The Panama Papers — the biggest data leak ever — have shed a light on how many among the rich and powerful hide their wealth from taxes, creditors and former spouses or launder their money.
The investigation conducted by more than 100 journalists from 80 countries focused on 3,500 people who owned shares in shell corporations created by the Panamanian law firm of Mossack Fonesca. They revealed ties to 12 current or former world leaders, 143 politicians, their families or close associates.
The shell companies often use the names of lawyers and accountants to hide actual ownership. One Mossack Fonseca employee is a director or shareholder with 10,000 companies. The shell companies may be legal entities, but the money is often dirty.
Among the shell companies formed by Mossack Fonseca was one for Gordon Parry, a Brit convicted of money laundering in the 1983 heist of $40 million in gold bars from a Brinks-Mats warehouse, and another for drug lord Rafael Caro Quintero, co-founder of the Guadalajara Cartel, currently a fugitive, but convicted in 1985 in Mexico for the murder of “Kiki” Camarena of the U.S. Drug Enforcement Agency.
The investigation is ongoing, with more data sent by a “John Doe,” who first contacted the German newspaper Süddeutsche Zeitung, and asked, “Interested in data?” The information was so massive — 11.5 million files in 25 languages on 214,488 corporates entities — the Washington-based International Consortium of Investigative Journalists was brought in to shepherd the project.
Among the luminaries named thus far:
Prime Minister Sigmundur Gunnlaugsson of Iceland, who was forced to resign.
Mauricio Macri, president of Argentina.
Ayad Allawi, a former Iraqi prime minister.
King Salman of Saudi Arabia.
Former Qatar emir Hamad bin Khalifa al-Thani and former Prime Minister Hamad bin Jassim bin Jaber al-Thani.
President Petro Poroshenko of Ukraine.
Associates of Russian President Vladimir Putin.
Leaders of FIFA, the world soccer federation, and Argentine superstar Lionel Messi.
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Relatives of British Prime Minister David Cameron, Pakistani Prime Minister Nawaz Sharif, Syrian President Bashar al-Assad and Kofi Anan, the former U.N. secretary of general.
The State Department has called Panama an “attractive target” for money laundering because of lax regulations. In 2009, the Organization for Economic Cooperation and Development established a transparency initiative, but Panama hasn’t complied with it.
Based on data from the World Bank, International Monetary Fund, United Nations and central banks of 139 nations, the Tax Justice Network estimates $21 trillion to $32 trillion is stashed in the offshore havens with $1 trillion to $1.6 trillion flowing in annually.
Economic woes in Greece, Italy, Portugal and much of Africa have been attributed, in part, to the loss of tax revenues. The report has prompted investigations in the United States, France, Germany, Italy, Australia, Austria, Sweden and the Netherlands.
Tax Justice Network’s Financial Secrecy Index, which ranks countries by secrecy and the scale of offshore financial activities, put Panama as No. 13. Yet the United States is No. 3, behind Switzerland and Hong Kong.
Most states, according to Panama Papers reporting, don’t require companies to disclose their beneficial owners, and registered agents have no obligation to ask.
In Delaware — home to 60 percent of the Fortune 500, where 170,000 companies were incorporated in 2015 — the state derives $1.2 billion annually for registering companies without owner identification required.
“While we talk about offshore accounts in other countries,” said Patrick Fallon, head of the FBI’s financial crimes section. “I think we have a lot of room for improvement here to promote transparency. It is a significant impediment to our investigations when we can’t determine who the true owner is of a company.”
The requirements, noted Heather Lowe, director of government affairs at Global Financial Integrity, are more rigid for a library card. “The fact that a state doesn’t think it’s important to know who owns or controls the companies it creates is truly frightening,” she said.
In addition, a lot of dirty money is hidden in real estate transactions. A New York Times investigation revealed wealthy foreigners — including 16 investigated by their home governments — have invested huge amounts in U.S. real estate through shell corporations.
One shell corporation that bought a 36-story skyscraper in New York City was a front for the Iranian government.
Even banks haven’t had to “know their customers.” That may change. The U.S. government, according to the New York Times, is proposing a customer due diligence rule to require banks to reveal the identity of individuals owning 25 percent of more of corporate accounts.
Congress is currently considering legislation to require states to maintain registries of shell company owners.
The Panama Papers should inspire lawmakers to make financial transparency a top priority, rather than allowing the wealthiest people on the planet to continue this massive rip-off.