The Panama Papers – A Brief Intro

If you’ve been paying attention to the news lately, you might have heard some furore about a leak known as the Panama Papers, the biggest trove of evidence in recent memory indicating financial skulduggery at the highest levels of politics, sport and elsewhere. This is some heavy stuff, and powerful people are already feeling the repercussions. Below, I’ve compiled a handy primer for those of you who are still not completely up to speed on the leaks.

Featured Image Original Photo Credits: TheBlanksInc.com, Zsuzsanna Kilian

1P is for Panama

Panama skyline. Money not pictured. (Nico2Panama)

Panama is a country in Central America that has long been a retirement destination for English- and Spanish-speaking ex-pats seeking low cost living in tropical surroundings. It has history as an important international shipping location as well as a major linchpin in drug trafficking routes and money laundering. Another reason it’s so popular is because of its status as a tax haven. Regulations and jurisdictional rules allow for people and companies to set up offshore shell corporations, trusts and foundations that are exempt from any corporate taxes, withholding taxes, income tax, capital gains tax, local taxes, and estate or inheritance taxes, which includes gift taxes. Financial privacy laws, banking secrecy laws and the lack of international tax treaties protect the privacy of individuals and businesses that are holding money and assets there, and you don’t have to report on (limitless) money transfers either in or out of the country. Sounds like a great spot altogether if you have a few quid!

2A is for Avoidance

Semantics and the Law. (CFO.com)

An important distinction that is made when talking about the Panama Papers and offshore tax havens is the difference between tax evasion and tax avoidance. Evasion is when you fail to report earnings or interest earned to whatever revenue service you are beholden to in order to pay less taxes or none at all, and is illegal. Avoidance is the utilization of technically legal methods that will reduce tax liability (how much tax you owe) such as the use of deductible expenditures like charities and the like. In the case of offshore banking and the creation of shell corporations, the beneficiaries avoid paying taxes on earnings and assets because of the layers of protection and privacy afforded to them by the offshore facilities. They become anonymous owners of corporate expense accounts for companies that only exist on files. Simply put, this means that they can keep more of the money and give less to their home governments or wherever their businesses are really based. Which is awesome for them, and fairly shit for the rest of us when we’re stuck paying higher taxes because there isn’t enough money in the government coffers, and fucking annoying when we’re told that it’s us who have to tighten our belts. Pricks.

3N is for Numbers

Notice the little dip after each financial/economic hiccup, but they didn’t stop…

Numbers are funny things. When they start getting big, they stop making a lot of sense to regular people because of the lack of reference we have. However, this is also the point at which they become the most important. Here are some of the relevant numbers related to the Panama Papers leak:

  • 11.5 million documents leaked
  • 2.6 terabytes of data (2,600 Gigabytes)
  • 40 years of records
  • Over 214,000 offshore companies
  • Connected to people in more than 200 countries/territories
  • Including 140 politicians and their families
  • Estimates vary between conservative figures of $7.6 trillion in offshore tax havens – roughly 8% of the world’s wealth – and numbers as high as $21 to $32 trillion (Tax Justice Network figures) – 24% to 32% of total global investments
  • Annual losses of roughly $200 billion in tax revenues because of illegal activity only (who knows how much due to the legal loopholes!)

4A is for Anger

Unhappy Icelanders taking to the streets (AP Photo/Brynjar Gunnarsson, File)

As the revelations reverberate around the world while the journalists in charge of the Panama Papers release them piecemeal over time, citizens of the countries involved are understandably pissed off. This is pretty much the definition of one set of rules for the elite and the powerful (read: rich) and another set for the rest of us. Politicians and leaders, some of whom have been championing the cause of bankers and the need to be transparent have been caught rotten with either their own slice of a tax-dodging pie, handing the assets over to a family member or using a close friend to hide their money. The former Prime Minister of Iceland has resigned after his involvement was revealed, the first in what might be a row of falling dominoes as more information becomes available to the public. His position was especially grating, as he had been a vocal spokesman against the corruption of banking officials who were partly responsible for their banking crisis, and mass protests were organized in the country after his dodgy dealings were laid bare. On a lighter note, try and pinpoint the exact moment he fills his trousers in this interview when he is first asked about his tax dealings.

5M is for Mossack Fonseca

Just a glimpse at the worldwide network of Mossack Fonseca

Moving on, we come to the legal office at the eye of this hurricane of controversy, Mossack Fonseca. Founded in 1986 by German lawyer and Swiss banking expert Jürgen Mossack – whose father Erhard was a Rottenführer or senior corporal in the Waffen-SS and later worked for the CIA spying on the Cubans, and holy shit this stuff just writes itself at Those Conspiracy Guys™ – and Panamanian lawyer and novelist Ramón Fonseca Mora – former legal counsel and special adviser to Panamanian President Juan Carlos Varela, a post he left only a few days before the leak, and also former president of the Panameñista Party until he was dismissed in March of this year (2016) because of Operation Car Wash, an investigation into corruption and money laundering – Mossack Fonseca is a law firm and “corporate service provider.” With more than 40 offices across the world, they are a powerhouse in Panamanian business and financial dealings. They provide their clients with the paperwork, the mailing addresses and the signatures needed to create quasi-anonymous shell companies. Staff are available to become signatory CEOs, providing their name on the ownership paper for a modest fee to protect the anonymity of the real beneficiaries. The Panama Papers leak is not the first time they have been under scrutiny for their “don’t ask, don’t tell” type policies regarding their services, but this is definitely the harshest light that has been shone on them so far. Mossack himself resigned as CEO shortly after the leaks.

6A is for Association

Reconstruction of the scene, to scale. (perspecsys.com)

As well as catering to businessmen, footballers and politicians looking to hide their massive wealth from the grubby mitts of international revenue offices or salty exes, Mossack Fonseca has been providing services for much shadier characters. Drug kingpins, human traffickers, organized crime syndicates, thieves, arms dealers and people who possibly have links to terrorist organizations have all used their services to hide their funds and conduct criminal activity anonymously. In addition, there is evidence that CIA intermediaries and other clandestine agencies from around the world, as well as lone wolves used the Panamanian firm to keep their financial activities hidden. Some geniuses even used some hilariously spy-themed names for company titles and signatory names, such as Octopussy, Goldfinger, SkyFall, GoldenEye, Moonraker, Blofeld, Austin Powers and Jack Bauer. When you get to those levels of wealth and power, I guess giving a fuck goes out the window of your gold-plated penthouse along with the guy that rubbed your wife’s feet.

7P is for Players

Some of the named people in the leak. (International Consortium of Investigative Journalists)

Presidents. Kings. Prime Ministers. Dictators. Powerful figures and world leaders, celebrities, sports personalities and their families have all been linked to shell companies in the Panama Papers leaks. The head of an international anti-corruption organization resigned after he was mentioned in the leaks. Past and current leaders are crying out against the invasion of privacy and the unfair focus on their unscrupulous tax dodging, with what seems like absolutely zero self-awareness. Putin is decrying the leaks as a CIA plot to tarnish his image. The president of Ecuador is outing journalists online who were involved with the leaks and the investigations, targeting them for abuse and threats. With further revelations to come, expect to hear more banging of drums on both sides, as the implicated protest and their detractors revel in the orgy of material against them.

8A is for Arguments, Amoral, Anymore?

Arguments have been made by the owners and PR staff of Mossack Fonseca, as well as the supposedly legitimate individuals and entities that use their services that what they do is okay because it falls under an umbrella of technical legality. Just keep in mind, just because something is legal does not mean it is morally or ethically sound. Some of the people involved are directly or indirectly responsible for tax hikes on the ordinary citizen, national debt that could be greatly reduced if these taxes weren’t being dodged, and they will gladly run away with your money, declare bankruptcy and hide it all in one of these offshore accounts, with the law on their side. That has to make you stop and think about the philosophy and the efficacy of a judicial system that allows this shit to go on. Also, there have already been lots of A’s in this article and I can’t think of any more things that begin with A so just leave me alone. Go organize a protest or something, for fuck’s sake.

9P is for Police

When the crooks are this quick, the cops have a need for speed. (AnelGTR)

Panamanian police, at the time of writing, have just recently finished a 27-hour raid on the offices of Mossack Fonseca in tandem with organized crime prosecutors, seizing a cache of digital documents and servers. This is the second raid and collection of equipment and documents, the first occurring in San Salvador, which came on the heels of a related raid on the FIFA headquarters after the Panama Papers were made public. Statements from Mossack Fonseca indicate that they did nothing illegal themselves, and are not responsible for the activities of their clients. They are however supposed to vet clients thoroughly, but it remains to be seen if they will be found guilty of any wrongdoing under the law. Normally I’d say not to hold your breath, but who knows, maybe we’re finally coming into an age of justice…

panama papers unicorn
Also, keep an eye out for these fellas.

10E is for Economy

How I understand the global economy works (Pixabay)

Everybody is talking about the myriad layers of the Panama Papers, and one of the issues that is coming in secondary to the criminal aspect is the economic one. If the figures cited earlier are correct, especially the higher estimates, the current problems with the global economy and the financial crisis – crises? Or has it just been one long one? – that much of the world has been suffering could be seriously alleviated if these entities weren’t dodging their taxes. Granted, issues with political corruption and less-than-perfect treasury spending don’t exactly inspire trust in the government to wisely manage the revenue that they already have. And these things are not happening in a vacuum, as many influential people in political, financial and judicial circles have been found to be naughty boys and girls. However, if appropriate and adequate pressure and oversight was applied on both sides, maybe some of the problems we’re facing could be tackled with a bit more ease. People before profit?

panama papers unicorn
Seriously, there could be one along any minute!

11R is for Reporters

How I like to imagine those reporters (Mass Communication Specialist 3rd Class David A. Cox)

Right when people were beginning to lose hope in the media as punditry and fluff takes over from real journalism, the heroes at the International Consortium of Investigative Journalists (ICIJ) make a great case for redemption. The whistleblower, with the imaginative name of John Doe, made contact with German newspaper Süddeutsche Zeitung over a year before the leaks were made public. Those reporters worked with the ICIJ to research, evaluate, organize and review the documents and files that were sent to them using encryption. All in all, over 400 reporters from 107 media organizations in 80 countries worked on the leaks before the first reports were made on April 3rd, which were accompanied by 149 of the documents as a taster. So the next time that someone tells you that there’s no way a big conspiracy could have taken place because too many people would have had to stay quiet about something, tell them this: 400 people across the world, some of whom were in competing companies, whose job and purpose it is to tell people stuff kept the biggest data leak and financial scandal in the world a secret for over a year. Also, kudos for the snappy name. The Panama Papers sounds way better than Panamagate.

12S is for So What Now?

So what happens next? Well, a special meeting was called in Paris as tax officials from 28 countries met to discuss how to cooperate and share data revealed in the leaks and what can be done to tighten up and improve tax regulations. The unprecedented scale of the Panama Papers and the heights to which the tax dodging reaches poses some serious questions and reveals grave problems with how the world financial system operates at the highest levels. Will the last few decent and honest people with the authority and inclination to do something actually take steps against this blatant “fuck you” to the non-elites? Can anything even be done to combat the completely legal practices that embody the very spirit of profit-centric capitalism? After the dust settles, will we go back to scrabbling for the scraps that are left to us and convince ourselves that it’s just the way it is, or is it time to stand up and say something? Perhaps most importantly, will you pay your taxes this year, or is a certain group in Panama getting an email from you this tax season?

Tell us what you think!