What we know so far about the “biggest leak in history”
On Sunday April 3, 2016, the world witnessed the largest data leak in history, after 11.5 million documents from Panamanian law firm Mossack Fonseca were released by a massive global reporting partnership of over 100 publications led by the International Consortium of Investigative Journalists (ICIJ).
The documents—dubbed the Panama Papers—highlight Mossack Fonseca’s financial dealings, revealing a myriad of suspicious offshore accounts and shell companies in tax havens like Panama, the British Virgin Islands, and the Seychelles.
The documents were originally brought to German newspaper Süddeutsche Zeitung last year by an anonymous source using the pseudonym “John Doe.” The publication received a torrent of approximately 2.6 terabytes of leaked information, containing reports on the offshore financial ventures of many of the world’s elite over the last four decades.
[pullquote align=”left” cite=”” link=”” color=”” class=”” size=””]…source did not seek financial compensation…[/pullquote]The source did not seek financial compensation, and asked only for encryption and other security measures: “There are a couple of conditions. My life is in danger. We will only chat over encrypted files. No meetings, ever. The choice of stories is up to you.”
When asked why the source leaked the documents, the reply was: “I want to make these crimes public.”
Süddeutsche Zeitung quickly realized that the information they received was far too much for them to take on alone, and brought it to the Washington, D.C.-based ICIJ.
Although there is nothing unlawful about using offshore companies, the systematic flaws within the laws of tax havens like Panama make it easy for the world’s wealthiest elite to engage in illicit activities.
The typical methods of tax evasion are known as shell companies, and these are established corporations that do not conduct any actual business. Instead, they are used as vehicles for various financial maneuvers, or are kept dormant for future use in some other capacity. Shell companies can be legally used to protect business information and plans, ensure privacy, and allow the owner to purchase property in certain countries. They are often illegally used to hide assets from creditors, avoid taxation, and for money laundering.
The Panama Papers reveal a multitude of politicians, celebrities, and corporations that are in some way connected to offshore financial dealing, but the overall political and legal fallout is still very uncertain. Among the celebrities whose names appear on the list are Simon Cowell, Jackie Chan, Lionel Messi, and the late Stanley Kubrick. A member of FIFA’s Ethics Committee, who are endeavouring to reform the scandalous governing body of football, also appears on the list.
The political implications of the documents are monumental, with several major world leaders already coming under fire for their involvement in this generational scandal. Twelve national leaders are among 143 politicians, whose families and close associates from around the world, have been found using offshore accounts.
The most significant monetary trail leads directly to Russian President Vladimir Putin, whose associates have taken over $2 billion worth of assets and placed them into offshore shell companies. The first is Sergei Roldugin, a Russian cellist and businessman, who is not only described as President Putin’s best friend, but is the godfather of his daughter. The second is the owner of a ski resort where President Putin’s daughter was married. There have been speculations that these two associates have acted as proxies, and that President Putin is the owner of the accounts. President Putin has dismissed the Panama Papers as an American conspiracy to undermine Russian unity and weaken his support going into the expected election in September.
In the U.K., Prime Minister David Cameron has faced ongoing protests demanding his resignation after it was revealed that he profited from his unreported stake in his late father’s offshore investments. In an effort to appease the protestors, Prime Minister Cameron made the unprecedented decision to publicly reveal his personal tax records. Prime Minister Cameron’s decision immediately backfired, as it now appears that his mother deposited £200,000 into his account in 2011, allowing the family to evade a potential £80,000 inheritance tax.
In the Nordic nations, On April 5, 2016, Sigmundur Davíð Gunnlaugsson resigned as Iceland’s prime minister. His party claims that this is only a temporary measure. The move comes after Gunnlaugsson faced allegations that he hid a major financial conflict of interest from voters when he was elected as a member of parliament in 2009. The accusations came forth when Gunnlaugsson was named in the Panama Papers as a co-owner of a company in the British Virgin Islands, used to hold investments with his wealthy partner and later wife.
The Panama Papers have shaken the political spectrum across the globe, with high-standing leaders in China, Iran, Saudi Arabia, and Pakistan all being named in the documents. On April 10, 2016, Ukrainian Prime Minister Arseniy Yatsenyuk submitted his resignation amid the corruption crisis surrounding the nation, after President Petro Poroshenko was named by the Panama Papers.
It is unclear how many of those named by the documents have committed illegal acts through these tax havens, but a great deal of suspicious activity has been uncovered by the Panama Papers.
A Mossack Fonseca partner has been quoted as saying, “95 per cent of our work coincidentally consists in selling vehicles to avoid taxes.”
If that is indeed the case, the political and economic aftermath of the Panama Papers could prove to be catastrophic.