Data trove from ‘Panama Papers’ offers glimpse of how the rich hide their money

A security guard sits outside the Mossack Fonseca law firm in Panama City, on Sunday, April 3, 2016. (AP Photo)

FRANKFURT, Germany (AP) — A leak of 11.5 million documents from a Panama-based law firm offers a glimpse into the shadowy world where the rich and powerful hide their money, raising sharp questions about the use of shell companies that obscure the identities of their true owners.

Leaders of the Group of 20 – representing about 80 percent of the global economy – have vowed to crack down on the practice, which is blamed for helping conceal money laundering, corruption and tax evasion.

By themselves, shell companies aren’t illegal. Countries have tightened rules on using them – but not enough to satisfy anti-corruption activists.

News organizations working with the Washington-based International Consortium of Investigative Journalists have been processing the legal records from the Mossack Fonseca law firm that were first leaked to the Sueddeutsche Zeitung newspaper based in Munich, Germany.

In reports that began Sunday, they said the document dump that they dubbed the “Panama Papers” shows the hidden offshore assets of politicians, businesses and celebrities, including 12 current or former heads of state.

Among the countries with past or present political figures named in the reports are Iceland, Ukraine, Pakistan, Saudi Arabia, Russia and Argentina.

The law firm said in a statement it observed all laws and international standards covering corporate registrations.

Ramon Fonseca, a co-founder of Mossack Fonseca – one of the world’s largest creators of shell companies – confirmed to Panama’s Channel 2 that documents investigated by the ICIJ were authentic and had been obtained illegally by hackers.

But he said most people identified in the reports were not his firm’s direct clients but were accounts set up by intermediaries.

Russian President Vladimir Putin (AP Photo)
Russian President Vladimir Putin (AP Photo)

One of the most prominent subjects of the report is Russian President Vladimir Putin, although his name does not appear in the documents. ICIJ said on its website that the documents show how complex offshore financial deals channeled as much as $2 billion to a network of people linked to Putin.

The U.S. Justice Department was reviewing the leak for evidence of possible criminal wrongdoing that might have a link to the United States or to its financial system but could not comment on specific documents, said spokesman Peter Carr. It’s not clear how many Americans have been identified in the documents, but thousands of Europeans have been named, according to local journalists.

At the U.S. Treasury Department, spokeswoman Whitney Smith also declined specific comment on the revelations of the documents. The U.S. government “intently focuses on investigating possible illicit and sanctions-evasion activity using all sources of information, both public and non-public,” she said in a statement.

The ICIJ said the documents involve 214,488 companies and 14,153 clients of Mossack Fonseca. The nonprofit group said it would release the full list of companies and people linked to them next month.

Sueddeutsche Zeitung said it was offered the data more than a year ago through an encrypted channel by an anonymous source. The source sought unspecified security measures but no compensation, said Bastian Obermayer, a reporter for the paper.

The data was from 1977 through 2015, the paper said. The newspaper and its partners verified the data’s authenticity by comparing it to public registers, witness testimony and court rulings, Obermayer added.

“It allows a never-before-seen view inside the offshore world – providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues,” the ICIJ said.

Panama “is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities,” said Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, an organization representing mostly rich countries. It has been working with the G-20 to restrict the use of shell companies.

Panamanian President Juan Carlos Varela said his government had “zero tolerance” for illicit financial activities and would cooperate “vigorously” with any investigation.

Sueddeutsche Zeitung said its Tuesday edition would report that 28 German banks had used Mossack Fonseca’s services to set up 1,200 shell companies.

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