Suddeutsche Zeitung has in its possession files from the Panamanian law firm of Mossack Fonseca, which is in the business of manufacturing tax shelters and off-shore companies. The paper has 11.5 million documents in its hands, 2.6 terabytes of data — dwarfing the Edward Snowden leaks. The documents show the extent to which the rich and powerful of the world go to avoid taxes and to hide payoffs and embezzelled funds. It’s so bad that even Iceland, the nation that jailed its crooked bankers, may lose its prime minister.
There are legitimate reasons for off-shore accounts, for instance, if a firm does business in a foreign country, it makes sense to have bank accounts in that nation. There are also reasons to set up companies off-shore, to protect assets that might be confiscated by a revolutionary government for instance.
However, the secrecy they offer is ideal for tax evasion and money laundering. Mossack Fonseca has been in this business for 40 years, and the firm maintains that it is merely producing a legal product. If someone misuses their product, they can’t be held responsible. Ramon Fonseca, one of the founders, in an interview with Al Jazeera, likened it to making cars; if someone kills another person with a car, the manufacturer is not responsible.
Picking one’s analogy is key to this kind of defense. It may also be like deliberately producing a lethal virus. Making it doesn’t kill anyone, but if a customer bought a vial of it and released it in a major city, there might be some good questions the manufacturer should have to answer.
Forbes magazine said, “The data includes the names of the leaders of Argentina (Mauricio Macri, President); Iceland (Sigmundur Gunnlaugsson, Prime Minister); Pakistan (Nawaz Sharif, Prime Minister); Saudi Arabia (Salman bin Abdulaziz bin Abdulrahman Al Saud, King); Ukraine (Petro Poroshenko, President); and the United Arab Emirates (Khalifa bin Zayed bin Sultan Al Nahyan, President). Additionally, information was uncovered linking family members of heads of states in at least 40 other countries including Ian Donald Cameron (father of the Prime Minister of the UK), Alaa Mubarak, (son of the former President of Egypt) and the children of Xi Jinping (President, China).”
This is not to say that these people have done anything illegal. However, it is clear that they have used their positions and connections to do things with their money that lesser mortals cannot. And there is every possibility that they have innocently violated some arcane regulation of their home country.
At the same time, one cannot discount the possibility that some of these individuals have taken money they are not legitimately entitled to possess and have illegally and immorally hidden it from the authorities who are tasked with enforcing the law in their own countries. Inquiries in dozens of countries would be entirely appropriate at this juncture.
Governments could fall, and that would be a destabilizing factor in global politics. Governments headed or largely run by those who have done illegal things with money that doesn’t really belong to them should fall. One is always amused by the dictator who claims never to have taken more than his meagre salary but who has five palaces, a dozen yachts, and whose family goes shopping in London, Paris and New York every year. Coupon clipping must take up a great deal of their free time.
This is also just the tip of the iceberg. Mossack Fonseca isn’t the only firm engaged in the practice of helping people put their money beyond the reach of authorities in their home countries, merely the one whose files have been leaked. Panama is not the only country engaged in this practice either, merely the domicile of Mossack Fonseca. This is much worse than most had imagined, and it is much worse than the Panama Papers reveal.