What do heads of state, FIFA execs, billionaires, celebrities, and hundreds of their rich and powerful friends have in common? Quite a few things, I’d wager, but here’s something specific: They’ve all been named in the “Panama Papers,” the trove of 11.5 million records that give insight into how the rich and powerful hide their money abroad.
On Sunday, a consortium of newspapers broke the news about the documents and records, apparently leaked from the Panamanian law firm Mossack Fonseca, which specializes in setting up offshore shell companies for its clients.
How it all happened:
The German paper Süddeutsche Zeitung obtained the documents, which reportedly include e-mails, PDFs, photos, and “excerpts of an internal Mossack Fonseca database,” dating from the 1970s up to this spring.
The paper says the encrypted files came from an “anonymous source,” who apparently “wanted neither financial compensation nor anything else in return, apart from a few security measures” for what came out to 2.6 terabytes of data: the biggest leak of this kind of all time.
In a feat of impressive collaboration, coordinated by the International Consortium of Investigative Journalists (ICIJ), 100 news outlets publishing in 25 languages analyzed the records for a year before publication.
What’s in the documents:
The documents analyzed so far largely relate to off-shore bank accounts established by Mossack Fonseca on behalf of its clients, which are said to include politicians, celebrities, a ton of very wealthy people, and quite a few criminals—both alleged and convicted.
There’s nothing illegal, per se, about opening a shell company or using bearer bonds, and there are plenty of legitimate business reasons to do so. But their use can also suggest the owner is trying to hide funds or disguise the terms of a transaction like a divorce or real estate acquisition.
Clients can buy an anonymous company for as little as USD 1,000. However, at this price it is just an empty shell. For an extra fee, Mossack Fonseca provides a sham director and, if desired, conceals the company’s true shareholder. The result is an offshore company whose true purpose and ownership structure is indecipherable from the outside. Mossack Fonseca has founded, sold, and managed thousands of companies. The documents provide a detailed view of how Mossack Fonseca routinely accepts to engage in business activities that potentially violate sanctions, in addition to aiding and abetting tax evasion and money laundering.
According to the ICIJ, some of the documents show that the banks, law firms and middlemen involved “often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption.” Other documents examined by the ICIJ reportedly show offshore middlemen concealed suspect transactions.
According to Süddeutsche Zeitung, concealing the client’s identity constituted the primary goal in “the vast majority” of cases. Which makes sense—that’s why they go to Mossack Fonseca, which, according to a 2015 audit, knew the true owners of just 204 of 14,086 companies it had incorporated in the Seychelles. According to the ICIJ, the company once went so far as to remove paper records from its Nevada offices to protect its clients from discovery.
The end result? A lot of money no one knows about.
The firm is denying everything: Mossack Fonseca co-founder Ramon Fonseca Mora tells CNN the reports are false and claims several of the parties named in the leak “are not and have never been clients of Mossack Fonseca.”
“Our services are regulated on multiple levels, often by overlapping agencies, and we have a strong compliance record,” the firm said.
“In addition, we have always complied with international protocols” to assure “that the companies we incorporate are not being used for tax evasion, money laundering, terrorist finance or other illicit purposes,” it added.
Oh, and this meme:
This is largely a European issue anyway: Despite indications that further revelations may implicate Americans, American corporate law makes it largely unnecessary for citizens to open shell companies abroad. According to Fusion, only 200 or so companies were registered to Americans.
Panama Papers on US front pages... or not pic.twitter.com/uCYw3IJuvk— ian bremmer (@ianbremmer) April 4, 2016
Who’s been implicated, so far:
It’s not clear that the ton of bold-faced, high-profile names reported as of today—at least 12 current or former heads of state, plus hundreds of their wealthy friends, family, and countrymen—have done anything illegal. But they also include at least 33 individuals and companies blacklisted by the U.S. because of their business dealings with entities like Hezbollah, North Korea, and Iran. According to the ICIJ, one of those companies has been accused of giving the Syrian government fuel to use to bomb and kill its own citizens.
It’s going to take a while to parse out who owns what and whether those transactions were legal or illegal, and more names are expected to be made public in the weeks to come. According to the ICIJ, the still-largely-anonymous client list contains a bevy of prominent and powerful people that include “politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.”
At least two of Putin’s closest friends are named in the documents, which describe what appears to be a billion-dollar money laundering ring.
Those two men are said to be concert cellist Sergei Roldugin, a childhood friend of Putin’s and godfather to Putin’s daughter, and Yuri V. Kovalchuk, the majority shareholder of Bank Rossiya, referred to by some as a “cashier” for Russian officials.
The Papers indicate Mossack Fonseca created a “complex, deliberately convoluted network of offshore companies” for the men to funnel close to two billion dollars through. Documents also show Roldugin’s involvement with other companies—including the advertising firm founded by Mikhail Lesin—who was found beaten to death in a Washington D.C. hotel.
Kovalchuk specifically denied the allegations to the New York Times, saying, “I’ve got an apartment, a car and a dacha... I don’t have millions.”
The Kremlin has so far, and will undoubtedly continue to, dismiss the papers as a smear campaign. Via CNN:
The Kremlin spokesman said it was clear the main target of the reports was Mr Putin, as well as Russia’s political stability ahead of parliamentary elections.
Dmitry Peskov dismissed the investigation as insinuation and speculation, and suggested many of the team of journalists behind it were actually former US state department and CIA officials.
According to the ICIJ, documents also show Putin associates “disguised payments, backdated documents and gained hidden influence within the country’s media and automotive industries.”
Petro O. Poroshenko
Documents in the trove also indicate Petro O. Poroshenko, the reformer president of Ukraine since 2014, lied about divesting his assets before the election.
Mr. Poroshenko, a tycoon with assets in television and a chocolatier before his entrance into politics, pledged to divest himself of his holdings but instead moved the assets into an offshore company in the British Virgin Islands, according to the consortium’s reporting. It said that Mr. Poroshenko, who has received political support from the United States, had not disclosed the arrangement.
His financial advisors tell the ICIJ he did not disclose the firm because it had no assets. Even so, evidence indicates he was “scrambling” to find a copy of his utility bill for the paperwork as Russia began its bloody invasion of the country in 2014.
Icelandic Prime Minister, Sigmundur David Gunnlaugson
The documents indicate Iceland’s Prime Minister, Sigmundur David Gunnlaugson, bought an offshore company called Wintris with his wife in 2007 which held millions of dollars in Icelandic bank bonds while the country was in a financial crisis. Just a day before he would have had to declare his 50% interest as a prerequisite of entering parliament, he sold it to his wife—for the price of $1.
The company held bonds originally worth millions of dollars in three giant Icelandic banks that failed during the 2008 global financial crash, making it a creditor in their bankruptcies. Gunnlaugsson’s government negotiated a deal with creditors last year without disclosing his family’s financial stake in the outcome.
He walked out of an interview yesterday when someone brought it up.
Documents show Juan Pedro Damiani, a member of the FIFA ethics committee, had business dealings with at least three men implicated in the FIFA scandal last summer. FIFA’s ethics panel has since launched an investigation.
The papers show the soccer player—who is currently under investigation for tax evasion in Spain—owns at least one Panama company called Mega Star Enterprises Inc.
One wealthy client, US millionaire and life coach Marianna Olszewski, was offered fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money-laundering and tax evasion.
An email from a Mossack executive to Ms Olszewski in January 2009 explains how she could deceive the bank: “We may use a natural person who will act as the beneficial owner… and therefore his name will be disclosed to the bank. Since this is a very sensitive matter, fees are quite high.”
Documents show Mossack Fonseca was fined $37,500 for money laundering after it set up a company for Mubarak’s son but “failed to identify the connection” even after the former Egyptian president and his son were both charged with corruption.
President Bashar al-Assad
Rami Makhlouf, a cousin of al-Assad—described by the U.S. as a “poster boy for corruption”—was implicated in the papers, the Guardian reports, and while al-Assad is not specifically mentioned, the documents reveal “any foreign company seeking to do business in Syria had to be cleared by Rami.”
According to the Guardian’s analysis, Mossack Fonseca helped the Makhlouf family register its Syrian companies in the British Virgin Islands, and kept him as a client despite sanctions imposed against him by the United States and his involvement in the Syrian civil war.
The documents show, however, that the Panamanian firm continued to work with the Makhloufs, and in January 2011 it rejected the advice of its own compliance team to cut ties with the family as the crisis in Syria began to unfold.
Documents show a Mossack Fonseca compliance officer wrote: “I believe if an individual is found on a sanction list then this is a serious red flag and we should make every effort to disassociate ourselves from them.”
Though Mossack Fonseca was not legally bound to comply with US sanctions, it had an obligation to react to EU measures imposed in May 2011 and extended to the British Virgin Islands (BVI) in June of that year. It took until September 2011 before the partners finally agreed to resign from Makhlouf’s companies.
Argentina’s current president was reportedly a director and vice president of an offshore company managed by Mossack Fonseca at the same time he served as mayor of Buenos Aires. Documents appear to show he did not disclose these assets. A spokesperson tells the ICIJ he never personally owned shares of the firm.
Documents show the firm established companies that hid real estate holdings of Sharif’s children.
The firm established Panamanian foundations and shell companies for the family of Azerbaijan’s president to hide their ownership in gold mines and London real estate.
The family of Chinese president Xi Jinping—who rails against the “armies of corruption”—obtained offshore companies through Mossack Fonseca. The documents also indicate offshore holdings of the families of at least seven other members of China’s Politburo Standing Committee.
According to the Guardian, Cameron is now facing scrutiny over an offshore fund established by his late father, Ian, which avoided ever paying taxes in the UK. Cameron denies receiving any benefits from the offshore account.
“In terms of my own financial affairs, I own no shares. I have a salary as prime minister and I have some savings, which I get some interest from and I have a house, which we used to live in, which we now let out while we are living in Downing Street and that’s all I have.”
This list is sure to grow. We’ll keep you updated as it does.