Panama urges for talks to avert international crackdown on finance sector after Panama Papers leak

PANAMA CITY (AFP) - Panama is fighting off a feared international crackdown on its pivotal finance sector, calling for talks to calm a worldwide storm sparked by revelations of its role in a mass of secretive offshore dealings.

The small Central American nation launched the fierce rearguard action after a huge leak of 11.5 million documents from Panamanian law firm Mossack Fonseca, the so-called Panama Papers, exposed the confidential dealings of world leaders, celebrities and sports stars.

The revelations have toppled Iceland's prime minister, led to a Swiss police raid on the headquarters of European football body UEFA, and prompted media allegations against the inner circles of both the Russian and Chinese presidents.

Faced by accusations that Panama has allowed the rich and powerful to hide their funds from international tax authorities and the law, President Juan Carlos Varela vowed to "confront whoever comes to put down Panama's image".

"I call on the OECD countries to return to the table for dialogue and seek agreements, and to not use these events to affect Panama's image," said Mr Varela, whose country depends on the finance sector for seven percent of its economic output.

There was no immediate reaction to Mr Varela's comment from the Paris-based, 34-nation Organisation for Economic Coooperation and Development, which helps to coordinate the global fight against tax evasion.

Panama has already warned it could retaliate against France if it makes good on a promise to put the country back on France's blacklist of "tax havens" - a status that would cause transactions in Panama to be viewed as likely tax-dodging gambits.

The Panama government has also written a complaint to the head of the OECD, Angel Gurria, attacking a statement he made describing Panama as "the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities".

Those accusations were false, "unfair and discriminatory", Deputy Foreign Minister Luis Miguel Hincapie wrote in the letter which was obtained by AFP.

The embattled world of football was the latest victim of the leaked papers, which were obtained from an anonymous source by German daily Sueddeutsche Zeitung and then shared with more than 100 media groups through the International Consortium of Investigative Journalists (ICIJ).

After a year-long investigation into the papers, which come from around 214,000 offshore entities and cover almost 40 years, the first wave of revelations was published Sunday, detailing the hidden financial activities of 140 political figures.

On Wednesday, Swiss police searched UEFA's Geneva offices as part of a probe into a Champions League television rights deal signed by Gianni Infantino before he became the president of world football's governing body.

The Panama Papers purportedly showed that newly elected FIFA president Gianni Infantino had signed TV rights contracts for the Champions League with a company headed by two defendants later caught up in a corruption scandal.

Infantino, who was UEFA's legal director at the time he did the deals for the 2006 and 2007 tournaments with Argentinian TV rights specialists Hugo and Mariano Jinkis, told AFP he was "dismayed" by the claims and denied any wrongdoing.

The father and son team are fighting extradition from Argentina to the United States where prosecutors allege they paid tens of millions of dollars in bribes to win various contracts.

The Panama Papers claimed another scalp Wednesday when Uruguayan Juan Pedro Damiani resigned as an ethics judge for world football body FIFA after he was also named in the leaks.

Piling pressure on FIFA, already reeling from a vast bribery scandal, Uruguayan Juan Pedro Damiani resigned as an ethics judge after he was linked in the papers to another disgraced football official wanted in the United States.

In Iceland, the authorities called elections in the autumn and appointed agriculture minister Sigurdur Ingi Johannsson as premier after his predecessor was forced out over allegations he hid millions of dollars of investments in the country's banks.

Mr Sigmundur David Gunnlaugsson was the first political scalp of what is thought to be the biggest ever leak of inside information in history.

Though not illegal in themselves, offshore financial transactions may be used to hide assets from tax authorities, launder the proceeds of criminal activities or conceal misappropriated or politically inconvenient wealth.

People close to Russian President Vladimir Putin, Chinese President Xi Jinping's relatives, and film star Jackie Chan have all been named as owning offshore accounts with Mossack Fonseca.

But the Panama law firm also counted criminals among its clients, including "drug traffickers from Mexico, Guatemala and Eastern Europe" and people and companies under US and European sanctions, said Sueddeutsche Zeitung.

Investigators around the world, including in Australia, the Netherlands, El Salvador and Costa Rica, have all announced probes following the leak. A judicial source said Spain had opened a money-laundering probe into the law firm.

Many of the world's top banks have also been named in the leaks, including HSBC, UBS, Credit Suisse and Societe Generale, as creating thousands of offshore companies.