What Are the Panama Papers?
Offshore bank accounts have been a scandal for a long time. Many people have heard about wealthy individuals keeping caches of money in offshore accounts in order to evade local taxation laws, thus allowing them to illegally avoid paying millions of dollars worth of taxes in some cases. However, the Panama Papers scandal reveals just how extensive the offshore funds of wealthy people have really been over the course of the last forty years.
The Panama Papers scandal is a historic leak of financial records. These leaked records came from the Mossack Fonseca law firm, which is based in Panama and has branches in more than thirty-eight other areas. As such, the leaked records have come to be known as the Panama Papers. As many as 11.5 million financial records have been leaked.
The cause of the leak was an anonymous source. According to Mossack Fonseca, the leak was not the result of someone who was on the inside. The John Doe claimed that his or her life was in danger, but still wanted to be able to make all of the terrible crimes public. The German newspaper Suddeutsche Zeitung journalists received an astonishing 2.6 terabytes of data from the John Doe, making this the single largest data leak in journalism history. To put the size of the leak in perspective, it is larger than the 2010 WikiLeaks leak of the American diplomatic cables, and Edward Snowden’s release of intelligence documents in 2013.
The People in the Panama Papers
Many different rich and powerful people are in the Panama Papers, including celebrities, professional athletes, politicians, drug lords, and billionaires. Icelandic Prime Minister Sigmundur David Gunnlaugsson, his wife, movie star Jackie Chan, and football star Lionel Messi have all been found in the documents. This offshore leak will now shine light on more than 140 public officials and politicians. People in more than 200 different territories and countries are involved in this leak, so this offshore leak should truly be regarded as an international scandal. However, its implications for the international community at large are truly staggering.
The people in the Panama Papers have responded in different ways. The Kremlin has more or less dismissed the charges out of hand. Other people have just denied that what they did was illegal. Thus far, few people seem to be taking responsibility.
Mossack Fonseca and The Corruption of the Offshore Financial Industry
Law firm and financial services provider Mossack Fonseca has its own global network that has spread over 42 different countries, with about six hundred different people involved. Every single one of these individuals is now under suspicion and may have been directly involved in their illegal and unethical operations. The firm acted as an agent for at least 300,000 different companies, but rarely worked with them directly. The intermediaries that they used might be guilty of crimes in their own right.
Mossack Fonseca has been assisting the rich and famous in evading taxes and keeping money from the rest of the world for a long time. It is almost disturbing just how long it took for an offshore leak of this magnitude to occur. All of this leaked data spans an astonishing four decades. The global economy, incidentally, started to dip around the 1970’s. The 1980’s is famous for being a decade that marked the reversal of some of the economic growth and prosperity that occurred throughout the middle of the twentieth century. It is possible that some of the offshore activities and tax evasion from so many of the world’s elites helped contribute to this terrible situation.
What is interesting about the situation is that a lot of the services that these organizations provide are technically legal, which is one of the many reasons why they were able to get away with what they did for so long. However, banks, law firms, and other organizations have the duty to make sure that their clients are not part of tax evasion schemes, political conspiracies, or criminal enterprises. These leaked documents reveal that an astonishing proportion of the banks and law firms involved with the offshore financial industry have been consistently unable to meet even this very low standard.
The Future of the Offshore Financial Industry
It is worthwhile to note that the offshore financial industry is going to change forever as a result of this tremendous leak of data. The data contained in these documents can be used to track the dealings and operations of the offshore financial industry on a very minute level. The flow of money through the global financial system has been obscured for far too long, and that is one of many reasons why the offshore financial industry has been able to operate like this for so long.
Thanks to the investigation into this offshore leak, authorities all around the world are going to have a much better idea of how the offshore financial industry works. They will be able to discern the daily operations that made it happen, as well as the long-term operations that allowed this ultimately unsustainable situation to function as long as it did. Offshore tax havens mainly have secrecy going for them, and the loss of this secrecy might shake the entire foundations of offshore tax havens.
Reaction of the International Society
The international community has been horrified that the Panama Papers scandal has taken place. Barack Obama and many other prominent individuals are now pushing international tax reform efforts. Journalists writing in more than twenty-five different languages have been working together in the largest media collaboration in history. Brazil has launched what it is calling Operation Car Wash in order to thoroughly investigate Mossack Fonseca and arrest everyone responsible for these crimes. German law enforcement agencies have been raiding local banks. This is one of the biggest crimes of the twenty-first century.
Mossack Fonseca, predictably, is denying responsibility. They are primarily placing the blame on the lawyers, accountants, and banks who served as their intermediaries. The firm has issued some generic statements of regret, but they overall are hiding behind the client confidentiality responsibilities that more or less allowed this scam to go on in the first place.
The firm’s response has been oddly petulant in that they also claim that the information is being taken out of context and that journalists have no right to be using the information. It seems that they are responding to being caught about as well as their clients.