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Massive money-laundering probe heartens anti-corruption activists but fails to lift Pandora Papers’ pall over Seychelles

The African tax haven, recently removed from the EU’s blacklist despite uproar, is prosecuting its first major money laundering case against an influential couple who feature among the wealthy elites in the Pandora Papers.

In handcuffs and a striped shirt, one of the Seychelles’ wealthiest and most powerful men shuffled toward prison after an unprecedented hearing last month.

Mukesh Valabhji faces years behind bars for allegedly laundering $50 million and is among the first high-profile figures from the East African island nation’s efforts to cast off its reputation as a financial crime hotspot.

Police arrested Valabhij last month when he alighted from his helicopter, on his return from a hotel he owns on the private island of Felicite, and later seized weapons at his home, according to local news reports.

He was taken into custody along with his wife, Laura Alcinder Valabhij, on suspicion of the embezzlement and laundering of millions of dollars donated to the Seychelles government by the United Arab Emirates.

Commenting on the case, Seychelles’ anti-corruption commissioner May De Silva told the International Consortium of Investigative Journalists: “Mr Valabhji and his wife have been arrested on suspicion of embezzling (Mr Valabhji) those funds and laundering (with the help of his lawyer wife Laura Valabhji) over a period of 19 years.”

According to reports by the Seychelles News Agency, which did not name the couple, the money moved in and out of a network of companies, including a state-owned hotel and tourism company directed by Mukesh Valahbji.

Valabhji, an adviser to Seychelles’ former president, telecommunication and hotel business owner, and founder of an investment company, denies wrongdoing. The case against the couple is politically motivated, one of them told the Seychelles News Agency.

Transparency advocates see the case as a landmark effort by the Seychelles to cast off its reputation as a financial crime and corruption hotspot.

“As a first case of grand corruption, it means a lot,” said Chrystold Chetty, chairman of the nonprofit Transparency Initiative Seychelles. “It will also possibly lead to other related cases of embezzlement and drug trafficking and may provide a beacon of hope for the people of Seychelles who have been waiting far too long for corrupt practices to be addressed.”

The Pandora Papers, an investigation by the International Consortium of Investigative Journalists and media partners into the financial secrets of the world’s rich and powerful, reveals that Valabhji, 61, was a prolific user of secretive companies and bank accounts far from home.

The investigation, which includes thousands of leaked files from offshore service providers in the Seychelles, highlights the country’s role as a prized tax haven, exposing hidden financial dealings of more than 20 politicians worldwide from Africa, Asia and Europe.

“The Seychelles has developed its own homegrown corruption problems, but we have seen with the Panama Papers and the Pandora Papers that it has also been used by rich and powerful people from all over the world for secretive deals and tax evasion,” Chetty said.

Seychelles in Pandora’s box

The Pandora Papers include more than one million records from inside Seychelles-based offshore service providers, Alpha Consulting Ltd. and All About Offshore Ltd (AABOL). Leaked records, which include passports, contracts, emails and other confidential records, provide unprecedented insight into the owners of shell companies in the Seychelles.

The Seychelles does not require owners or shareholders of shell companies to publicly disclose their identities.

Among the politically connected people who chose the island nation for their offshore business were:

  • Aires Ali, Mozambique’s former prime minister, who set up a Seychelles company in 2012 while in office. His company, which he owned with his daughter, opened a bank account in Portugal.
  • Isabel dos Santos, the daughter of Angola’s longtime ruler, Jose Eduardo dos Santos, owned two Seychelles companies to own real estate and import and export goods;
  • Martin Rushwaya, a Zimbabwean general and adviser to President Emmerson Mnangagwa, owned a Seychelles company called Greatgems Corp.
  • Zakaria Deby Itno, brother of Chad’s president, set up a Seychelles company in 2010 with an alleged arms dealer.
  • Delyan Peevski, a Bulgarian politician sanctioned by the U.S. government last June for alleged bribery. Peevski failed to declare $100,000 in profits earned through his Seychelles company as required by law, according to investigative news site Bird.
  • Shaukat Fayaz Ahmad Tarin, Pakistan’s finance minister, and his family used a Seychelles company to invest in a bank.

None responded to ICIJ’s requests for comment

In October, one week after the Pandora Papers once again thrust the Seychelles into the public limelight, the European Union removed the country from its blacklist of tax havens, prompting criticism. The Council of the European Union said in a statement that the Seychelles and other tax havens “do not yet comply with all international tax standards but … have committed to implementing tax good governance principles.”

Dominica and Anguilla, two Caribbean islands with zero or low tax rates and ironclad corporate secrecy laws, were also moved to a “grey list.”

“The EU is shutting its eyes to real tax havens while considering blacklisting poor countries,” said Chiara Putaturo, tax policy adviser with nonprofit Oxfam. Removing the countries from the EU’s blacklist was a “joke,” Putaturo said, adding that it “lets them off the hook.”

Sven Giegold, a German member of the European Parliament, said that delisting the countries was “grotesque.”

Crossbow and luxury hotels

In 2009, Valabhji created the Topaz Trust in New Zealand, records show. Through layers of secrecy, including companies in Belize and the British Virgin Islands, Valabhji owned Return Hound Ltd, a company with $1 million in cash and other investments, according to the Pandora Papers.

According to reports, the Seychelles’ anti-corruption agency alleges that Valabhji and his wife, an attorney who has worked with offshore service providers on the island, laundered money through the Seychelles to buy hotels on the island, which is a popular tourist destination.

In the Supreme Court’s decision to detain the couple, dated Nov. 19 and seen by ICIJ, Chief Justice Ronny James Govinden said that “the sums involved form a large portion of the misappropriated assets and led to the hotels moving to private hands under the control of Valabhji and other involved persons.” The $50 million, granted in 2002, was intended to pay down Seychelles’ debt but was never recorded in government accounts, Goviden wrote.

“Significant assets have accrued over the time elapsed since the original theft and there have been numerous companies, both in Seychelles and offshore, used to create the appearance of varied ownership or to hide the origination of the associated funds,” Chief Justice Govinden wrote in an interim decision

Police also seized a sniper rifle, pistol crossbow and ammunition from a bedroom, wine cellar and other rooms at Valabji’s home, according to a copy of the ruling by the Supreme Court of the Seychelles seen by ICIJ.

Basil Hoareau, the couple’s defense attorney, did not respond to ICIJ’s requests for comment.

As part of the probe into the missing $50 million, May de Silva, commissioner of the Anti-Corruption Commission, said that officials have also arrested an army officer, the country’s former finance minister, and the wife of the former president, France-Albert René. The investigation is ongoing.

The Seychelles’ secretary of state for finance Patrick Payet has pledged to make the country compliant with international standards and said that changes to its tax laws, implemented in 2020, were the reason why the EU removed the country from the blacklist.

In October, Payet also told reporters that the Seychelles government had requested a review on its exchange of information framework.

“The OECD has asked that a visit is done by experts to evaluate the request. That is why the EU has kept Seychelles on the gray list for this criteria until the experts complete their review,” Payet said.

The Seychelles, population 100,000, has repeatedly featured in ICIJ investigations.

The Panama Papers investigation revealed that three Seychelles companies helped supply fuel to military airplanes in Syria that were sanctioned by the United States Treasury Department during the country’s civil war. Sam Kutesa, Uganda’s former foreign minister and long criticized for shadowy financial deals, created a trust and company in the Seychelles, according to ICIJ’s 2017 Paradise Papers investigation. Another beneficiary of a secretive Seychelles company was Clavenda Bright-Parker, a childhood friend of former Liberian president Ellen Johnson Sirleaf, according to ICIJ’s West Africa Leaks investigation. Liberia’s Revenue Authority opened an investigation into Bright-Parker, who denied wrongdoing.

Correction: An earlier version of this story misstated Patrick Payet’s title. He is the Seychelles’ secretary of state for finance, not the minister for finance. 

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