Are You Interested in Data? The Panama Papers

A whopping 2.6 terabytes of data, the Panama Papers are the single largest leak of incriminating information in human history. The documents contain the business dealings and customer information of the Panamanian law firm and corporate service provider Mossack Fonseca, founded in 1986.

This is the question an anonymous contact by the name “John Doe” sent to the German newspaper Süddeutsche Zeitung (SZ) about a year ago before proceeding to disclose over 11.5 million secret files that have become known worldwide as the “Panama Papers.” A whopping 2.6 terabytes of data, the Panama Papers are the single largest leak of incriminating information in human history. As Forbes Contributor, Michael Fortik put it: “First we had Wikileaks. Then we had Snowden. Now we have the Panama Papers.” The documents contain the business dealings and customer information of the Panamanian law firm and corporate service provider Mossack Fonseca, founded in 1986.

The reach of the Panama Papers is still being uncovered––its fallout still implicating more and more politicians, businessmen, and other powerful officials. In order to thoroughly investigate the documents, Süddeutsche Zeitung has partnered with the International Consortium of Investigative Journalists (ICIJ), a non-profit project of the United States’s Center for Public Integrity. To date, over 400 journalists and data specialists are working to decode the documents––find names, make connections, and ultimately release article after article detailing their findings. As many as 140 politicians, associates, ministers, and other elected officials from 50 countries have been linked to hiding financial assets in 21 offshore tax havens around the world. Twelve current and former heads of state are among those found in the documents. In all, the individual wealth found in the documents amounts to 21-32 billion dollars, while corporate money numbers in the trillions. See the ICIJ’s “Power Players” for a detailed overview of those involved, but some of the most notable are listed below:

Sergey Roldugin: Close friend of Russian President Vladimir Putin

Sigmundur Davíð Gunnlaugsson: Former Prime Minister of Iceland

Mauricio Macri: President of Argentina

Petro Poroshenko: President of Ukraine

Deng Jiagui: Brother-in-law to Chinese President Xi Jinping

Khalifa bin Zayed bin Sultan Al Nahyan: The Emir of Abu Dhabi

Ian Cameron: Father of British Prime Minister David Cameron

Salman bin Abdulaziz bin Abdulrahman Al Saud: King of Saudi Arabia

Because I cannot begin to explain the details of each of these stories in this brief article––as each involves a unique web of connections and channels to divert wealth––I recommend this guide on the “six biggest revelations from the Panama Papers (so far)” to all OCA readers interested in further information. Below are some highlights and major take-aways.

The Response of Mossack Fonseca

Mossack Fonseca specializes in offshore accounts and shell companies, which are often labeled “hollow” because they do not technically conduct business. Shell companies are more like storage units in others’ names designed to hide who truly owns the assets they contain––owning things on behalf of others. Though it’s possible to use shell companies for legitimate reasons, such as holding funds during complicated transactions or guarding trade secrets, they are associated with tax evasion, fraud, and money laundering. (For detailed graphics of which tax havens Mossack Fonseca uses and where its intermediaries operate, please see the Panama Paper’s Key Figures as listed by the ICIJ.)

In an interview with CNBC, Mossack Fonseca’s co-founder, Jürgen Mossack, denied any knowledge that his company’s clients included, for example, friends of Putin and at least eight current or former members of China’s Politburo Standing Committee. Mossack explained that it is the media who informed him of these clients. On its website, Mossack Fonseca has released a Statement Regarding Recent Media Coverage, at the beginning of which, the firm states:

Recent media reports have portrayed an inaccurate view of the services that we provide and, despite our efforts to correct the record, misrepresented the nature of our work and its role in global financial markets. These reports rely on supposition and stereotypes, and play on the public’s lack of familiarity with the work of firms like ours. The unfortunate irony is that the materials on which these reports are based actually show the high standards we operate under.

When asked: “Do you feel you have a moral obligation to know who is using your services and what they’re using their services for?” Mr. Mossack replied, “we have an obligation to know that the services are being used in a proper and legal way. We have the obligation to know that nothing illegal is going to be done with that company.” He maintains that he has lived up to this standard.

Featured in a recent BBC Panorama episode titled The Secrets Of The Super Rich, Australian Senator Sam Dastyari posed the rhetorical question: “What is the business model of these tax havens?” He answers remarking: “Be it the Cayman islands, the British Virgin Islands, Panama…the business model is built around, ‘we will allow you to engage in practices for a small fee that would otherwise be illegal in your host country.’” In the same feature, James Henry of the Tax Justice Network explains: “Tax havens have low tax jurisdiction compared to other places. Non-residents can take advantage of the fact that they’re not really taxed on their income, or their capital gains, or their estates, even though they have planted companies there.”

Speaking at a White House Press Conference, U.S. President, Barack Obama commented: “We’ve had another reminder with this big dump of data coming out of Panama that tax avoidance is a big global problem. It’s not unique to other countries, because frankly there are folks here in America who are taking advantage of the same stuff. A lot of it’s legal, but that’s exactly the problem. It’s not that they’re breaking the laws; it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by.” Drawing Mossack, Dastyari, Henry, and President Obama’s comments together, one draws the simple and obvious conclusion––just because it’s legal, doesn’t make it right. One might add that, even though it is not a main focus of the Panama Papers, the U.S. ranks third, behind Switzerland and Hong Kong, on the Tax Justice Network’s Secrecy List.

Funding Violence, Crime, War and Terrorism

More important than the individuals incriminated by the Panama Papers, are the indirect victims of offshore finance and a system that permits such outrageous secrecy to go on. Even if Mossack Fonseca’s dealings with clients were technically legal, we must consider the consequences of such a large-scale, shaddy exchange of capital. Wolfgang Krach, Editor in Chief of Süddeutsche Zeitung, writes under a “What Needs to be Revealed” page of the newspaper’s website:

So far, it has commonly been known that rich people and companies use offshore firms to avoid – as they see it – annoying taxation as much as possible. This is already shameless and violates the societal contract, because these taxes are desperately needed for national budgets. The missing money can’t be used for community purposes: the construction of schools, rail tracks and public housing. But the offshore problem goes far beyond that. Apparently terror groups are using this system to finance themselves, as SZ’s stories will show. Criminal regimes in Syria and elsewhere are presumably capable of bypassing sanctions imposed by the international community.

In its introductory video, The ICIJ details three examples of victimization Mossack Fonseca facilitated:

  1. Weapons Finance: According to a BBC article, “Mossack Fonseca worked with 33 individuals or companies who have been placed under sanctions by the US Treasury, including companies based in Iran, Zimbabwe and North Korea. One had links to North Korea’s nuclear weapons programme.”
  2. Sex Trafficking and Rape: Paedophiles in Russia kidnapped, raped, and then sold orphan girls as young as 13. The ringleader of this organization was a client of Mossack Fonseca. When the firm learned of the man’s sex trafficking business, Mossack Fonseca determined they were not legally obligated to report the activities.
  3. Oil Field Business and Local Poverty: An oil business in Uganda escaped paying over $400 million dollars in taxes, which exceeds the nation’s annual health budget. At the same time, one in three people in Uganda lives on $1.25 a day. Hospitals in the same area near the oil field the company operates lack basic resources and services to treat the sick.

These are only three examples of the crimes carried out in the shadows. No doubt others will surface in the coming weeks, as more and more of the details of the Panama Papers, which SZ has not yet fully released, come into the light.

Professor of Law, Shima Baradaran Baughman warns that what Mossack Fonseca really teaches us is just how vulnerable we are to global networks able to mobilize funds for heinous purposes. In her article, Baughman explains that each terror attack, every act of violence, has a price. The price tag of the Sept. 11 terrorist attacks was $500,000. Within national borders, local authorities target and dismantle crime syndicates, it’s time we do the same at the international level. Baughman cites that “ISIS makes $1 million to $2 million a day in oil production” and “has obtained over $100 million in ransoms from kidnapping and collects ‘taxes’ from the 6 million people it has gained control over.” Other experts, such as Luis Moreno Ocampo, the first Prosecutor of the International Criminal Court, have made similar calls for more attention on the financing of terror networks and international criminals.

On 8 April, United Nations Independent Expert on foreign debt and human rights, Juan Pablo Bohoslavsky, stated:

The “Panama Papers” underscore the need to make public disclosure of beneficial ownership information legally binding in all countries. States must put an end to such harmful banking secrecy, for which there is no meaningful justification. We need to move to a global system of automatic exchange of tax information which ensures that developing countries can benefit from it on an equal footing. Financial institutions and intermediaries facilitating tax evasion, corruption or other criminal activities must be also held to account.

However, such a task requires cooperation at the global level. Individual countries must pass legislation to end secrecy and the world of shadows for the sake of the millions of innocent victims of corruption and greed around the world. These victims should really be the beneficiaries of global trade, development, and information exchange in the first place. It is shameful this information was kept secret from the world; now all we can do is learn from each case, so as to tailor both legislation and policy in order to prevent these crimes and shady business from happening again.

This article was written by Anthony Comeau. Please send an email to to get in touch.
Photo Credit: Christopher Dombres via Flickr

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