“The Panama Papers”, What You Need to Know

Bus Article 02 - Jack O'Sullivan

They’ve been called the biggest leak in history. But what are the Panama papers and why are they important?

They are 11.5 million leaked files from Mossack Fonseca, the world’s 4th largest off-shore law firm, which detail the secretive industry of offshore finance.  Among the thousands of people mentioned in the files are politicians, drug traffickers, celebrities, sex offenders, billionaires, and their families.  The firm set up hundreds of thousands of companies primarily in the British Virgin Islands, Panama, Seychelles and the Bahamas to hold funds anonymously and free of taxes.

12 world leaders are now known to have been using offshore tax havens.  Notably, a trail of $2 billion from Russian state banks leads to Vladimir Putin through his close friend, Sergei Roldugin.  Iceland’s prime minister, Sigmundur Davíð Gunnlaugsso, resigned Tuesday evening following revelations that he used to own (his wife now owns) an offshore company with millions of dollars’ worth of claims in Iceland’s failed banks.

Irish names in the papers include many relatively ordinary people like small business owners.  Also appearing are well-known business figures JP McManus and Dermot Desmond.  Neither are tax resident in Ireland so it is no surprise to see their names here.

It is important to note that the use of offshore structures is legal.  It is reasonable to assume that most people using them are doing so legitimately, for example for reasons of inheritance or estate-planning.  However, what has garnered an outcry over the widespread use of tax havens is their enablement of criminal activities due to their anonymity.  David Cameron, whose late father was shown to have run an offshore investment fund, spoke just last year of “the corrupt, criminals and money launderers” who make use of offshore company structures.

Mossack Fonseca has refused to discuss specific cases of alleged wrongdoing, citing client confidentiality. But it has strongly defended its conduct and admits no wrong-doing.  The firm says it carries out due-diligence on clients and complies with anti-money-laundering laws.  It stated it regrets any misuse of its services and tries actively to prevent it. Finally, the firm says it cannot be blamed for failings by intermediaries, who include banks, law firms and accountants.

It remains to be seen what will be the full fallout of the biggest leak in history.

By Jack O’Sullivan

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