The massive leak known as “The Panama Papers” came to light over the weekend, exposing the normally secretive activities of many political leaders, law firms and corporations in stashing massive amounts of cash “offshore” in what are known as tax havens.
The Panama-based law firm, Mossacka Fonseca, which specialized in the creation of shell companies for the express purpose of providing the pools of cash with anonymity had their systems hacked. Those so far implicated, including members of Vladimir Putin’s inner circle and the wife of the Prime Minister of Iceland may have some uncomfortable questions to answers over the coming days.
The exposure of world leaders, corporate big shots and wealthy private citizens has just begun however, with an amazing 11.5 million files leaked to the media and currently being digested by International Consortium of Investigative Journalists (ICIJ) and their global media partners including the BBC. That makes it potentially the biggest ever data leak, much larger than even the infamous diplomatic cables leaked by Wikileaks or the Edward Snowden files.
Of course, parking vast sums of money in offshore accounts is nothing new and doesn’t always have a nefarious purpose behind it. Many wealthy individuals use such accounts to diversify financial institutions, while international citizens who live in unstable economies often turn to offshore havens to secure their capital. Shell companies can also be a legitimate means of maintaining an individual’s privacy when it comes to holding property or investments.
But unfortunately, such offshore accounts are also often used for underhanded purposes, including tax evasion and criminal money laundering. Many offshore havens lack the same rules as banks in the US with rules on identifying customers through regulations such as “Know Your Customer” (KYC) and other provisions related to the Patriot Act.
Are you curious about where these offshore accounts are located and the types of people who use them? We’ll take a look at the top offshore destinations, famous people who have been know to use their services and the law firms and corporations that have made offshore finance a profitable business niche all this week on the blog. Stay tuned!