The Panama Papers: Reinforcing Concerns About International Political Corruption

“The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous.”

-Süddeutsche Zeitung

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Introduction

The Panama Papers, one of largest document leaks in history, demonstrates how a “global industry” of banks, law firms, and businesses coordinate to conceal and launder the financial assets of powerful individuals.[1] The 11.5 million documents originate from the records of Mossack Fonseca, the world’s fourth largest offshore law firm, located in Panama.[2] The documents reveal the intricate workings of tax shelters for 140 public figures including twelve former and current world leaders.[3] Among the largest concerns raised by the Panama Papers is the scope and duration of the criminal actions undertaken by influential world leaders to transfer and conceal their wealth in order to avoid discovery and paying taxes; often in contradiction to their own supposed efforts to combat political corruption.[4]

What are the Panama Papers?

The Panama Papers are a collection of encrypted emails, bank records, company disclosures, and other informational documents originating from a Panamanian law firm that organizes and sells offshore companies around the world.[5] The German newspaper Süddeutsche Zeitung originally received the documents from an anonymous source more than a year ago, but had to sift through 2.6 terabytes of data on more than 216,000 companies formed since the 1970s.[6] Süddeutsche Zeitung stated in its original report after receiving the documents: “The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous.”[7] 

Major Figures Implicated

The files revealed information on offshore shell companies controlled by the current Prime Ministers of Iceland and Pakistan, the King of Saudi Arabia, and the President of Azerbaijan.[8] As a result of Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson being included in the leaks, an estimated 20,000 Icelanders, nearly 10% of the island's population, protested outside of Parliament on April 4.[9] The following day, Prime Minster Gunnlaugsson resigned from his position.[10]

British Prime Minister David Cameron did not escape criticism for his involvement in the Panama Papers, as the documents revealed that his family, namely is father, held undisclosed wealth in numerous offshore tax havens.[11] Cameron has faced calls for a government inquiry, which were exacerbated by the hypocrisy of the reveal due to Cameron’s previous championing of financial transparency.[12] Oddly enough, there was a distinct lack of United States citizens, who are not innocent when it comes to tax evasion, implicated in the Panama Papers, though this may be because Americans more frequently turn to Bermuda, the Cayman Islands, and Singapore instead of Panama.[13]

Conclusion

The full impact of the Panama Papers has not even begun to be realized. For now, the papers only further the narrative that the wealthy, powerful few resort to immoral if not criminal means to grow and preserve their own wealth and power. It is important to note that, depending on the country of origin of these individuals, their conduct may not be illegal per se. Nonetheless, the global climate of vast income inequality has been reaffirmed and political corruption and general distrust of political figures continue to reach new heights.

[1] Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption, International Consortium of Investigatory Journalists (Apr. 3, 2016), https://panamapapers.icij.org/20160403-panama-papers-global-overview.html.

[2] Luke Harding, What are the Panama Papers? A guide to history's biggest data leak, The Guardian (April 5, 2016), http://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers.

[3] ICIJ, supra note 1.

[4] See id.

[5] Marina Koren, What are the Panama Papers?

[6] Id.

[7] Id.

[8] ICIJ, supra note 1.

[9] Robert Mackey, Panama Papers Leak Sparks Protests in Iceland Over Prime Minister’s Secret Finances, The Intercept (Apr. 4, 2016), https://theintercept.com/2016/04/04/panama-papers-leak-sparks-protests-iceland-prime-ministers-secret-ties-banks/.

[10] Steven Erlanger, Iceland’s Prime Minister Steps Down Amid Panama Papers Scandal, NY Times (Apr. 5, 2016), http://www.nytimes.com/2016/04/06/world/europe/panama-papers-iceland.html?_r=0.

[11] Id.

[12] Id.

[13] Danny Vinik, The Panama Papers: Where are the Americans?, Politico (Apr. 4, 2016), http://www.politico.com/agenda/story/2016/04/the-panama-papers-where-are-the-americans-000083.