Panama Pandemonium: The stealing of the world’s wealth

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Dana McMahan/ Flickr

Ailey O’Toole
   Staff Writer

If you haven’t heard of the Panama Papers…well then, you’re in for a wild ride.

The Panama Papers are a set of 11.5 million leaked confidential documents detailing information about more than 214,000 offshore companies and the identities of company shareholders listed by Mossack Fonesca, a Panamanian law firm.

These documents explain how wealthy individuals, including — wait for it — government officials, can hide assets from the public eye.

When they first came out, the papers identified five state leaders from Argentina, Iceland, Saudi Arabia, Ukraine and the United Arab Emirates, as well as the close relatives and associates of various heads of government from more than 40 other countries.

Hong Kong housed the largest number of law firms, affiliated banks and middlemen involved in the scandal, while the British Virgin Islands contained more than half of the companies exposed.

Although the use of offshore businesses is not illegal in the jurisdictions in which most of the revealed companies are registered, investigative reporters have thus far discovered that some of the shell companies may have been used for illegal purposes, including fraud, drug trafficking and of course, tax evasion.

While the most public release of the documents occurred on April 3, the anonymous source that published the documents began making them available to a German newspaper, Süddeutsche Zeitung, in early 2015.

The leaked information provides information on transactions dating back to the 1970s and eventually provided so much information that the newspaper enlisted the help of some 400 journalists at 107 different media organizations in 76 countries.

Here’s how the hiding of assets works in exchanges revealed by the Panama Papers. It starts with Mossack Fonseca.

So what exactly is Mossack Fonseca?

It is a law firm based in Panama whose services include incorporating companies into offshore jurisdictions, so that rich people can hide their money from the public eye. This process is often used lawfully, but the companies revealed by the Panama Papers registered their property in tax havens, which is definitely not legal.

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Dafne Sanchez / The Carolinian

The process then focuses on intermediaries, such as accountants, lawyers and bank and trust companies. Mossack Fonseca acted on instructions from those people rather than dealing directly with company owners.

Now the real question — where does the money flowing offshore come from?

This information is usually hard to come by because real owners hide behind nominees, people with no real control or assets in the company who simply lend their signature. A small sampling was compiled by Mossack Fonseca to give some indications of the companies involved; most of them are based in China and Russia.

And now for the juicy details: what public officials are involved in this scandal?

Well for starters, a $2 billion trail leads all the way to none other than Vladimir Putin. The Russian president’s best friend – a cellist named Sergi Roldugin – is at the center of s scheme in which money from Russian banks is hidden offshore. Some of the funds end up in a ski resort where Putin’s daughter Katerina got married in 2013.

Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.

Even the beloved Lionel Messi, the world’s wealthiest athlete, was identified in the papers.

On top of all of that, an offshore investment fund run by the late father of British prime minister David Cameron avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign its paperwork.

After this revelation, Britain is scrambling to tighten rules on tax evasion so as to make it look like it is doing something about this situation, when in all likelihood, many of the people involved will continue to hide their money and continue to not pay taxes on it.

The initiatives created to combat tax evasion come in response to Jyrki Katainen, the European Union’s vice-president for Jobs, Growth and Competitiveness, likening these cases of tax evasion to a “cancer” that has to be tackled.

“It’s a bad disease, it’s a cancer of market economies,” Jyrki Katainen told CNBC on the sidelines of the Ambrosetti workshop in Italy this weekend.

“The market economy is a fantastic tool to create wealth and to give all citizens the opportunity to distribute the wealth in a fair manner but if you only want to take the fruits and not pay your liabilities in terms of taxes then it’s not fair and it’s a cancer,” he said.

What can you take away from all of this?

Well, it’s basically another example of the rich staying rich without any consequences.

At this point, all I can do is sit back, relax and enjoy the show as politicians and celebrities everywhere struggle to cover up all their dirty secrets.



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