The Panama Papers: Everything You Need To Know
The impact of the Panama papers was felt instantly around the world.
In 2016, 11.5 million documents were leaked from Mossack Fonesca, a law firm based in Panama, which shined a harsh, detailed light on the maneuvers of a litany of powerful, rich, and famous to protect their wealth through tax havens.
The behavior was unfathomable, everything from money laundering and tax evasion to sanction dodging. And most of it was in direct violation of international law. It was the largest leak in history and the details were so striking and monumental that they seemed straight from a movie script.
Now, nearly six years later, the ramifications of the Panama Papers continue to reverberate. Here’s why.
Panama Papers: The Beginning
The Panama Papers weren’t just the largest document leak ever made; it made the 2010 Wikileaks information dump look minor in comparison.
Organized by the International Consortium of Investigative Journalists, the investigation was also one of the largest journalistic collaborations ever known, involving over 350 reporters from 80 countries.
It was an operation that required as much. The miles of documents and a year of reporting blew the lid open on what had been one of the most powerful but lesser-known lawn firms and its four decades of unscrupulous behavior.
Based in Panama with 35 locations worldwide, Mossack Fonesca was founded by Ramón Fonesca and Jürgen Mossack and quickly became one of the largest creators of corporate structures to hide asset ownership, better known as shell companies.
What was Mossack Fonseca?
Mossack Fonesca was quite popular. The deluge of documents revealed that at least 140 well-known figures around the world, everyone from celebrities and politicians to drug dealers, used the firm to hide unsavory business deals and their wealth through tax havens and companies that were extremely difficult to track.
Such means were both legal and illegal, even for the world’s elite. And they were riveting in their revelations of the meticulous lengths some of the world’s most powerful people would go to to make themselves even more powerful.
The firm offered wealth management services and administered offshore firms for a fee paid yearly. It often incorporated companies in areas such as the British Virgin Islands that acted as offshore jurisdictions.
At its height, Mossack Fonesca had franchises around the world and operated in tax havens ranging from the Isle of Man and Switzerland to Cyprus. It worked in over 40 countries and was a network of 600 people.
The leaked Panama Papers data involves more than 200,000 companies, 100,000 of which were held in the British Virgin Islands with Mossack Fonesca acting as a registered agent. Company owners rarely interacted directly with Mossack Fonseca which instead was given business instructions from accountants, trust companies, banks, or lawyers.
Most of the owners of the companies working with the firm came from China and Russia, but large numbers were also based in Hong Kong, the United Kingdom, Switzerland, and the United States.
Its downfall started with just two people.
Panama Papers: The Investigation
The documents came fast — emails, passport photos, bank statements, and more — to the desk of Bastian Obermayer, a journalist with Munich newspaper Süddeutsche Zeitung.
The source? Anonymous, a whistleblower, a John Doe who later wrote that he was motivated to leak the documents and expose Mossack Fonesca to force the company and its employees to face responsibility for their “injustices” and their role in ever-widening income inequality.
Obermayer teamed with colleague Frederick Obermayer, shared the leaked documents with the ICJJ and a team of investigative reporters was formed. Later, the documents were shared with journalistic partners around the world.
The nature and scope of the documents — and the widespread and nefarious use of offshore tax regimes — were immediately clear. Tax havens tied to dozens of prominent national leaders and hundreds of politicians, their business partners, and families were revealed to take advantage of offshore tax havens.
The leak covered a period of business activity starting from the 1970s up to spring 2016.
Name the players
The names tied to the Panama Papers were familiar. A friend of Russian President Vladimir Putin was revealed to be at the center of a scheme to hide Russian money from state banks offshore.
Iceland’s prime minister at the time, Sigmundur Gunnlaugsson took advantage of offshore wealth. So did Petro Poroshenko, then-president of Ukraine, Pakistan’s prime minister Nawaz Sharif and the former Iraqi vice president, Ayad Allawi
An investment fund run offshore by former British prime minister David Cameron’s father had all of its paperwork signed by residents of the Bahamas so the company never had to pay tax.
Current heads of state named in the Panama Papers include Khalifa bin Zayed Al Nahyan, the president of the United Arab Emirates, and Salman, the King of Saudi Arabia.
Former heads of government-linked to practices outlined in the Panama Papers, also included Silvio Berlusconi, the former prime minister of Italy, Benazir Bhutto, the former prime minister of Pakistan, and Mauricio Macri, the former president of Argentina.
Though many of the documents did not reveal illegal actions, some of Mossack Fonesca’s shell corporations were established to evade taxes, avoid international sanctions, and were used for fraud.
All told, the documents revealed a network of wealthy people, politicians, and organizations involved with 214,000 tax havens. All are now named in a searchable database compiled by the ICIJ.
Panama Papers: The Aftermath
The ramifications of the global scandal came fast. Gunnlaugsson resigned in April 2016, soon after the papers were released. In August 2017, Mongolian capital city council member Sandui Tsenduren resigned, as did politicians from Iceland to Pakistan and Spain.
Other arrests and charges related to the information outlined in the Panama Papers have been sporadic. Among the most serious: five people in Uruguay were arrested on money-laundering charges involving shell companies run by Mossack Fonesca for a drug cartel in Mexico.
Of course, one of the most prominent victims of the leak was Mossack Fonesca itself. The firm was forced to close in 2018 and many countries launched investigations into its practices. More than $1 billion has been recovered since the Panama Papers leak in the form of penalties, unpaid taxes and fines.
It all comes down to numbers…
Additionally, 10 countries over the past two years have recovered $185 million as part of investigations triggered by the Panama Papers. Those investigations are ongoing, as tax probes around the world related to companies and individuals are still open. Banks have not been immune. Police in Belgium raided a bank run by the state whose subsidiary helped clients set up more than 1,500 offshore companies.
Laws have been enacted. Panama adopted a convention that promised to share information about foreign taxpayers with other countries. Trust laws have been tightened in New Zealand to prevent further abuses; foreign trusts in the country have fallen 75% since the new law. In the United Kingdom, a law was passed making it a criminal offense for lawyers to not disclose their clients’ tax evasion. Owners of companies must now identify themselves in Ghana, one more than 80 countries who have passed such laws. And in the United States, the Panama Papers inspired Congress to pass the Corporate Transparency Act. Now, owners of United States companies must disclose their identities to the government.
It is all over, at least for some
In 2017, Mossack and Fonesca were arrested on money-laundering charges after Panamanian police raided the law firm. The pair spent two months in jail.
Germany also issued an arrest warrant for both Mossack and Fonesca for operating a criminal organization and for tax evasion but they have not directly faced charges in the country due to extradition laws in Canada.
Subsequent Mossack Fonesca leaks starting in 2018 led to other charges and investigations in countries ranging from Algeria to Colombia and Switzerland, having a huge impact on tax compliance by citizens and companies. In Germany, Deutsche Bank headquarters were raised by police as part of a money laundering investigation. At its core, the Panama Papers outlined in great detail how tax havens have led to an epidemic of income inequality that continues to rise around the world.
The Privacy World difference
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Why weren’t they affected at all?
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