Touted as the biggest confidential document leak in history, the release of “the Panama Papers” has rocked the world’s financial elite and strengthened calls for clampdowns and greater transparency on the tax haven system.
The leak comprises 2.6 terrabytes of data containing 11.5 million documents dating back to 1977 and sheds light on 214,000 of the most secretive offshore companies.
The almost year-long investigation began when an anonymous source leaked the documents to German newspaper Süeddeutsche Zeitung, which shared the information via the International Consortium of Journalists to over 107 media outlets.
At the centre of the scandal lies Mossack Fonseca, a Panamanian law firm whose clients include 12 national leaders, 143 politicians and their associates, and sport and movie stars Lionel Messi and Jackie Chan.
Mossack Fonseca is the fourth largest offshore law firm in the world specializing in creating offshore or shell companies for wealthy elites in tax havens to afford them anonymity and significantly reduced or nonexistent tax levies.
On one end of the spectrum, the use of tax havens and offshore trusts to protect wealth is not strictly illegal. On the other, system abuse can facilitate tax evasion, kleptocracy and the concealment of criminal paper trails.
Mossack Fonseca has denied all wrongdoing and claims it has operated beyond reproach for 40 years, citing thorough due diligence checks. Yet, the documents show Mossak Fonseca continued to transact with Rami Makhlouf, Bashar al-Assad’s top financier and a key intelligence player in the early stages of the Syrian civil war, four months after Washington, the EU and Switzerland blacklisted Makhlouf in 2011.
Leaders are scrambling to deny or justify their involvement in the scandal. Questions have been raised about the potential involvement of Russian president Vladimir Putin and a $2bn loan trail benefitting his close associates. The Kremlin has denounced the claims as “Putinphobia” ahead of impending elections.
In Iceland, the fallout has been more dramatic. Faced with a no confidence vote and street protests after his wife was named for concealing a multi-million pound undeclared claim on the country’s collapsed banks, Prime Minister Sigmundur Davíð Gunnlaugsson has stepped down, despite denying any wrongdoing.
New Zealand has also found itself caught up in the controversy for minimal safeguards over tax-free overseas trusts. Prime Minister John Key denies New Zealand is the “Fort Knox” of asset protection, citing transparency, treaty participation and an OECD “clear bill of health”.