uncovered is one of several entities that analysed the Fishrot Files. “Our analysis of leaked invoices, e-mails and contracts, as well as company accounts, showed that Samherji … shifted cash out of Namibia to low-tax destinations like Cyprus, Mauritius and even the UK,” said the organisation.
The methods used by Samherji were clever and appeared normal. In his presentation Stefánsson said bribes were paid in rent, consulting fees, and other similar channels, and through banks inside and outside Namibia, mainly through branches of Den norske Bank (DnB). A Cyprus company with a DnB bank account was a conduit to the Sharks’ accounts in Dubai and Namibia.
Transfers were mostly electronic. “Not much cash was used but when it was, it was transported in a sport bag,” Stefánsson said.
Samherji used Cyprus, the UK, Mauritius, Dubai, Iceland, Norway and Namibia, as well as Poland, as role players or waypoints for the money that eventually ended up in private bank accounts.
Most of these countries are not perceived to have high levels of corruption. On the 2019 Corruption Perceptions Index Norway ranked at seven, Iceland at 11, and Namibia at 56 out of 180 countries surveyed, while Poland and Cyprus are ranked joint 41st. Mauritius ranked joint 56th with Namibia, but the former is notorious as a tax haven and money laundering conduit, to the point where it was listed earlier this year as a high-risk country for money laundering and the financing of terrorist activities. Dubai falls under the United Arab Emirates which ranked at 21, but the emirates are known as a key point in the global money laundering circuit.
Samherji also did everything it could to avoid paying taxes. It sold to trading companies which it owned in Cyprus. These companies had no staff and took delivery of no fish, yet sales commissions of approximately 10% to 20% were generated. In this way the perpetrators moved 10% to 20% of the turnover to the Cyprus shell companies.
Another tax evasion scheme involved paying inflated amounts from Namibia to Samherji companies in Europe, for certain services. For example, charter fees for the use of vessels could be inflated to up to $1-million per month.
Samherji also paid royalty fees to a company established in Mauritius. There is a double taxation agreement (DTA) between Namibia and Mauritius; this is a treaty between two or more countries to avoid international double taxation of income and property, provided the requirements of the specific treaty are met. This gave Samherji an inexpensive way to get money out of Namibia, and it was paid on the grounds that the Mauritian operation had know-how, management experience, staff, and other resources which it sourced to the Namibian operation.
This is what the bank in Namibia was told – but again, said Stefánsson, it was just a shell company.
Under the DTA, Samherji in Namibia paid 5% of its total income to Mauritius for the services mentioned. By moving the money to Mauritius before transferring it to Cyprus, the company minimised taxes, or avoided paying them altogether.
Samherji also paid a service and license fee to its company in the UK, which was the owner of the Namibian operation – “this was how they did it in the books in Namibia to reduce the tax liability,” Stefánsson explained. Losses were created in one company to receive profit from another. The company in Namibia was burdened with much costs as possible to record a loss, and then the profits were put into the loss company.
A classic tactic involves a loan of some kind, and through the loan, Samherji channelled interest payments out from Namibia.
In addition, Samherji circumvented Namibian forex regulations that require companies to declare all funds for export sales. “I had a lot of problems with this when I was there to get them to declare the funds,” said Stefánsson. “This involved the Cyprus companies with bank accounts at DnB.”
Alvin Mosioma, executive director of Tax Justice Network Africa, told Kveikur that he has seen the WikiLeaks files.
“Samherji went to Namibia to pursue two distinct strategies. One is to use bribery and corruption, to be able to expand its influence and gain access to the fishing quotas in Namibia, which it did, shamelessly. And secondly, to structure itself in a manner that it’s able to pay as little tax to the Namibian state as possible. And this it equally did without shame in terms of setting up subsidiaries in these two specific tax havens.”
Banks allowed to carry on enabling
Banks are nothing more than a global criminal cartel, said Swiss bank whistle-blower Bradley Birkenfeld at the Oslo Making Transparency Possible conference. “A weak compliance department and legal department is the first problem. My bank UBS paid countless fines over the years for breaking securities and tax laws in Japan, Germany, Italy, Canada and others, and yet they were still in business – why? Nobody goes to jail, and the bank writes a cheque and walks away.”
The problem, he said, is that this settlement arrangement is condoned, and that’s where people in the American justice department, for instance, are failing to do their job properly. He also cited cronyism and nepotism, where there are close links between government employees and American law firms.
“This incentivises banks to keep doing it, and just pay some money as a fine. We need stricter law enforcement, jail time, and possibly losing a bank license for several months or even years.”
To prevent the kind of cross-border misuse, he said, it’s important to have stricter laws and regulations across the board.
The importance of DnB must be noted, said Stefánsson, because it lent an air of credibility to the transactions. “Cyprus is popular with those committing white-collar crimes because it’s also an EU country and has been accused of having weak regulations to deal with such crimes. And DnB allows Cyprus companies to open bank accounts, which means the money is held in a reputable bank system.”
This puts Cyprus-registered companies in a good position for money laundering, he explained, with a bank account at a reputable institution in a country with a good reputation.