The Panama Papers are an unprecedented leak of 11.5m files from the database of the
world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from
an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them
with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared
them with a large network of international partners, including the Guardian and the BBC.
What do they reveal?
The documents show the myriad ways in which the rich can exploit secretive offshore tax
regimes. Twelve national leaders are among 143 politicians, their families and close
associates from around the world known to have been using offshore tax havens.
A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist
called Sergei Roldugin – is at the centre of a scheme in which money from Russian state
banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter
Katerina got married.
Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister;
Ayad Allawi, exinterim
prime minister and former vicepresident
of Iraq; Petro Poroshenko,
president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister
of Iceland, Sigmundur Davíð Gunnlaugsson.
An offshore investment fund run by the father of British prime minister David Cameron
avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign
its paperwork. The fund has been registered with HM Revenue and Customs since its
inception and has filed detailed tax returns every year.
A lengthier overview of the revelations can be found here.
What is Mossack Fonseca?
It is a Panamabased
law firm whose services include incorporating companies in offshore
jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee.
Other services include wealth management.
Where is it based?
The firm is Panamanian but runs a worldwide operation. Its website boasts of a global
network with 600 people working in 42 countries. It has franchises around the world, where
separately owned affiliates sign up new customers and have exclusive rights to use its
brand. Mossack Fonseca operates in tax havens including Switzerland, Cyprus and the
British Virgin Islands, and in the British crown dependencies Guernsey, Jersey and the Isle
of Man.
The transfer of wealth
How big is it?
Mossack Fonseca is the world’s fourth biggest provider of offshore services. It has acted for
more than 300,000 companies. There is a strong UK connection. More than half of the
companies are registered in Britishadministered
tax havens, as well as in the UK itself.
How much data has been leaked?
A lot. The leak is one of the biggest ever – larger than the US diplomatic cables released by
WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward
Snowden in 2013. There are 11.5m documents and 2.6 terabytes of information drawn from
Mossack Fonseca’s internal database.
Panama Papers: Biggest leak in history
Are all people who use offshore structures crooks?
No. Using offshore structures is entirely legal. There are many legitimate reasons for doing
so. Business people in countries such as Russia and Ukraine typically put their assets
offshore to defend them from “raids” by criminals, and to get around hard currency
restrictions. Others use offshore for reasons of inheritance and estate planning.
Are some people who use offshore structures crooks?
Yes. In a speech last year in Singapore, David Cameron said “the corrupt, criminals and
money launderers” take advantage of anonymous company structures. The government is
trying to do something about this. It wants to set up a central register that will reveal the
beneficial owners of offshore companies. From June, UK companies will have to reveal their
“significant” owners for the first time.
What does Mossack Fonseca say about the leak?
The firm won’t discuss specific cases of alleged wrongdoing, citing client confidentiality. But
it robustly defends its conduct. Mossack Fonseca says it complies with
antimoneylaundering
laws and carries out thorough due diligence on all its clients. It says it
regrets any misuse of its services and tries actively to prevent it. The firm says it cannot be
blamed for failings by intermediaries, who include banks, law firms and accountants.
On Monday, May 9, a trove of information from the Panama Papers will hit the web. Mostly,
it will be a list of names.
And that’s a big deal: There’s a battle going on over whether you should have to link your
real name to the things you own, unravelling the lucrative industry that has sprung up around
creating “shell companies” to hide the true owners of assets.
This longrunning
debate was thrust into the public spotlight after a hacker penetrated the
email
system of a Panamanian law firm called Mossack Fonseca. The stillunknown
hacker
approached the German newspaper Süddeutsche Zeitung, which brought in reporters
through the International Consortium of Investigative Journalists (ICIJ) to help sift through
11.5 million documents that came from the law firm, which are now known as the Panama
Papers.
Last month, the initial splash of stories from media outlets with access to the documents
made waves. Most notably, the Icelandic prime minister’s previously unknown links to an
offshore company that owned millions of dollars of bonds issued by the country’s troubled
banks led to his resignation. Other officials identified in the papers faced awkward questions
about their offshore holdings.
But now that the initial batch of Panama Papers stories has been published, what should be
done with all the documents? Many media outlets excluded from the consortium, Quartz
included, are eager to see the source material. So too are law and tax enforcement
authorities around the world. But so far the documents haven’t been released from the
database built by the journalists involved in the consortium.
The ICIJ says that next week they will add the information from the Panama Papers to a
public database that includes information from a similar, smaller leak in 2013. In most cases
it will not be the actual documents, but rather the names of shell companies and beneficial
owners that can be gleaned from the files. For example, here’s a visualization from the 2013
database of some offshore companies set up by the heir to the Mellon fortune:
(ICIJ)
Connecting James R. Mellon to companies like Benelm Limited matters to tax authorities
because, before the 2013 leak, all they could see is that Benelm was directed by an attorney
in the British Virgin Islands. But as well as revealing the true ownership of shell companies,
the 2013 leak also included documents that showed Mellon was moving millions of dollars
worth of his inheritance through the companies.
The fear with this new Panamaderived
database is that, without access to full documents,
reporters and law enforcement won’t be able to understand what these shell companies are
doing. But ICIJ must be extremely careful not to reveal too much information about the
people in these documents, since shell companies can be used for entirely benign and legal
purposes. Hence this disclaimer:
Unlike, say, the Wikileaks database of leaked US diplomatic cables, which made for
fascinating reading for the layman, the Panama Papers database will largely matter to
investigators seeking to link companies that have already raised suspicions with their true
owners, or link people already suspected of shenanigans with the companies that may serve
as their conduits for shady dealings.
The secrets of what went on behind closed doors at Mossack Fonseca—including, for
example, emails
revealing that their staff apparently scrambled to destroy evidence of its
connections to Argentine corruption—will not feature in the database. For the full extent of
those secrets, the public must wait for the consortium—or the court room.
They list more than 200,000 shell companies, foundations and trusts set up in tax havens
around the world.
The John Doe statement came shortly before US President Barack Obama delivered an
address on the economy, in which he cited the Panama Papers as highlighting the problem
of corruption and tax evasion.
He said the US would require banks to identify those behind shell corporations. Mr Obama
said his administration's actions would allow it to do a better job of making sure people paid
taxes.
'Immunity'
Although the name John Doe is used, the gender of the source has not been revealed.
In the statement, The Revolution will be Digitized, John Doe starts by saying: "Income
equality is one of the defining issues of our time."
He adds: "Banks, financial regulators and tax authorities have failed. Decisions have been
made that have spared the wealthy while focusing instead on reining in middleand
lowincome
citizens."
BBC graphic comparing size of Panama Papers data leak to other recent leaks
He goes on to say: "Thousands of prosecutions could stem from the Panama Papers, if only
law enforcement could access and evaluate the actual documents.
"ICIJ and its partner publications have rightly stated that they will not provide them to law
enforcement agencies.
"I, however, would be willing to cooperate
with law enforcement to the extent that I am
able."
But he adds: "Legitimate whistleblowers who expose unquestionable wrongdoing, whether
insiders or outsiders, deserve immunity from government retribution."
'Sordid acts'
Responding to speculation about his or her identity, John Doe's statement says: "For the
record, I do not work for any government or intelligence agency, directly or as a contractor,
and I never have.
President Barack Obama, 6 May
AP
The statement came shortly before President Obama called for action on tax evasion
"My viewpoint is entirely my own, as my decision to share the documents with Suddeutsche
Zeitung and the International Consortium of Investigative Journalists (ICIJ), not for any
specific political purpose, but simply because I understood enough about their contents to
realise the scale of the injustices they described."
John Doe says that global judicial systems have "utterly failed to address the metastasizing
tax havens spotting Earth's surface".
He says: "I decided to expose Mossack Fonseca because I thought its founders, employees
and clients should have to answer for their roles in these crimes, only some of which have
come to light thus far.
"It will take years, possibly decades, for the full extent of the firm's sordid acts to become
known."
Panamabased
Mossack Fonseca says it was hacked by servers based abroad and has filed
a complaint with the Panamanian attorney general's office.
It says it has not acted illegally and that information.
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