Panama Papers Tax Leak Causes International Scandal

By Sarah Kuehn,
International News Writer

panama papers
A recent leak of confidential documents from one of the world’s most secretive companies has revealed how the wealthy use tax havens to hide their wealth. The Panamanian law firm Mossack Fonesca is not commonly known, but has long been a favorite of the global financial and political elite due to its skill at helping foreigners set up Panamanian shell companies to hold financial assets using fake identities, according to CNBC. The leaked documents, commonly known as the Panama Papers, show how Mossak Fonseca helped their clients launder money, dodge sanctions and avoid taxes. The company released a statement shortly after the leak saying that it has operated the same way for 40 years without being charged with criminal wrong-doing.

There are many prominent people who are linked to the Panama Papers, including 12 current leaders or former heads of states and at least 60 people linked to current or former world leaders in the data. One example is the Icelandic Prime Minister, Sigmundur David Gunnlaugson, who bought an offshore company called Wintris with his wife in 2007 and failed to declare interest on the company upon his entrance into the Icelandic Parliament in 2009. The BBC reports that Wintris was used to invest millions of dollars of inherited money, according to a document signed by Mr. Gunnlaugsson’s wife, Anna Sigurlaug Palsdottir, in 2015.

According to the BBC, Gerard Ryle, director of the International Consortium of Investigative Journalists (ICIJ), said that the documents covered day-to-day business at Mossack Fonseca over the past 40 years, adding that he thinks “the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents.”

Eleven million documents that were held by Mossack Fonesca were passed to a German newspaper, Sueddeutche Zeitung, who then shared them with the International Consortium of Investigative Journalists. There are 107 media organizations in 70 different countries have been analyzing the documents, but BBC does not know the identity of the source. According to BBC, one of the clients, a US millionaire and life coach Marianna Olszewski was offered fake ownership documents to hide money from authorities. The data has also revealed secret offshore companies that are related to Egypt’s former President, Hosni Mubarak, former Libyan leader Muammar Gaddafi and Syrian President Bashar al-Assad.

According to the BBC, the Panama Papers also revealed a suspected money laundering ring that was run by a Russian bank, Rossiya, which is subject to US and EU sanctions following Russia’s annexation of Crimea, and involved many close associates of President Vladimir Putin. The money was channeled through a number of offshore companies, two of which were owned by the Russian President’s friend Sergei Roldugin, a concert cellist and the godfather to the president’s daughter Maria.

Documents from Mr. Roldugin’s companies state that “the company is a corporate screen established principally to protect the identity and confidentiality of the ultimate beneficial owner of the company,” according to the BBC. Kremlin spokespersons implied that Putin and Russia’s political stability in the face of the parliamentary elections were the actual targets of the report.

According to BBC, Dmitry Peskov has dismissed the investigation against Russian nationals as insinuation and speculation, and suggested that many of the team of journalists behind it were actually former US state department and CIA officials. The papers show that Mr. Putin’s inner circle controls what appears to be $2 billion in offshore assets.

According to the BBC, Jennie Granger, a spokeswoman for the UK’s tax authority, HM Revenue and Customs (HMRC), said her organization had received “a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation.”

A version of this article appeared in the Tuesday, April 12th print edition.

Contact Sarah at
sarah.kuehn@student.shu.edu

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