Ambrose Evans-Pritchard, Telepgraph, April 5, 2016
The secret world of offshore banks and money-laundering has been under the microscope ever since the financial crisis. Now it is the turn of lawyers, registrars, and the hidden network of facilitators.
The treasure trove of 11.5m documents leaked – or more precisely stolen – from the Panama law firm Mossack Fonseca lifts the lid on the extraordinary practices of the global elites, and on the alleged services of off-shore legal cabinets for terrorist organisations, drug cartels, sanctions busting, and front companies of all kinds.
The files on 213,000 firms first slipped to the Suddeutsche Zeitung and then shared with the International Consortium of Investigative Journalists (ICIJ) is the biggest data leak in history. It will have long-lasting ramifications.
The avalanche of allegations has barely begun. The red-hot dossier on US citizens has not even been released. Yet the scandal has already triggered a string of criminal investigations around the world, kicking off in Australia and New Zealand within hours.
Germany’s vice-chancellor Sigmar Gabriel said the files go far beyond issues of tax evasion, touching on vital national interests and the rule of law. “It is about organized crime, evasion of UN sanctions, and terrorist finance,” he said.
“This shadow economy is a risk for global security. We must ban the anonymous letterbox companies. The international community must ostracize any country that allows these dirty dealings,” said Mr Gabriel.
Mossack Fonseca’s clients include 23 people under sanctions for helping North Korea, Russia, Iran, Syria, and Zimbabwe. The Israeli newspaper Haaretz reports that 33 of those named are on the US black list for terrorism.
Panama has cornered the trade in anonymous shell companies that allow owners to disguise their identity and carry out global operations secretly. While this may be a legitimate for those in the limelight trying to protect their privacy or to safeguard sensitive corporate dealings, many use it to avoid detection for money-laundering, tax avoidance, or predatory behaviour.
The country has pushed through reforms in a bid to clear its name and to get off the OECD’s ‘grey list’ of uncooperative tax havens, but has clearly not yet done enough.
“Panama has an extremely aggressive and obstructive attitude. Dialogue has broken down,” said Pascal Saint-Amans, the OECD’s tax chief. “It is the last financial centre that has refused to implement global standards of fiscal transparency. There has been very strong pressure from the law firms on the Panamanian government.”
Mr Saint-Amans said offshore secrecy in on the wane in most of the world, but becoming more concentrated in Panama. “The majority of undeclared clients are coming clean in other locations, but those who don’t are going to Panama,” he said.
French president Francois Hollande warned violators to prepare for the worst. “I can assure you that investigations will be opened and there will be trials as all the information emerges. The leakers have done valuable work for the international community. They have taken risks and should be protected,” he said.
There was no need for him to spell out the danger. The files shed light on a $2bn nexus of operations linked to the inner-most circle of Russian leader Vladimir Putin, a man famed for hunting down his enemies.
The Kremlin retorted that the Panama Papers were a conspiracy targeted at Russia and intended discredit Mr Putin and destabilize the country before the next elections.
Mr Hollande remains curiously silent, however, on the fate of a French journalist due to face judgment in Luxembourg later this month for receiving stolen documents in the LuxLeaks scandal.
This is part of a pattern where EU leaders support whistle-blowing freedoms at a distance, but deny it at home or within the EU. Such lack of legal clarity is poisonous since the law can be used selectively and for political purposes.
Vows to crack down on off-shore abuses today came from Scandinavia, Switzerland, Brazil, and India, where finance minister Arun Jaitley warned that those who failed to respond to an amnesty on hidden assets last year will find “such adventurism extremely costly”.
Mossack Fonseca said it does not “foster or promote illegal acts” and insisted in an odd turn of phrase that the “vast majority” of firms registered were for legitimate purposes.
“We believe there’s an international campaign against privacy. Privacy is a sacred human right that is being eroded more and more in the modern world. Each person has the right to privacy, whether they are a king of a beggar,” it said.
It is unclear why some world leaders, or members of their family, are posted on the ICIJ’s rogue’s gallery as somehow implicated in the affair.
The Argentine leader Mauricio Macri, the King of Saudi Arabia, and a sister of the former King of Spain are all flagged, yet the supporting documents do not suggest that they have done anything wrong. Critics say there is a risk of a witchhunt and vigilante publicity.
Yet what seems clear is that off-shore finance will never be the same again after these revelations.
“The Panama Papers seem to confirm the evidence from elsewhere that the world’s corrupt elite are gaming the international financial system to launder and protect their stolen wealth,” said Robert Barrington from Transparency International.
Few would disagree.