Erstellt am: 4. 4. 2016 - 15:19 Uhr

Panama Papers: "Politicians will feel the heat"

The biggest leak in history is likely to make the richer and powerful sleep uneasily. But will it usher in real change?

The so-called Panama Papers release is being called the biggest leak in history: Eleven million documents, held by the Panama-based law firm Mossack Fonseca were passed by an anonymous whistle-blower to German newspaper Süddeutsche Zeitung, which has now shared them with the International Consortium of Investigative Journalists. In an age of click-bait, it seems a heartening reassertion of the role of the press as a fourth estate - challenging power.

“In the past 12 months, around 400 journalists from more than 100 media organizations in over 80 countries have taken part in researching the documents,” writes the Süddeutsche Zeitung. “These have included teams from the Guardian and the BBC in England, Le Monde in France, and La Nación in Argentina.”

The documents include e-mails, pdf files, photo files and are covering a period spanning from the 1970s right up to the present day. Now an avalanche of newspaper reports has begun. Those reports are expected to embarrass some of the most wealthy and powerful people on the planet; and shine a light on how money has been laundered, hidden or secretly used to bypass sanctions and prop up corrupt regimes.

Much of the leaks involve what are called "shell companies" which simply serve as vehicles for other businesses, and are owned by "nominees". John Christensen, the executive director of the Tax Justice Network, explained to me how the nominee system means secretive investors can basically hire signatures:

JC: Nominees are people who give their names so you don’t have to disclose who you are. A nominee director is a director who comes in and acts on your behalf under their own name. A nominee shareholder owns shares under their name but on your behalf.

And why is that dangerous?

It’s dangerous for a number of reasons. First of all, it means that companies can act in all sorts of criminal ways without disclosing who the real people behind the company are. It can be used for tax avoidance or tax evasion. It can be used to avoid disclosure about political conflict of interest. It can be used for fraud or embezzlement. A range of money laundering activities can be hidden behind these secretive shell companies.

So if I was a dictator and there were sanctions against me, I could get someone, who was untainted by my regime, to be my nominee?

That’s precisely it. That is exactly what happens and that is why these companies are so dangerous.

dpa kjh soe

And why have they been able to get away with what seems a rather unsubtle approach?

It might seem unsubtle but in practice the offshore structures can be very sophisticated and cover many different jurisdictions. So don’t think that Mossack Fonseca, the Panama law firm, is acting in isolation from other countries.
In practice they will be working together with other law firms, banks, accounting firms and a whole range of other professional service providers in different jurisdictions because if you are a top end kleptocrat or dictator you will want to be assured of secrecy and you won’t depend upon a single offshore company in a single jurisdiction. You will very typically have an offshore trust in one jurisdiction, which owns a company in another jurisdiction and a whole set of other companies in other jurisdictions.

Big household name banks must know, that some of the money they hold in the name of nominees, is shady…

Well of course they do. They have all been playing this game for a very long time and some banks have had major leaks of their own disclosing this. So this isn’t the first leak but this is the first leak involving a big global law firm. It is a massive leak and shows that this major law firm is up to its neck in illicit activities. But of course there are lots of other banking and accounting firms that will have been colluding in this.

You describe it as a massive leak. Who will be sleeping uneasily now that this information has been revealed?

I think global elites in many, many countries will be losing sleep, but also other law firms. This is the first time a major offshore law firm has had a leak of this type. If it can happen to a company like Mossack Fonseca, it can happen to many of the other so-called “magic circle” law firms which operate in these offshore tax havens, and they all have a similar range of clients, doing a similar range of criminal activities, so they’ll all be losing a lot of sleep at the moment.

CC BY-SA 3.0 by Ayaita via Wikicommons

Panama Stadt, CC BY-SA 3.0 by Ayaita via Wikicommons

Do you think that these leaks will change anything? Will governments try and crack down on this?

Well, governments have been saying for years, for decades in fact, that they’re going crack down on the whole offshore tax haven world.
There has been some progress, but the truth of the matter is, that politicians will only move when there is such public pressure for change, that they have no alternative but to move. That’s why this is important because I think this reveals for the first time to the general public the extent to which law firms – lawyers, privileged, professional people - are supporting this kind of criminal activity. What I hope is that the public pressure on politicians will increase and the politicians will be forced to take more effective action.
Now - what kind of action are we talking about? First of all we need to have full, automatic information exchange in place, so that countries across the world share information about who hides behind these offshore companies. That is the first step, and we have already seen some move towards that. But unfortunately we haven’t had a strong political commitment so far to require full disclosure of who are the real people, the real owners behind these offshore companies, and the offshore trusts and foundations. That’s what is missing at the moment.

Could that be because a lot of our political parties have donors, who are very rich, and some of their money will be in these tax havens?

I think that is a fair comment. It is true that many political donors are working through offshore companies to make their political donations and hide what they are doing. But I think we also have to accept the fact that many politicians, and their families, and the cronies that surround them, are themselves involved in using offshore structures.

The first to feel the heat has been Iceland’s Prime Minister, who stormed out of a press meeting, after being embarrassed by a leak. Can we expect more politicians to be having awkward press conferences?

Yes, awkward for Iceland of course, which has tried to present itself as squeaky clean in recent years after their financial crisis. Awkward for them, but I think we can expect further revelations, and an awful lot of politicians are likely to feel the heat and might well be walking out of press conferences in the next few weeks.