Arms producers suspected of using paper firms in tax haven

Park Sae-jin Reporter Posted : 2016-04-27 11:04 Updated : 2016-04-27 11:17
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[Yonhap News Photo]

South Korean arms producers are suspected of having controlled black money through secret offshore paper companies in a tax haven mainly for Turkish military projects including a deal to sell self-propelled howitzers in 2001, Newstapa, an online news outlet, reported Wednesday.

Turkey has been the key destination of weapons such as training aircraft, mobile howitzers and battle tanks sold by South Korean firms that included Hyundai Rotem, a Hyundai Motor affiliate, and Hanwha Techwin, a Hanwha Group unit formerly known as Samsung Techwin.

In 2001, Turkey forged a landmark deal to buy Techwin's K-9 self-propelled howitzers. From 2007, Hyundai Rotem, the producer of K-2 Black Panther tanks, has been involved in discussions about its participation in Turkey's next-generation Altay tank project.

Newstapa said Techwin and Rotem were suspected of having opened secret accounts in Switzerland for their arms deals through paper companies, named Kolon Limited and KTR Limited, which were registered in the British Virgin Islands by their "exclusive" agent based in Turkey following the 2001 deal.

The revelation was based on analysis of internal documents leaked from Mossack Fonseca, a Panama law firm known for helping clients conceal assets.

The establishment of paper companies in the tax haven was probably aimed at opening secret bank accounts with Geneva-based UBS S.A. to facilitate arms contracts between South Korean firms and Turkey, Newstapa said, suggesting that the accounts might have been used as a window for the payment of "black money".

The agent in Turkey deleted the names of  Techwin, Rotem and other South Korean partners from its homepage shortly after queries were sent about its paper companies, Newstapa said, adding Techwin and Rotem have refused to comment or denied any wrongdoing.

"We cannot rule out a scenario that the secret bank accounts  ... might have been used as a channel for the flow of black money" as international arms contracts usually involve kickbacks and rebate, it said.

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