Naomi Fowler: Hello and welcome to the Taxcast, the Tax Justice Network Monthly podcast. I’m Naomi Fowler. Coming up later:

Frederik Obermaier: The window of opportunity is still open, but we have to take that chance, and we have take it now.

Naomi Fowler: I’ll speak to Panama Papers journalist Frederick Obermaier about the book he’s co-authored called The Chinese Phantom, the Hunt for the World’s Most Dangerous Arms Dealer. And before that, a few quick headlines.

In the previous Taxcast episode, we talked about the efforts to block the US’s Corporate Transparency Act. From January the 1st 2025, the real flesh and blood owners of eligible businesses were supposed to declare who they are on a register, and not even a public one, but some powerful people had other ideas and there was a farcical on, and now off again, now on again, kind of dance through the courts. After what we’d hoped was the final court ruling, a new deadline was set of March the 21st 2025 to finally get that beneficial ownership register going. Well, now it’s off again. This is Erica Hanichak of the Financial Accountability and Corporate Transparency Coalition:

Erica  Hanichak: On Sunday, the Treasury Department announced that it no longer intends to – quote: enforce any penalties or fines against US citizens or domestic reporting companies or their beneficial owners, end quote. The announcement was first made by social media post and then subsequently through a formal statement. Though the U.S. is the world’s leading economy, and our dollar is the world’s reserve currency, the U.S. has lagged behind nearly 100 countries that have already had similar databases in place. This announcement further jeopardizes U.S. progress toward transparency.

Naomi Fowler: At the moment, only foreign reporting entities will be required to report ownership information. That means only around 12,000 companies a year will now need to comply instead of about 32 million companies. More court battles are likely. We’ll bring you the developments here on the Taxcast.

And on the other side of the pond in the UK there’s some good news. Whistleblowers who inform the tax authority HMRC about tax dodging will now get a cut. Here’s lawyer Mary Inman of the law firm, Whistleblower Partners:

Mary Inman: On March 11th, James Murray, exchequer secretary to HM Treasury made an announcement about his ambitious goals for closing the tax gap in the UK and actually going after tax dodgers, tax evaders, and midway through the speech he surprised a lot of us by saying that starting this fall, he’ll be rolling out what he described as a US and Canadian-style whistleblower reward scheme, to pay whistleblowers who bring him actionable information between 10 and 25% of any fine that HMRC imposes, which is really rather remarkable.

In terms of the benefits that the UK can expect, it will really be a force multiplier. Right now, HMRC is prosecuting tax fraud with one or both hands behind their back, they have to rely on voluntary tips, which, you know, are very difficult for people undertaking those kinds of risks.

Up until this point HMRC had had what was called a discretionary rewards program, meaning that if whistleblowers brought them information they had in their sole discretion the ability to pay them or not, which for a lot of whistleblowers that injects a lot of uncertainty and whistleblowers who put a lot on the line really abhor uncertainty. It ended up being around 600,000 to 900,000 pounds a year they actually ended up paying these whistleblowers under the discretionary program. And that is really chump change compared to what they’re now poised to be able to recover. I had been banging on for years advocating while I lived in London from 2017 to 2020, and a lot of British people in particular, there seems to be just almost a constitutional resistance to the idea of rewards. And so my advice was always, well, you already have a discretionary program. Why don’t you just make it mandatory and see if the sky falls?!

Naomi Fowler: Ha! Mary says in the United States, the tax authority there, the IRS has recovered over $7 billion due to whistleblower tips, so we’ll be watching how it goes.

Also, in the UK we’ve just seen the Labour government taking big cuts to welfare for Britain’s poorest people. And it doesn’t have to be this way. Here’s one option. Our friends at Positive Money have calculated that a windfall tax on bank profits could raise 15 billion pounds. Here’s Hannah Dewhirst of Positive Money.

Hannah Dewhirst: From 2021, when the Bank of England started raising interest rates in response to the higher inflation that we were seeing, banks started making huge unearned windfall profits. They weren’t passing those higher rates on to savers, and they were earning them without having to lift a finger. The bank surcharge is currently a tax that’s applied on bank profits, and the previous Conservative government slashed that surcharge down to 3%. So yeah, even just restoring the levy back up to what it was just a few years ago would bring in a huge amount of revenue, but we’re also calling for the government to go even further and kind of step up those rates to reflect the huge profits that banks have been earning in the last few years. Every year, when banks release their yearly earnings, we’ve been calculating how much we would bring in from this tax, and based upon their record earnings from 2024, that was almost 50 billion, we calculated that 14.8 billion would be brought in. And that’s just from the four biggest UK banks alone, so it could be even higher.

Chanting crowds at rally: Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich! Tax the rich!

Naomi Fowler: There’s a campaign in Britain at the moment calling for a 2% wealth tax on assets over 10 million pounds. It’ll be a tax on only 20,000 people in the UK , that’s only 0.04% of the British population. It could deliver 460 million pounds a week. That’s about 24 billion pounds a year.

Here’s accountancy professor, Prem Sikka speaking at a rally outside the treasury in Central London:

Prem Sikka: Well, the predicament we find ourselves in is because of the rotten politics, there is absolutely no shortage of money, you don’t hear any minister, any industrialists calling for cuts in corporate welfare. We have bailed out banks and energy companies, and we are giving billions in subsidies for auto companies, oil companies, gas companies, steel companies. We are giving subsidies as though there is no tomorrow. And these subsidies are being given with absolutely no strings attached. The government is not taking any equity stake in those businesses. We have cut corporation tax rate, top income tax rates. We have had the lowest rates of inflation. We have had the lowest interest rates. Yet when you look at the investment league, the UK is near the bottom of the G7 countries and 28th out of 31 OECD countries.

Just how far are you going to squeeze people? You are killing them literally with poverty. That is unacceptable. It is shameful that we live in a society where 16 million people live below the poverty line. 5.2 million children live below the poverty line, where the government has exacerbated poverty. Poor people pay a greater proportion of their income in taxes than the richest, it is life threatening. And that cannot really continue in any way whatsoever. What the government needs to do is tax the rich! [crowd cheers]

Crowd chants: Hey, you billionaire! Hey, you billionaire! Have you forgotten how to share? Have you forgotten how to share? Hey, you billionaire… [fade]

Naomi Fowler: The 2% wealth tax on assets above 10 million pounds is just one of 10 reforms proposed by various tax justice campaigns in the UK. Combined, these reforms would raise 60 billion pounds a year. Details on all of those are in the show notes.

Now, on the Taxcast, how easy is it to get filthy rich selling arms to anyone who will pay? There may be sanctions, there may be laws against it, even being the FBI’s most wanted fugitive, this arms dealer and manufacturer has evaded arrest for two decades. No better people then to chase him down and tell this story than Panama Papers journalists, Frederick Obermaier and Basian Obermeyer. They teamed up with  Josef Grüll and Christoph Giesen to write the book The Chinese Phantom , the Hunt for the World’s most Dangerous Arms Dealer. Here’s Frederick Obermaier from the International Consortium of Investigative Journalists and Paper Trail Media, and co-founder of the anti-corruption data collective.

The last time we spoke, Frederik, was in April 2017, which is quite a long time ago, and we were talking about the Panama Papers one year on, and I just have to start by asking you what your reflections might be since we last spoke, on the world of secrecy and corruption, I hope you don’t get too tired of being asked about the Panama Papers?!

Frederik Obermaier: No, I love to speak about the Panama Papers although I realize that I grew a lot of more gray hair since! But for me, the Panama Papers have changed a lot because I think the Panama Papers have changed the view on tax havens, on tax evasion and corruption because before the Panama Papers, it was a very technical topic. It was like expert circles discussing the need of UBO registers, nominee directors, and secrecy jurisdictions, but it was not for the broader public. But now we have, since the Panama Papers, we have Netflix movies, we have references to it in series like Billions, we have, in the last week Tonight with John Oliver the Panama Papers, tax havens being mentioned. Um, we have it in rock music and pop music. And I think that’s important because it should not be a niche topic, to speak about transparency in the field and the world of companies, because it is a topic that affects us in every part of our life.

Before the Panama papers this was not something that the public was aware of. And this, this changed and if we see what has changed afterwards, it is a lot. It was laws that have been changed. A lot of jurisdictions introduced UBO registers. That’s a lot.

But also I have to be honest to you and to myself as well. I think it was not enough, because the Panama Papers have shown what is going wrong and we and lawmakers all around the world had the chance to change accordingly, to change laws. And to make our democracy and our world more resilient against the activities of autocrats, of crooks and criminals. But I think to a certain extent, we have missed that, that’s why we are now living in a world where the oligarchs are not only ruling in Russia, but they seem to take over the U.S. as well and other countries as well. And I think that’s worrying and it shows me how many opportunities we have missed.

And I really hope that, for example, the European Union where I’m based, as I’m based in Germany, is taking that opportunity now and seeing the urgency, looking to what is happening in the U.S., to what is happening in Russia, that there is a still a chance. The window of opportunity is still open, but we have to take that chance and we have to take it now.

Naomi Fowler: Absolutely, yeah. I mean, I can definitely attest that it was a game changer, you’re right, awareness just shot up. I hope that what’s happening now globally is going to be a kind of a second wave of a wake up call. And this book is really relevant to all that. May be you can describe the book to someone who hasn’t heard of it. And tell us a bit about why this book, why this subject, why you’ve written about this.

Frederik Obermaier: Well, together with my colleagues, with whom I did also the Panama Papers, I wrote the book that is about a Chinese citizen who is called Li Fang Wei, but normally he’s calling himself Karl Lee, as it sounds like more Western, who is basically hunted by intelligence services all around the world since two decades. There’s a 5 million bounty on his head, he’s on the most wanted poster in the U.S. And still, basically, nobody knew anything about him. There was only one picture that existed of him. I heard about him several years ago, and I was immediately thrilled, like, how can that be?

One Chinese citizen who is allegedly helping Iran to develop their missile program, to helping Iran to then export missiles, for example, to Russia to attack Ukraine. And how could it be in these times that nobody knows more about this guy? And then I was also like thrilled as a, like paper trail investigator, I was like, hey, there must be a money trail, there must be, if you deal with this kind of stuff, you need to find intransparent ways of receiving the money for example, from the Iranian regime.

The US is offering 5 million dollars for anyone who could give a hint or tips where to find Li Fang Wei, to get hold of him. So that’s a lot of money. Just in comparison that’s what the US government offered for hints in regards to Osama bin Laden after the embassy bombings in Africa. So that tells you something, how urgently they are looking for him and how desperate they are, because even the US with all their satellites, their eavesdropping technology, their agents that are on the ground in dozens of, if not hundreds of countries all around the world, they were not able to get a hold of him. So that’s why they are offering this shitload of money to everyone out there, who has a hint on Karl Lee.

And we then did a journey, I was speaking with experts in the U.S. traveling to to Israel, traveling to Vienna, then in the end, with the help of our colleague Christoph Giesen, hunting him on the ground in China and then basically finding more hints than we have ever seen in the public and we now still hear it from investigators that they’re like, yeah you found a lot of stuff that we are still using and that helps us now. But what I wanted also to tell is here again we see one aspect of where intransparent company structures are used by individuals to do a lot of harm and I think when we started this, to investigate the research for this book, proliferation was also still an expert topic, like tax havens before the Panama Papers, because it was very abstract, the times of the arms race felt like a long time ago, that was the Cold War, but now, as we speak, we are again speaking about missiles because we have seen missiles that have been allegedly developed by Iran and we see Russia fighting an aggressive war against its neighbor, Ukraine, and bombing and sending missiles on Ukrainian cities, basically every day. If you solve the mystery of Karl Lee, I think we can learn a lesson how to then track down other proliferators in the future.

Naomi Fowler: Yeah, and you know, the whole issue of sanctions, why they’re not functioning in the ways that they should, your book sheds a lot of light on that. Karl Lee or Li Fang Wei, this most wanted person. What does somebody like this who’s had such a long criminal career and, you know, has been wanted for a long time, there’s a 5 million dollar bounty on his head, what does it tell you about the state of financial secrecy at the moment?

Frederik Obermaier: Well, I wished I had better news, but this person again shows us and proves that we do not have enough transparency still in this field. That there’s still too many secrecy jurisdictions and also enablers. We shouldn’t close our eyes before that fact. Banks helping individuals like Karl Lee to hide his money track and thereby helping him to do what he’s doing and he’s bringing danger and a threat to the world.

When you speak with lawmakers these days especially when I do it as one of the Panama Papers journalists, they always are like boasting, like oh, yeah and they’re like trying to say nice words to me like, oh, great work, but we have also done a lot since the Panama Papers, we have done this and that and this and that and then I’m like, okay, that sounds super cool and good, but if we were really living in a world that is so transparent, why could an individual like Karl Lee do his business for more than two decades while he was sanctioned? While he was on basically every red flag list a financial institution should have and still he was able to continue doing his business?

And that is shocking to me, but it tells me like, hey, we have not done enough, it is still possible, and if he’s able to do so then others are doing it as well and that tells me, and this is my message to all the whistleblowers out there and listening to your podcast, here I am. If you have data, please feel free to reach out if it’s in the public interest, because I think we need more transparency in this field still, and we need to put more pressure on secrecy jurisdictions and I think the best help to force them to bring more transparency is putting it out there in the public.

Naomi Fowler: You know, what’s really interesting in the book, when you talk about operating as journalists in China, non-Chinese journalists in China, there’s some really interesting surprises there about transparency in China, you know, with the use of ID numbers there, and the availability of information on company owners, and court cases being very publicly available too. I mean, obviously this is an autocratic nation, there’s still the same tensions between rights and responsibilities in China versus the preference by elites for secrecy, you know, opacity. Just wondering if you could give us a bit of a flavor of what it was like from your perspective as a journalist.

Frederik: I think the investigation was full of surprises. I think that is a strange thing and I must admit, I learned this during this research, I had a lot of prejudices and some of them are based on facts because we have to face the fact China is an autocratic country. It’s going after journalists. It’s censoring news, it is preventing their citizens to access news from all around the world. It is regularly kicking out foreign journalists if they are doing investigations that are critical towards the Chinese government or the Communist party but on the other hand side, it’s still a very transparent country. So if you go to the Chinese company register, it contains so much information, like the identity numbers of shareholders, of executives there, in many cases, even their private telephone numbers. That’s something that I dream of in the German company register!

Because in Germany there are a lot of like ‘Myers’, like that’s like every days name, I’m Obermaier. So you can imagine there’s Niedermeyers, Obermeyers, Meyers with different spellings and there’s thousands of them out there and you can imagine how difficult that investigation is to see who’s who, like if I had an ID number attached to the name, that would make my life far easier, and China does it.

Naomi Fowler: Let me just explain how it works in China, according to what Frederik and his co-authors found. Like Germany, in China there are lots of names that are similar or even exactly the same. In fact, millions can share the same family name. That’s a challenge in the best of scenarios, but it can also be used to throw investigators and journalists off the scent. Chinese ID numbers are cradle to grave and they work like this: the first six figures contain information about the region where the individual was born. The next figures are their date of birth, and the penultimate number is an even number for a woman, and an odd number for a man. They’re like fingerprints in a way, and that’s helpful for investigators worldwide, not only in China. And court cases and their documents are pretty accessible in China too, unlike in many countries. Here’s Frederik again.

Frederik Obermaier: You find a lot of court documents in registries, and that’s my dream coming true. So for example, if you search in the Chinese court database for a very German Western company, tech company, if you search for that name in the court documents, you find a lot of indictment and sentences where this company was, for example, sentenced for bribery. In other countries this is not that public. Of course, sometimes it comes up in the public, but there’s a lot of cases that stay hidden in China, despite China getting more and more restrictive on this on this terms, because they realized journalists are using it, civil society groups are using it, but still there is more transparency than in many, many other Western countries. And I think that is also something that those lawmakers in those countries should have in mind. I don’t want to be, to live in a country that is less transparent than the autocratic state of China.

Naomi Fowler: It’s really interesting, it’s really interesting, when we’re assessing financial secrecy with our financial secrecy index, one of the things we’re assessing is transparency in court cases, we know how important that is. Um, when it comes to sanctions, you talk about this in the book where, you know, Li Fang Wei or Karl Lee, he’s constantly changing names of companies, keeping ahead of investigators, so easy for him to do. When it comes to sanctions, how would you describe what they achieve as they currently function and how they’re failing to achieve what’s needed in a world that’s becoming more and more concerned about state power and armaments and all of that stuff?

Frederik Obermaier: I would say that, forgive me to being a little bit pessimistic in this regard, but I think sanctions are a nice PR tool to put pressure on individuals and companies in public. But they are not a very effective tool that can be used by law enforcement. And one of the reasons again is intransparent secrecy jurisdictions who are providing services that help individuals to evade sanctions. And in the case of Karl Lee, we could see how unbelievably easy it was. I mean, imagine who was the adversary and is the adversary of Karl Lee. It is, among others, the U.S. Government, U.S. law enforcement, like FBI, CIA, all hunting him. This is like some of those authorities who have like the best access to this kind of information out there, because they have the power to do so. But still, Karl Lee was able to evade their sanctions, but really like, I mean, I could tell that to my kids because it’s so easy! I mean, he, for example, had one company that was called Wealthy Ocean Enterprise Limited that was registered in the Seychelles. And the U.S. authorities learned about it. So they sanctioned it, but this always takes time because it’s very bureaucratic. But we could see in the Panama Papers even, there we are getting back to the Panama Papers, we could see that when the U.S. government sanctioned Wealthy Ocean Enterprise Ltd., that company was already gone because Karl Lee simply gave it another name. He changed the company name to ABC Metallurgy and that company was not listed on the sanctioned list so, banks and other companies could still continue doing business with ABC Metallurgy because it was not sanctioned. Well, it was in fact, only a sanctioned company that was painted with another color.

And I think that tells us also something about complicity, because the government and the authorities in the Seychelles, they knew what was the original name, like this is the name of a now sanctioned company, and they knew the new name. So they basically were aware of him using a new name to hide the real identity of the company but still they didn’t do it, they did not raise the flags publicly and I think that is a problem because if it’s happening in the case of Karl Lee I’m sure that is happening in the case of hundreds and thousands other, uh, companies as well and I think for me, it’s really frustrating because I just came back from Ukraine. I was in Kiev and seeing and speaking with a lot of Ukrainians who really suffer a lot and going through a lot due to Putin attacking their home country and there’s so many sanctions against Russians out there, but still even here in Germany, we can see how easy it is to, first of all, evade sanctions. But second of all, even prevent reporting about sanctions. So for example, in Germany, there’s a lot of real estate that is supposed to be ultimately beneficially owned by sanctioned oligarchs. And those oligarchs are currently going after basically every journalist who ever writes something like that because they’re always claiming like, Hey, that’s not my villa. Hey, I’m Oligarch X, but that’s not my villa because look it up in the real estate documents. That’s not my name. That’s the name of a company in the Isle of Man, or a trust somewhere. That’s not me, you cannot claim that it’s me owning it. Sometimes there’s photos of them using it you see, when those villas have been raided by the police, they found, like, clothes with their, like, the names and their initials in there and still they’re like, I may have rented it, but it’s not mine. And that is telling you how useless sanctions are as long as they cannot be enforced, and they cannot be properly enforced as long as there’s so much intransparency out there.

Naomi Fowler: It’s fascinating to read in the book the Chinese Phantom, how Relaxed Karl Lee or Li Fang Wei was in the past with what he wrote to his clients in his emails . Here are excerpts from two of his emails that US investigators found. They got access to them because of a warrant from a US judge, because he used US email providers, Yahoo and Hotmail. I’m sure he stopped writing this kind of stuff years ago, but it really shows you how open he was and how confident he was that he wasn’t gonna get caught!

Karl Lee or Li Fang Wei email: We would like to urgently draw your attention to the fact that you should not transfer the payment for the last two consignments to the name and account of the beneficiary we included in the commercial invoices. This is because it’s possible that the beneficiary’s name and account number have recently been blacklisted by the United States, and if so, the money may be blocked. We shall give you a new name and account number for the beneficiary early next week, and you can then transfer the money.

Please remember that RWIOT Steel Service is not the real company name. It’s a false name. If we give the name of your company, we are afraid that the consignment might be blocked by the USA. For your information we recently sent a shipment by the same route to one of your subsidiaries in Mashhad, which dispatched and paid for the cargo without any trouble.

[Musical interlude]

Naomi Fowler: So, how do they make sanctions work properly? What do they need to do?

Frederik: We need ultimate beneficial ownership registries in every jurisdiction and they need to be public because let’s face the fact, law enforcement is nice but sometimes the best investigators are activists, journalists, civil society groups. It is them using those tools by far better than the authorities. And I think one should put a lot of pressure on those secrecy jurisdictions. If they don’t want to introduce those kind of registries, then prevent companies in your own country doing business with them! Sanction them, go after them because they are helping drug dealers, paedophile rings, oligarchs, they’re helping to finance wars, they are helping to ship arms all around the world. They are helping to do harm to the environment. And I think we have to get stricter on that one.

But, and there’s also a big but again, who are the ones who could put a lot of pressure on those countries? It’s the European Union, in my opinion. It’s the U.S. And both cannot easily put a lot of pressure on them because it would be like a weird argument because the United States of America, unfortunately, don’t have a public UBO register in place. I mean, the Corporate Transparency Act brought a UBO register, but it’s not public for journalists and as we have learned recently, the U.S. government doesn’t even want to enforce it under Trump. So how should the U.S. put more pressure on other countries? So I think now it’s up for the European Union. Go for it! Go for it! In Germany, after the Panama Papers, we had our finance minister at that point in time, promising a public UBO register, and guess what we got? We got a UBO register, but it’s not public.

So there we are again, and I think we have to remind our lawmakers on their promises and keep them accountable for promises having been broken and telling them again and again where this leads to. Because it is so – pardon my French – but fucking frustrating to see all those problems out there. It’s corruption, sanctions, wars, disinformation, foreign powers mingling with politics in countries all around the world. But if you go down where it all starts, it’s with money, with money flows. And there we are again – if you want to fight those problems, you have to fight for more transparency and against secrecy.

Naomi Fowler: And definitely taking on the enablers, this is absolutely essential because without those people, without that infrastructure, none of this can happen and you just wonder when is the world going to learn? But yes, the United States is, is not in a position at the moment to be enforcing anything or doing the right thing, sadly. But it is definitely about squeezing the space, you know, the European Union can do a lot now to be squeezing the space and making it harder and harder for these people and for their enabler infrastructure to be operating. I mean, of course, there’ll always be another place they can go, but what we want to see is less and less possibilities for them.

I wanted to ask you about Li Fang Wei or Karl Lee. He’s still not been in any courtroom anywhere. What do you know about him right now? Where is he?

Frederik Obermaier: Well, that’s a strange thing. We came to the conclusion that at least the Chinese authorities put a protecting hand above him. There is hints that he was at least for a certain point in time in prison, but we have seen no official indictment. And from diplomatic sources, we hear that there’s even in these days, still a lot of pressure on the Chinese government, to go after him because we are living in a world that has changed. When we wrote the book, that was for most of the part, before the war against Ukraine. But now we have Iran helping Russia, Iran delivering drones, delivering missiles to Russia. And that is arms that end up flown to Ukraine, killing civilians. And that’s why there’s a lot of pressure, righteously so, by the way.

The US is offering 5 million dollars for anyone who could find Li Fang Wei, Karl Lee, to get hold of him. We don’t hear that much in public but I’m quite confident that we will hear soon more developments on Karl Lee. Could you imagine that – 5 million dollars? You can earn a lot of money, even if you don’t have altruistic motives, but simply financial motives and you know something about Karl Lee, hey, 5 million dollars is a lot! So that’s why I guess that the days of Karl Lee are in the end counted, but in the end we should not be naive. As soon as he’s out of business there will be others taking over, and if we want to go after them again, I think that is my duty and that’s what I see as my duty as journalist, but I hope that law enforcement are seeing it as their duty as well.

Naomi Fowler: You can find out more about the book, the Chinese Phantom in the show notes and about everything else we’ve been talking about this month. My thanks to Frederik Obermaier. That’s it for this month. You’ve been listening to the Taxcast from the Tax Justice Network. Thanks for listening. We’ll be back with you next month. Bye for now.