50 Shades of Panama

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Panama Papers

By Nikola Kedhi.

A hurricane of names, sums of money and offshore accounts coming from Panama on Sunday evening quickly passed borders and continents. The Panama Papers, considered the biggest leak of the century, have exposed the secret wealth and financial transactions of politicians and other rich individuals. After the initial bewilderment, everyone is beginning to question who was behind it and what comes after this.

Mossack Fonseca is a law firm and the fourth biggest provider of offshore tax services. The company, whose seat is in Panama, has helped more than 300 thousand companies worldwide. It has a network of 600 employees working in 42 states, including Switzerland, Cyprus, the Virgin Islands and many more. The documents from this company were leaked to Germany’s Süddeutsche Zeitung, the largest German daily newspaper, and then published in numerous newspapers worldwide.

There are 11.5 million documents, which are approximately 2.6 terabytes of information regarding wealth of individuals or companies stored in tax havens. These are countries that offer little or no taxation, while at the same time providing almost no information to foreign tax authorities. Usually, tax havens are small countries which know that through the tax facilitation they can attract large amounts of capital, thus helping in their economic and financial development. Furthermore, over time they build reputation, which helps them draw not only powerful individuals, but also big corporations.

These wealthy people can create new companies under different names, with different shareholders and managers, and invest their money there, profiting from the lack of taxation and from loopholes in legislation. Thus, it is a perfectly legal thing to do. A company can move offshore certain sums of money in order to pay lower taxes. Nevertheless, there are also cases in which certain individuals, usually corrupt politicians or criminals, use these means for money laundering and tax evasion purposes. These are illegal and subject to criminal charges.

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The names that have come out from this leak include Ukraine President Petro Poroshenko, Iceland’s PM Sigmundur David Gunnlaugsson, people associated with Russian President Vladimir Putin, soccer player Lionel Messi, several Chinese authorities etc. The first political victim was the Prime Minister of Iceland who resigned two days ago due to massive popular protests. However, everyone should be careful not to fall in the trap of being judge, jury and executioner. Since not all published names have done something illegal, it should be left to the judiciary system and those investigating to determine the criminals in the matter.

One aspect of this case, which has been left in the shadows somewhat, is finding out who made the leak. Experts believe that, given the size of the documents, it is not the work of hackers. It would have taken a lot of time and effort to perform an attack of such a massive scale, and logic tells us that the IT department of Fonseca would have noticed suspicious activity immediately. These documents were not leaked this week. An unknown source approached the German newspaper more than one year ago through an encrypted chat offering “more data than you have ever seen” according to the Wired magazine. The documents were analyzed and verified and only then were they published. They were made public with the help of Organized Crime and Corruption Reporting Project and International Consortium of Investigative Journalists. Both organizations have a common funder, the Open Society foundation headed by George Soros. Several major newspapers are pointing this fact out and wondering about the role of Mr. Soros in the publication. WikiLeaks, in a reaction on their twitter account, seemed pretty convinced that Soros had a major hand in the leak and may be the main sponsor. Beyond these facts we can only speculate and it is up to everyone to draw their own conclusions.

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Many highlight the fact that the names of interest in this scandal are Mr. Putin, Saudi Arabia’s King and high-ranking Chinese officials. According to the Wall Street Journal, a Kremlin Spokesperson described the allegations of the Russian President’s involvement as Putinphobia. One can wonder if the leak is strategically directed at certain countries. There are plenty of questions which add a lot of ambiguity to this scandal. Why some of the countries known for their high level of corruption are not included? Why documents on these countries and other corrupt politicians were not included? Is this a new way of doing politics? Are there specific interests behind it? What comes after a leak of such magnitude? For now, all these questions remain unanswered. Hopefully, time will tell.

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