Panama Papers

The Panama Papers (Spanish: Papeles de Panamá) are 11.5 million leaked documents (or 2.6 terabytes of data) published from April 3, 2016. The papers detail financial and attorney–client information for more than 214,488 offshore entities. These documents, some dating back to the 1970s, were created by, and taken from, the former Panamanian offshore law firm and corporate service provider Mossack Fonseca, and compiled with similar leaks into a searchable database.

The documents contain personal financial information about wealthy individuals and public officials previously private. Their publication made it possible to prosecute Jan Marsalek, a person of interest to a number of European governments and revealed his links with Russian intelligence, and international financial fraudster Harald Joachim von der Goltz. While offshore business entities are legal (see Offshore Magic Circle), reporters found that some of the Mossack Fonseca shell corporations were used for illegal purposes, including fraud, tax evasion, and evading international sanctions.

"John Doe", the whistleblower who leaked the documents to German journalist Bastian Obermayer from the newspaper Süddeutsche Zeitung (SZ), remains anonymous, even to the journalists who worked on the investigation. "My life is in danger", the whistleblower told them. In a May 6, 2016, document, Doe cited income inequality as the reason for the action and said the documents were leaked "simply because I understood enough about their contents to realize the scale of the injustices they described". Doe had never worked for any government or intelligence agency and expressed willingness to help prosecutors if granted immunity from prosecution. After SZ verified that the statement did in fact come from the source for the Panama Papers, the International Consortium of Investigative Journalists (ICIJ) posted the full document on its website.

SZ asked the ICIJ for help because of the data involved. Journalists from 107 media organizations in 80 countries analyzed documents detailing the operations of the law firm. After more than a year of analysis, the first news stories were published on April 3, 2016, along with 150 of the documents themselves. The project represents an important milestone in the use of data journalism software tools and mobile collaboration.

The documents were dubbed the Panama Papers because of the country they were leaked from. Still, the Panamanian government, as well as other entities in Panama and elsewhere, expressed strong objections to the name over concerns that it would tarnish the government's and country's image worldwide. Some media outlets covering the story have used the name "Mossack Fonseca papers".

In June 2024, a judge in Panama acquitted all former Mossack Fonseca employees, including the two founders, due to insufficient evidence and problems with the chain of custody of evidence.

Disclosures

In addition to the much-covered business dealings of British prime minister David Cameron and Icelandic prime minister Sigmundur Davíð Gunnlaugsson, the leaked documents also contain identity information about the shareholders and directors of 214,000 shell companies set up by Mossack Fonseca, as well as some of their financial transactions. Although it is generally not against the law to own an offshore shell company, reporters found that some of the shell corporations were used for illegal purposes, including fraud, tax evasion, and evading international sanctions.

The journalists on the investigative team found business transactions by many important figures in world politics, sports, and art. While many of the transactions were legal, since the data is incomplete, questions remain in many other cases; still others seem to clearly indicate ethical if not legal impropriety. Some disclosures – tax avoidance in very poor countries by very wealthy entities and individuals for example – led to questions on moral grounds. For example, the shell company Octea is registered to Beny Steinmetz and owes more than US$700,000 in property taxes to the city of Koidu in Sierra Leone, and is $150 million in debt, even though its exports were more than twice that in an average month in the 2012–2015 period. Steinmetz himself has a personal worth of $6 billion.

Other offshore shell company transactions described in the documents seem to have broken exchange laws, violated trade sanctions or stemmed from political corruption, according to ICIJ reporters. For example:

• Uruguay has arrested five people and charged them with money laundering through Mossack Fonseca shell companies for a Mexican drug cartel.
• Ouestaf, an ICIJ partner in the investigation, reported that it had discovered new evidence that Karim Wade received payments from DP World (DP). He and a long-time friend were convicted of this in a trial that the United Nations and Amnesty International said was unfair and violated the defendants' rights. The Ouestaf article does not address the conduct of the trial, but does say that Ouestaf journalists found Mossack Fonseca documents showing payments to Wade via a DP subsidiary and a shell company registered to the friend.
• Swiss lawyer Dieter Neupert has been accused of mishandling client funds and helping both oligarchs and the Qatari royal family to hide money.

Named in the leak were 12 extant or former world leaders; 128 other public officials and politicians; and hundreds of celebrities, businessmen, and other wealthy individuals from over 200 countries.

One notable case involved former Iceland prime minister Sigmundur Davíð Gunnlaugsson, who was found to possess a secret offshore account in a shell company called Wintris Inc., along with his wife. When Gunnlaugsson was elected in 2013, he had promised to be tougher on Iceland's foreign creditors. However, as revealed by the Panama Papers, Wintris Inc., which he and his wife owned a stake in, was one of these creditors. This conflict of interest ultimately led to his resignation in 2016.

Tax haven

Individuals and entities may open offshore accounts for any number of reasons, some of which are legal. A Canadian lawyer based in Dubai noted, for example, that businesses might wish to avoid falling under Islamic inheritance jurisprudence if an owner dies. Businesses in some countries may wish to hold some of their funds in dollars also, said a Brazilian lawyer. Estate planning is another example of legal tax avoidance.

American filmmaker Stanley Kubrick had an estimated personal worth of $20 million when he died in 1999, much of it invested in an 18th-century English manor he bought in 1978. He lived in that manor for the rest of his life, filming scenes from The Shining, Full Metal Jacket, and Eyes Wide Shut there as well. Three holding companies set up by Mossack Fonseca now own the property, and are in turn held by trusts set up for his children and grandchildren. Since Kubrick was an American living in Britain, without the trust his estate would have had to pay transfer taxes to both governments and possibly have been forced to sell the property to obtain the liquid assets to pay them. Kubrick is buried on the grounds along with one of his daughters, and the rest of his family still lives there.

Other uses are more ambiguous. Chinese companies may incorporate offshore in order to raise foreign capital, normally against the law in China. In some of the world's hereditary dictatorships, the law may be on the side of the elite who use offshore companies to award oil contracts to themselves, or gold concessions to their children, however such dealings are sometimes prosecuted under international law.

While no standard official definition exists, The Economist and the International Monetary Fund describe an offshore financial center, or tax haven, as a jurisdiction whose banking infrastructure primarily provides services to people or businesses who do not live there, requires little or no disclosure of information when doing business, and offers low taxes.

"The most obvious use of offshore financial centers is to avoid taxes", The Economist added. Oxfam blamed tax havens in its 2016 annual report on income inequality for much of the widening gap between rich and poor. "Tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share," said Raymond C. Offenheiser, president of Oxfam America, "depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality".

International Monetary Fund (IMF) researchers estimated in July 2015 that profit shifting by multinational companies costs developing countries around US$213 billion a year, almost two percent of their national income.

Real estate in London, where housing prices increased 50% from 2007 to 2016, also is frequently purchased by overseas investors. Donald Toon, then head of Britain's National Crime Agency, said in 2015 that "the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK". Three-quarters of Londoners under 35 cannot afford to buy a home.