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Panama Papers

Updated: Apr 6, 2016
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Panama Papers: How to hide a billion dollars?


A massive leak of documents from Mossack Fonseca has revealed a huge case of money-laundering. One of the reasons why the Panama Papers has made the newsline lately is because it does not include shady characters or incredulous identities - the Panama Papers include famous politicians, entertainers, and billionaires.


Mossack Fonseca is also one of the more secretive Panamanian law firms in the world, catapulting this data leak as one of the largest in history. The files show how the clients that work with Mossack Fonseca are able to launder money in offshore accounts, helping them dodge taxes and sanctions from their home countries. Mossack Fonseca is not only a place where businesses and financial identities can launder their funds, but it fosters open violations of several international regulations. Mossack Fonseca even offered several millionaires ownership records to hide their money from authorities, which is a breach of international laws.


Many people have drawn a parallel between the Panama Papers and the data released by WikiLeaks in 2010. The information set forth by the WikiLeaks dwarfs the amount released by Panama Papers. A German news outlet was the first to note that the Panama Papers consisted of more than 11 million documents and almost 5 million emails. This leak much larger than the amount of data that was released by Edward Snowden and the WikiLeaks scandal. Wiki leaks only released about 1.7 million documents compared to Panama Papers’ 11.5 million. Even Snowden, the person who spearheaded the WikiLeaks data breach noted that The Panama Papers is “the biggest leak in the history of data journalism.”


What is Mossack Fonseca?


The firm was founded by Jurgen Mossack, in the late 1970s. Ever since then, the company exploded and became a global institution that has employed hundreds of people around the world, highlighting its ability to create tax shelters for the wealthy. The founder of Mossack Fonseca is also a vague character that has an unsavory life story. His father moved the family to Latin America after World War II. He offered to spy for the CIA to watch on communist Cuba. To this day, Germany’s Federal Intelligence Service will not release documents relating to Jurgen Mossack’s father and his involvement with the CIA, noting "possible security risks.


The firm officially became Mossack Fonseca in 1986. According to the Panama Papers, Mossack found that he was involved with a company for men who had robbed 3.5 tons of gold. Even though the company wasn’t involved illegally, it opened the door for the company to start investing in money to banks and properties that were illegitimately sourced. Mossack Fonseca was always open about being a tax haven for the global elite. They advertise services in the Netherlands, United Kingdom, Hong Kong, British Virgin Islands, Nevada, and Wyoming. Which makes sense, since Nevada and Wyoming have very loose regulations and rules when it comes to hiding assets.


Legal and regulatory troubles abroad has slowly inspired the data leak. In 2012 and 2013, regulators fined the company for violating money laundering practices, including accounts associated with Egyptian dictator Hosni Mubarak. Even after its brush with the law, Mossack Fonseca was still in the good graces of the international community. This wasn’t a happenstance – Mossack Fonseca has close ties with major politicians, like Roman Fonseca - who was anointed advisor for Panamanian President Juan Carlos Varela in 2014.


Who Were Involved in the Panama Papers?


The Panama papers exposed the money-laundering activities of 12 current or past government officials, including several dictators that were accused of looting their countries. The effects of the Panama Papers were far-reaching, as it also offered tax protection for 60 of these former government officials. Some of the more famous individuals involved with the Panama Papers involve:


Vladimir Putin. Vladimir is busy trying to spin in the phenomenon surrounding the Panama Papers as an attempt by the West to discredit and damage Russian powers. Vladimir Putin had millions of dollars connected with Mossack Fonseca. The citizens of Russia understand that corruption is rampant in the government, and the Panama Papers only underlines these accusations.


Petro Poroshenko. The president of Ukraine, Petro Poroshenko also has ties to Mossack Fonseca. He is on the record of saying that the assets that were involved in the offshore leak, were clean and met the fiscal standards and requirements for Ukraine policy. This is also another country that has been inundated with complaints by its citizens for corruption and legal bribery.


The father of David Cameron. Funds were allocated offshore, specifically the Bahamas – which is shielded from tax. To rebuke the thought that he is gaining from offshore banking practices, he has said that he would publicly publish his tax returns.


How do tax havens work?


Even though there are many legitimate banking practices involving tax havens, tax havens are typically enacted to hide the primary owner or operator of funds. By avoiding to pinpoint the origin of money, many people can avoid paying taxes on it. Some of the main allegations surrounding tax havens are that it creates shell companies. Shell companies have the appearance of being legitimate businesses, but they are just that – shells that do not have any real operations. They do nothing to benefit society or local citizens – it exists mainly to do nothing but manage money while hiding the person who owns it.


Who leaked the Panama papers?


German newspaper Sueddeutsche Zeitung released the 2.6 terabytes of leaked Panama Papers to the International Consortium of Investigative Journalists. This organization is an active global network of reporters who collaborate to ensure public integrity of international journalism and putting an emphasis on accountability of power. After the information was passed on to ICIJ, they handed the information to more than 107 media organizations.


What happens now? The leaking means that the rich and powerful are quick to hide the money, and people who have access to power have a close relationship with corruption. This idea isn’t far-fetched or particularly mysterious. However, it puts a spotlight on the complex mechanisms when it comes to transferring and allocating money away from tax authorities. It’s an international issue. Tax authorities will now go through the information to see if any laws have been broken. For this to bring about evolution and critical accountability, this type of information needs to be made public. It has been noted that Britain should take responsibility for the network of tax havens across the British Virgin Islands, which is an area that is still under British rule.

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