Cover photo: https://panamapapers.icij.org/
By Nicole Tse, Updated April 8, 2016
140 politicians and public officials from around the world are in trouble thanks to a year’s worth of hard work by the International Consortium of Investigative Journalists, the German newspaper Süddeutsche Zeitung, and more than 100 of their reporting partners.
The ICIJ, a nonprofit global network of investigative journalists in more than 65 countries, recently leaked 11.5 million documents from a Panama-based law firm called Mossack Fonseca. These documents, spanning the decades between 1977 and 2015, reveal the offshore holdings of people in more than 200 countries, including politicians, celebrities, drug lords, and terrorist organizations. Also implicated are 12 current and former world leaders, some of whom have built their careers on an anti-corruption platform.
The majority of the offshore companies created by Mossack Fonseca to hold their clients’ money are located in the British Virgin Islands; the second-most popular location is Mossack Fonseca’s home country of Panama. While many of these properties are perfectly legal, Mossack Fonseca has also worked with banks and other law firms to hide clients’ wealth by manipulating official documents and facilitating unethical transactions.
The contents of the leaked documents have also led to accusations against Mossack Fonseca of money laundering. Under national and international policies, companies such as Mossack Fonseca are supposed to be on the alert for possible money laundering or tax evasion, especially if the client is a “politically exposed person”, that is, if they work for the government or are closely tied with someone who works for the government.
For example, in 2009, Mossack Fonseca sold an offshore company to a group of people led by Marllory Chacón Rossell. Chacón, also known as “La Reina del Sur”, was identified in 2012 by the U.S. government as the most active money launderer in Guatemala as well as one of the leaders of the Sinaloa Cartel. It can be concluded that the cartel, through Chacón, used the offshore company to launder millions of dollars. The blame falls on Mossack Fonseca because a simple background check would have revealed that two members of the group that bought the company already had criminal records for drug trafficking and financial crimes.
Several scandals have arisen from the leak. One involves FIFA: some of the documents from Mossack Fonseca show that Juan Pedro Damiani, a member of FIFA’s ethics committee, did business with three men who were accused during the FIFA corruption scandal. Additionally, Argentinian soccer player Lionel Messi is being investigated for tax evasion as a result of the leaked documents.
In the U.S., the leaked documents show that President Obama and then-Secretary of State Hillary Clinton pursued a free trade agreement with Panama, among other countries, despite warnings that the agreement would make it easier for rich Americans to avoid paying taxes through offshore companies and bank accounts. In 2011, they finalized and signed the agreement with Panama and effectively undermined the U.S.’s ability to combat tax haven activity in the country. This information comes at a critical time during the U.S. elections, possibly damaging Clinton’s bid for the Presidency.
Other scandals involve the prime minister of Iceland, Sigmundur David Gunnlaugsson, and his wife, who hid their ownership of an offshore company—a violation of parliamentary ethics rules and a conflict of interests. This triggered protests in the country, and on April 5th, Gunnlaugsson announced that he would be resigning from his position.
Similarly exposed politicians include the prime minister of Pakistan, the former and current presidents of Brazil, several members of China’s ruling party, and the presidents of Azerbaijan, Argentina, Ukraine, and Russia. It remains to be seen if any of these government officials will follow Gunnlaugsson’s example.
To learn more about the Panama Papers, visit https://panamapapers.icij.org/