Panama Papers: Washing Dirty Money for the Rich and Powerful

This is a leak of epic proportions. A huge cache of 11.5 million documents from a little known firm in Panama, Mossack Fonseca, shows how the rich and powerful have hidden their wealth from the public eye. While some of it could be legitimate, the bulk of these activities are either criminal money or to hide them from their tax authorities. Nothing else explains why the people concerned should create shell companies in Panama, whose purpose is to hide the income and the real owners of these companies.

Panama is only one among the tax havens. There are many more – Isle of Man, Virgin Islands, Cayman Islands, Luxembourg, and our very own Mauritius. The US figures prefer tax havens such as Caymen Islands, but also have Delaware and Nevada that perform similar functions. The tax havens have no tax, and allow moving money into the bank account of companies whose real owners are hidden away in the books of companies such as Mossack Fonseca. The data reveal the shenanigans of some 214,000 of such companies, who had registered with Mossack Fonseca to hide their deals.

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This huge cache of documents were leaked to Süddeutsche Zeitung (SZ) by an anonymous source. Snowden tweeted, The story behind the ‪#PanamaPapers? Courage is contagious.

SZ decided to work in cooperation with the International Consortium of Investigative Journalists (ICIJ). Finally, around 400 journalists from more than 100 media organizations in over 80 countries worked on the data for 12 months to analyse over 2.6 terabytes of data, the largest ever leak of information. In India, Indian Express had over 25 journalists working on this and tracing the activities of over 500 Indians who figured as clients in the Mossack Fonseca list.

What are the key findings in these documents? According to ICIJ,

Files reveal the offshore holdings of 140 politicians and public officials from around the world

It includes prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia

More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories

Major banks have driven the creation of hard-to-trace companies in offshore havens

Other figures involved are family members of Xi Jinping, the president of China, the late father of David Cameron, the prime minister of UK, figures close to President Putin in Russia, Jaynet Désirée Kabila Kyungu the twin sister of Joseph Kabila, the president of the Democratic Republic of the Congo, the member of the FIFA ethics committee, the list goes on. It covers major political figures from more than 50 countries.

In India, among the names involved are Amitabh Bachchan, Aisharya Rai, Gautam Adani's elder brother, KP Singh of DLF and his family members, promoters of Apollo Tyres and India Bulls.

As we have noted earlier, this is a tip of the ice-berg. Mossack Fonseca is only the 4th largest of companies dealing with such off-shore accounts, and Panama is only one among many tax shelters. While the west talks about preventing corruption, they have protected these tax havens till now and it is their banks that have been the drivers in this business of setting up such shell companies on behalf of their clients. It is the global financial majors that are behind such tax havens.

Mossack Fonseca took a small amount of money to set up these companies, arrange for directors, issue “bearer shares” that had no names of share holders on them, and even back date various documents. Thus, when a figure involved in a gold heist in UK was found in one such company, Mossack Fonseca back-dated the documents to wipe out his involvement in a company they had set up for him, which was used to “wash” the proceeds of the robbery.

The bulk of the “benefits” of such transaction went in the coffers of the financial companies. They were the ones who directly handled all the criminal money that flowed through such tax havens. It is in their accounts all such hot money ended up.

Global finance capital today controls the economies of nation states. They have effectively lost control of their own economies, ability to enforce tax laws, ensure that criminal money does not find safe havens. The rich countries have encouraged criminal flows of money as such money – either through loot of countries or direct criminal money through drug trade, etc., all end up in the financial institutions of the rich countries. Mossack Fonseca's records show that it was the banks representing their rich clients who set up such accounts and acted on their behalf. They were the main actors in this sordid game of “white washing” criminal money. And that is why the western countries refused to crack down on the tax havens. This was their conduit for syphoning of third world loot back into their coffers.

The Modi government has talked about black money and done precious little about it. It is time that they start walking the walk. The Mossack Fonseca records show how the Indian laws were flouted by the people who set up these companies in Panama. This was in direct violation of a number of laws. The earlier cases – the “offshore leaks” and then the “Swiss leaks”, have seen no action by the government. Or if there is some action, it is not visible to the naked eye. Will this case also go the same way? Another instance of Jumla economics?

Some key links to the Panama Papers

Panama Papers: An Introduction

Panama Papers: The Power Players

Panama Papers: The secrets of dirty money

Panamanian Law Firm Is Gatekeeper To Vast Flow of Murky Offshore Secrets