It sounds like the exposition for a tech thriller novel. The biggest data leak in history. The world’s rich and powerful exposed for hiding their massive wealth in offshore corporations to evade taxes. The only thing missing is a central plotline about a young, misunderstood genius hacker. Throw in some death threats and a romance, and you’ve just about got the rights to the film version.
The Panama Papers, made up of approximately 11.5 million leaked documents, are a real-life exposé of the world’s elite. The New York Times reported that an anonymous source who introduced himself to journalists at German newspaper Süddeutsche Zeitung with, “Hello, this is John Doe. Interested in data?” leaked 2.6 terabytes of data from the servers of Panamanian law firm Mossack Fonseca. The documents contained information on the opening of offshore shell companies through the firm.
Because the documents were too great in number for Süddeutsche Zeitung’s team of five investigative journalists to handle on their own, they decided to investigate the data in cooperation with the International Consortium of Investigative Journalists, according to the Times. They spent over a year crosschecking the documents, and they still aren’t done.
Mossack Fonseca is a law firm based in Panama, said to be the fourth-largest offshore law firm in the world, The Guardian reported. It operates in “tax havens” like Switzerland, the British Virgin Islands and Cyprus. The firm has vehemently denied any wrongdoing, saying it carries out “due diligence” on all its clients.
Strictly speaking, creating an offshore company is not illegal. In fact, sometimes it even makes sense in some business transactions. However, offshore companies can also be used for shadier purposes like tax avoidance or money laundering. According to Süddeutsche Zeitung, “concealing the identities of the true company owners was the primary aim in the vast majority of cases” they investigated.
Concealing your identity in a shell corporation might make sense if you’re, say, a celebrity trying to buy a house without your name on public real estate records. Or, you could be like the (now former) prime minister of Iceland who owned a company that had huge investments in three major Icelandic banks that collapsed during the 2008 financial crisis — he was in charge of overseeing a deal with the bank’s claimants, including himself, according to the BBC.
Among the others indicated in the papers is Russian president Vladimir Putin, who has a trail of about $2 billion leading to him, The Guardian reported. None of the money is under his name, but the documents suggest that people in his inner social circle have earned millions from deals that must have been secured by him.
The president of the Chilean branch of Transparency International, a German-based firm that aims to root out corporate and political corruption worldwide, had to resign after being linked to at least five offshore corporations. For a complete list of all the public officials that are a part of the document dump, ICIJ has created an interactive graphic here.
There are a lot of implications here, but immediate action is unclear. First of all, not all of the dealings may have been illegal. It will take some time to determine whether or not many of these officials are actually criminally liable. But the big question here is how so many public officials in so many different governments managed to accumulate this much money.
The Panama Papers are a rude awakening into the global goings-on of the wealthy elite. They confirm what we already essentially knew was probably going on in places like Russia and China, but also show that countries that we may consider to be fairly liberal and open, like Iceland, are also involved in this network. The world has done very little to establish some kind of global standard for corporate taxation.
Relatively speaking, there has not been that much impetus until now, but with the release of all these documents, perhaps the global outcry will be strong enough to push for more regulation. After all, the initial release was surely just the tip of the iceberg. There is no doubt that more people may be implicated in the weeks to come.
