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Awami League leader’s family set up offshore companies

Written By: Nazmul
06/04/2016 13:43

Date of first Publish: 12/07/2013

Source: New Age

David Bergman 
12 July 2013, NewAge

A top Awami League politician along with his family established a network of offshore companies in the British Virgin Islands, a country known as a secretive tax-free haven, New Age can reveal.

In July 2006, Kazi Zafarullah, a member of the party’s 12-member presidium, along with his wife Nilufer Zafar, the current member of parliament for the constituency which her husband previously held, became directors and shareholders of two offshore companies. 
As directors of one of the companies, documents show that Kazi and Nilufer opened up a bank account in the Singaporean branch of a Swiss bank, making themselves joint signatories.

The application form which the pair signed gave details of their Gulshan address and stated that the company was for ‘investment purposes.’
Two years later, in April 2008, their son Kazi Raihan Zafar became director and shareholder of another British Virgin Island company, with his wife Fahra Murad (providing a Canadian address) and his mother Nilufer, who has recently been appointed chairman of the parliamentary standing committee on the ministry of foreign affairs, also joining him as directors by the end of June that year. 

And then after six more months, whilst a ‘fugitive’ from a court verdict which had sentenced him to two years’ imprisonment for failing to submit his wealth statement to the Anti-corruption Commission, Kazi Zafarullah - a distant relative of the prime minister by marriage - set up a further offshore company in which he was the sole director and shareholder.
Kazi Zafarullah, told New Age that ‘the information is not accurate as far as it relates to me and my wife…. I don’t know about the rest.’ 

The information on the Zafarullah family offshore trusts, which also includes one set up by the AL presidium member’s sister, her husband and two nephews all based in New Zealand, is contained amongst 2.5 million electronic files which were leaked to the International Consortium of Investigative Journalists, and which was then shared with New Age. 
The leaked ICIJ documents, which relate to the period up to early 2010,  provide information on the ownership of a total of 120,000 offshore companies and trusts set up in the British Virgin Islands and other offshore tax havens. 

The leaked files include information on dozens of Bangladeshis, many of whom are well-known businesspeople in the country, who own or owned offshore companies. After 2010, it is possible that the companies were dissolved or otherwise became defunct.

People often use the secrecy afforded by offshore companies to place assets beyond the reach of their country’s tax authorities although people may also use them for entirely lawful purposes.

In the context of Bangladesh, which unlike the developed countries tightly restricts the outflow of money, residents using offshore companies also risk being in breach of the foreign exchange laws.

Bangladesh bank officials have confirmed to New Age that the Foreign Exchange Regulation Act 1947 and the associated guideline do not allow Bangladesh residents to establish offshore companies. 

Abu Hena Mohd. Razee Hassan, the Bangladesh Bank deputy governor responsible for the bank’s Financial Intelligence Unit told New Age that he could think of ‘no legal reason’ that could justify setting up such a company. 

Ziauddin Ahmed, the director general of the Anti-Corruption Commission in charge of the unit within the commission which investigates money laundering, added that it was ‘suspicious’ for any Bangladeshi to own an offshore company in the British Virgin Islands and that his unit would undertake inquiries into any information provided.

Three months ago, after the Indian Express newspaper had published information about offshore companies owned by prominent Indian politicians and business men, the country’s finance minister P Chidambaram announced an investigation. ‘We have taken note of the names and inquiries have been put in motion in respect of the names that have been exposed.’

The Council of the European Union has also formally requested the ICIJ to release to each EU government any information from its leaked cache of offshore financial data that may involve citizens of those countries.
In 2008, during the caretaker period, the Anti-Corruption Commission filed cases against four members of the Zafarullah family for owning assets disproportionate to their known sources of income. It also prosecuted the former lawmaker for money laundering and failing to provide a wealth statement.

After the Awami League government had come to power in 2009, the High Court quashed three cases relating to Kazi Zafarullah, in one of which he had been convicted and sentenced for two years imprisonment, and the Anti-Corruption Commission withdrew cases against his wife and two sons. There are no outstanding cases against any members of his family.

On July 27, 2006, Trustnet (BVI) Ltd, which provides ‘customised corporate, trustee and fund administration and management services to private individuals,’ incorporated the company Hanseatic Ltd in the British Virgin Islands.

On that same day, Portcullis Trustnet appointed Kazi Zafarullah, at that time an Awami League lawmaker in a Faridpur constituency, along with his wife Nilufer, to be the first directors of the company.

The two directors then signed a resolution which made themselves joint shareholders and allowed them to set up a bank account at the Singaporean branch of the Swiss bank UBS AG. ‘The account be operated either by Zafarullah Kazi or Zafarullah Nilufer signing singly for an unlimited amount,’ the resolution stated.

In a Trustnet ‘due diligence’ form, seen by New Age, the two directors wrote that the ‘nature of business’ of the new company was for ‘investment purposes.’ A copy of Zafarullah’s passport which was provided with the form stated that his profession was ‘member of parliament.’

On the very same day, the two family members also became directors and shareholders of another British Virgin Islands company Pathfinder Finance Ltd, which had also been set up a month earlier by Portcullis Trustnet. The information provided to the ICIJ suggests that this second company may have been dissolved before 2010.

On July 16 and 17, 2006, just 10 days before the married couple established these two offshore accounts, Zafarullah, according to charges drafted two years later by the Anti-Corruption Commission, withdrew a total of Tk 4.3 crore  ($551,800) from the Banani branch of Premier Bank. 

The charges, which were later quashed by the High Court, do not state what Zafarullah is alleged to have done with this money and the commission was unaware at the time that he owned any offshore companies.

At the end of 2008, in her disclosure to the Election Commission of her financial income and assets, Nilufer did not mention her ownership of either of these two companies or the holding of any foreign bank accounts.
On January 11, 2007, a state of emergency was announced and two years of caretaker government ensued which resulted in significant attention on Zafarullah’s financial affairs. In April, the politician was detained and then shown arrested in relation to an extortion case and the Anti-Corruption Commission started investigating his financial affairs. 

On July 26, 2007, Abdullah Erman Yousuf and Abdullah Ahsan Yousuf, the two sons of the politician’s sister Sabiha Mahboob and Abdullah Ahmed Yousuf, the sister’s husband, all of them living in New Zealand, became directors and joint shareholders of the British Virgin Island offshore company Assets Connexion Ltd. In September, Sabiha became a director.

With Zafarullah out on bail, but with cases proceeding against him, on April 15, 2008, Kazi Raihan Zafar, the younger son of Kazi Zafarullah, bought another offshore company, Elderstar Ltd, becoming its director and sole shareholder. One month later, on May 12, his mother Nilufer also became director of the company and on June 5, Raihan’s wife Fahra Murad, registering with an address in Toronto Canada, was also appointed. 

Zafarullah told New Age that his son and his son’s wife live in Canada. It has not been possible to contact those of Zafarullah’s family members in Canada and New Zealand who became directors of offshore companies.
By now, Zafarullah was in effect absconding from court and not present to hear a special court sentence him to two years’ imprisonment for failing to submit a wealth statement. However, on November 27, 2008, the former lawmaker found time to become the sole director and shareholder of yet another British Virgin Island offshore company, Majestic Success Ltd.

Notes made by Portcullis Trustnet suggest that the offshore service agency may by then have become aware that Kazi Zafarullah was subject to allegations of corruption. On December 10, 2008, two weeks after Majestic Success was set up, Portcullis wrote a note on the account stating, ‘This case will now be handled as ENHANCED DUE DILIGENCE which means that every single event or transaction involving the transfer of funds in excess of US$10,000 must be notified to Compliance for their records. (If Compliance consider it necessary further enquiries may be made.)’ 

A similar note was made on the same date on the records of Hanseatic Ltd, set up two and a half years earlier.

In the charge sheet that subsequently alleged that Kazi Zafarullah was involved in money laundering, it was alleged that in 2005 he had distributed Tk 5 crore amongst 10 accounts belonging to some of the same family members, including his wife and his sister, who subsequently become directors of offshore companies.
Legality of offshore companies, bank accounts

The legal foundation for the rules relating to how Bangladesh residents can remove money from the country for personal or business use is set out in the Foreign Exchange Regulation Act 1947.

Section 5 of the Act sets out a blanket restriction on residents from making payments to people resident outside Bangladesh – though the same section allows Bangladesh Bank to make both ‘general or special’ exemptions to this rule.

In particular since 1994, when the Bangladesh taka was declared convertible for current account transactions, Bangladesh Bank has granted a long list of exemptions which are set out in its document titled ‘Guidelines for Foreign exchange Transactions’

These allow, for example, individuals to pay for education and medical costs abroad, and allow commercial companies to undertake ordinary business transaction with foreign companies.

However, as Sheela Rahman, a lawyer who specializes in providing advice on banking, commercial, and corporate law in Bangladesh makes clear the exemptions circumscribe the limits. “If you do not fall in the general exemptions, you will have to seek specific permission from Bangladesh bank. Otherwise your use of foreign exchange is not lawful.’ she says.

One of the general exemptions contained in the guidelines allows businessmen to establish branches of their companies outside Bangladesh – though this must be reported to Bangladesh Bank within a month and a maximum of $30,000 is allowed to be remitted to meet the company’s running costs. ‘This is a specific exemption to the general rule that Bangladesh companies can not set up companies abroad,’ Sheela stated.

Again, the general rule is that Bangladesh residents cannot hold bank-accounts abroad, though there is an exemption if someone has had a job abroad and during the time of employment set up a bank account.
‘That kind of account can be kept,’ Sheela Rahman stated. ‘However bank accounts linked to offshore companies would not fall within this exemption.’

She also points out that the establishment of these companies will cost foreign currency and the use of money for this purpose would not be allowed, unless it comes from a foreign account established with the prior permission of Bangladesh Bank. Local businessmen’s link to offshore cos revealed

14 July 2013, NewAge

Directors of some of Bangladesh’s biggest business conglomerates, including the Summit, the Square, and the United group of companies, own or have owned offshore companies in the secretive tax haven of the British Virgin Islands, New Age can reveal.

Information about their offshore company ownership is contained amongst the 2.5 million electronic files which were leaked to the International Consortium of Investigative Journalists and which have been shared with New Age. 

The files contain information from the databases of two offshore company service firms including Singapore-based Portcullis TrustNet which was the firm that these businessmen paid to set up their British Virgin Island companies.

From the ICIJ files, New Age has identified over 20 Bangladeshi business people who have owned an offshore company, though there may be many more who have registered using a non-Bangladesh address or who have set up offshore companies using different service agencies.

The information from the files – much of which is now public through a database on the ICIJ website – is only accurate as of the beginning of 2010 since when some or all of these companies may have been closed down.

The disclosures follow New Age revelations on Friday that a leading Awami League politician and members of his family owned a network of offshore companies in the British Virgin Islands. Kazi Zafarullah denied both his involvement and that of his wife, Nilufer Zafar MP.

Business people around the world often use the secrecy afforded by offshore companies to conceal assets or place them beyond the reach of their country’s tax authorities – though they can also use them for entirely lawful purposes. 

An additional issue for Bangladesh residents, those living in the country for at least six months in any particular year, is the need to comply with the foreign exchange laws which impose tight restrictions on the outflow of money.

Many businessman argue that in today’s internationalised world, the country’s strict foreign exchange regulations make it difficult for them to conduct normal and necessary business transactions within the law.
From the information in the ICIJ leaked files Summit Industrial and Mercantile Corporation Pvt appears to be the Bangladesh company whose directors have had the most involvement in purchasing offshore companies, with its chairman and five directors owning or having owned six offshore companies between them. 

All five are members of the same family — Aziz Khan, the company’s chairman, his wife Anjuman Aziz Khan, their daughter Ayesha Aziz Khan, the chairman’s brother, Jafer Ummeed Khan, and Aziz Khan’s nephew, Md Faisal Karim Khan. Other than Jafer Ummeed Khan and Md Faisal Karim Khan, they registered their British Virgin Island companies through a Singaporean address.

Aziz Khan told New Age, ‘I am a permanent resident of Singapore. I have lived there for many years, and in exile in 2007 and 2008. During my stays I have conducted businesses. All my businesses are legitimate and within the law. The information in reference is inaccurate and misrepresents.’

Offshore companies in the British Virgin Islands provide confidentiality for the owners as the names of the company directors and shareholders are not made publicly available.

The Summit family directors though went to greater lengths than practically all the other Bangladesh businessmen to conceal their links to the offshore companies - by appointing ‘nominees’, rather than themselves, as both directors and shareholders of these companies. 
In the leaked ICIJ files, the companies Anticorp Ltd and Execorp Ltd were named as the ‘directors’ of Beckingsdale Ltd, Grattanville Ltd and Borneo Powers Ltd, which are three of the offshore companies that the Summit family members set up in 2005. The company Sharecorp was also named as the ‘shareholder’ of all three of the companies.

The Portcullis documents, leaked to the ICIJ, however, show that Jafer Ummeed Khan, at least until 2010, owned these companies although he shared ownership of Grattanville Ltd with Md Faisal Karim Khan and that of Borneo Power Ltd with his niece Ayesha Aziz Khan.

Similar kinds of nominee arrangements existed for two of the other companies which were held by the family members: Transnational Electricity Company Ltd, set up in December 2003 which was owned by Aziz Khan, and Fuji Power and Petroleum Ltd set up in 1998.

Each nominee director and shareholder cost $500 and $200 a year.
The only exception to the use of nominee shareholders concerns Euro Hub Investments Ltd, which was set up in January 2002, where the shareholders were directly named as Aziz Khan and his wife Anjuman Aziz Khan. However a nominee director was used for this company.

It remains unclear what were the purposes of the Summit directors’ six offshore companies although a note written by the Portcullis administrators in relation to three of the companies — Borneo Powers, Grattanville and Beckingsdale —  suggest that the owners intended that they would only be ‘used as a holding company and will be dormant.’

It is, however, known that Transnational Electricity Company had been used by Summit as part of a consortium which in 2004, together with Summit Power, participated in the second tender bid for the construction and operation of a 450MW power station in Sirajganj.

Documents leaked to the ICIJ show that an e-mail written by one of the directors in May 2005 instructed Portcullis TrustNet, which was presumably acting on behalf of the nominee director, to sign a power of attorney that would authorise Aziz Khan ‘to act’ in the Transnational Electrical Company’s place ‘in all matters’ relating to the Sirajganj project. 

Aziz Khan was, however, the real owner of the company: an internal TrustNet e-mail sent in response to the request noted that ‘the attorney appointed [i.e Aziz Khan] is the beneficial owner on records.’

TrustNet was also instructed to arrange the signing of a letter addressed to Bangladesh’s power ministry, stating that the Transnational Electricity Company ‘is prepared to provide the equity as stated in Exhibit III, Table 1 as a minimum amount pursuant to the terms of the RFP.’ 

The commitment to ‘provide the equity’ as stated in the letter suggests that funds were available in the offshore company. In addition to the Summit company directors, there are many other Bangladesh businessmen who own or owned offshore companies in the British Virgin Islands.

• Hasan Mahmood Raja, Khandaker Moinul Ahsan (Shamim), Ahmed Ismail Hossain and Akhter Mahmud of the United Group of Companies, in January 2002, became directors of the offshore company Multi-Trade Marketing Ltd which was liquidated sometime before 2010. Attempts to get a comment from Khandaker Moinul Ahsan (the only one of the four currently in Bangladesh were not successful. 

• The late Samson H Chowdhury, the founder of the Square Group of Companies, and Dr AMM Khan, a former president of the Bangladesh Association of Pharmaceutical Industries, in June 2003, became directors of the offshore company Fair Trading House Ltd, which sometime before 2010 was liquidated. Six months earlier, Samson and his wife Anita also became directors of Evening Stars Ltd. All three of Chowdhury’s sons were out of the country and attempts to contact them were not successful.

• Azmat Moyeen, the managing director of Momin Tea, and Dilip Kumar Modi, a jute businessman, along with some others, in March 2005, became directors/shareholders of the offshore company Wrightstar PTE  Ltd which before 2010 was liquidated. Dilip Kumar denied any involvement in the company. Azmat said,  ‘I have no idea what you are talking about. I do business in tea. I have nothing in the British Virgin Islands.’

• Dr Syed Serajul Huq, the chairman of Sea Pearl Lines, in October 2005, along with some other people, became a director/shareholder of the offshore company Sovereign Capital PTE Ltd, which was de-registered before 2010. Serajul Huq said, ‘[The information is] completely wrong. I was not a director there.’

• Md Aminul Haque, Nazim Asadul Haque and Tarique Ekramul Haque of Bangla Trac Ltd, in July 2006, became directors/shareholders of the offshore company Pyramid Rock Ltd. Tareq Haque told New Age that his brother who set up the company was a non-resident Bangladeshi. ‘The company was set up to do cotton trading in Bangladesh but ultimately that did not happen, and it has now been closed down. There is no illegality as no money was taken out of Bangladesh.’

• Captain Sohail Hasan of the ship builder Western Marine, between August 2006 and November 2007, using a Singapore address, became director/shareholder of four offshore companies — Noble Pacific Worldwide Ltd, Titan Alliance Ltd, Surreal Worldwide Ltd and Prominent Shipping PTE Ltd. Sohail did not respond to an e-mail from New Age.

• FM Zubaidul Haque, the chairman of the Mascot Group of Companies, in May 2007, along with his wife Salma, became director/shareholder of the offshore company Spring Shore Incorporated, which ceased to exist sometime before 2010. Zubaidal said, ‘The information is not correct. I am not aware of that company.’

• Mahtabuddin Chowdhury, the managing director of Shetu Corporation, in August 2007, along with his wife Ummeh Rubana became director/shareholder of the offshore company Talavera Worldwide Inc. Mahtabuddin has not responded to an e-mail.

• Iftekharul Alam, chairman and managing director of Spark Ltd and Omnichem Ltd, and his daughter-in-law Fawzia Naaz, the owner of Sitylink, in December 2007, using Singaporean addresses, became directors/shareholders of the offshore company Paume Technology Ltd. Iftekharul said that he needed time to check details of the companies.

• ASM Mohiuddin Monem, the deputy managing director of Abdul Monem Ltd, in June 2008, along with his wife, Asma Monem, became director/shareholder of the offshore company Magnificent Magnitude inc. Mohiuddin accepted that he had set up the company but said that ‘that was a long time back. It was set up to undertake commodity trading. The company is no longer there. There was no money involvement. The company was not activated.’

• Sharif Zahir of the Ananta Group, in February 2009, became the director of the offshore company CPAT (Singapore) Private Ltd. He said that the company was not set up by him but by an international partner company that intended to invest in Bangladesh but it subsequently pulled out. ‘The company was closed down in 2011,’ he said.
This op-ed appeared in NewAge. 

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