"Interested in data?”
According to the New York Times, that was the question that led journalists to 1.5 million documents from Mossack Fonseca, an offshore law firm in Panama that serves some of the world’s wealthiest and most powerful people.
An anonymous source leaked 2.6 terabytes of data that detail Mossack Fonseca’s most confidential business dealings, exposing how many heads of state, celebrities, athletes and other members of the global elite use secret shell companies and offshore accounts to their advantage.
The Panama Papers have been called the largest corporate data leak in history. They have implicated politicians including Prime Minister of the United Kingdom David Cameron, Ukrainian President Petro Poroshenko and Pakistani Prime Minister Nawaz Sharif, among others. Prime Minister of Iceland Sigmundur Davíð Gunnlaugsson resigned last week after the leaked documents disclosed his secret offshore account worth millions of dollars.
Jessica Tillipman, assistant dean for field placement and a professorial lecturer at GW Law, is an expert on corruption, government ethics and the Foreign Corrupt Practices Act. She caught George Washington Today up on what the Panama Papers reveal about the global elite’s questionable business dealings and how the leak might inspire greater corporate transparency and accountability.
Q: Can you briefly describe the services of Mossack Fonseca? Do we know anything about how its internal documents leaked?
A: Mossack Fonseca is a global firm that focuses on asset protection, tax and estate planning. It has been described as the world's fourth-largest provider of offshore services. According to public information, the firm is known for setting up offshore firms or trusts, registering the entities and, among other services, handling local paperwork.
We know that the firm’s documents were leaked by an individual—though little is known about this individual or his/her connection to the firm. The individual contacted a German investigative reporter and communicated only through encrypted channels (and never in person). This individual leaked the information because he or she wanted to “make these crimes public.”
Q: Although offshore banking itself is not illegal, what do the Panama Papers reveal about how the global elite use (or exploit) tax havens and companies like Mossack Fonseca?
A: It is true that offshore banking is not illegal, and there are many legitimate reasons for creating offshore companies. In this instance, however, the leak has exposed many of the questionable, or even illegal, reasons for doing business in this manner. Indeed, using offshore shell companies often enables individuals to, among other things, evade taxes, hide assets, launder money and avoid economic sanctions.
Q: What notable figures have been implicated in the scandal so far? Many have denied wrongdoing—do the leaked documents offer direct evidence of corruption?
A: The leaked documents have been of great interest to prosecutors around the world because they may expose violations of anti-corruption, money laundering, fraud or tax laws. However, most of the individuals exposed in the leak will never be charged because their actions were either legal or fell within gray areas of the law. While their actions may be viewed as unseemly and are certainly causing reputational harm, most individuals are unlikely to face criminal charges.
The most high-profile figures implicated in the leak include the former Prime Minister of Iceland Sigmundur Davíð Gunnlaugsson; Ukrainian President Petro Poroshenko; close friends of Russian President Vladimir Putin; a cousin and close friend of Syrian President Bashar al-Assad; high-ranking members of the Chinese government; and a member of the FIFA ethics committee, Juan Pedro Damiani. We also now know that U.K. Prime Minister David Cameron benefitted from an offshore trust established by his late father.
The list is not limited to politicians or individuals with political connections. Celebrities like Simon Cowell and Jackie Chan were also implicated. One of the most interesting names to emerge from the leak is the (now) former head of Transparency International's chapter in Chile, an anti-corruption organization that has been calling for an end to anonymous companies for quite some time.
Q: The Prime Minister of Iceland resigned after the Panama Papers disclosed his secret offshore account worth millions. What other repercussions are leaders embroiled in the scandal likely to face? Might patterns of global tax evasion change as a result?
A: We can only speculate at this point. Mr. Cameron is under fire because many view his high-profile statements regarding financial transparency as hypocritical given what we now know about his father’s trust. The Ukrainian president is also facing significant backlash because he was elected on promises of combatting corruption in Ukraine and also promised to divest his business interests before taking office. In contrast, we have not seen similar political outrage in Russia or China (the latter can be attributed to the fact that all mention of the Panama Papers has been blocked from Chinese websites).
The long-term impact of the leaks is unknown, but they have certainly strengthened calls to eliminate international tax loopholes and end anonymous companies. In recent years, governments, international organizations and civil society have been calling for greater transparency and accountability in this area, so we can only hope that the leak will propel these initiatives forward.