What are Panama Papers?
Panama papers are the leak of 11.5 million files and 2.6 terabytes of information drawn from the database of the world’s fourth-biggest offshore firm, Mossack Fonseca. These documents provided detailed information about more than 21400 offshore companies listed by the Panamanian firm, Mossack Fonseca. It also provided information about the shareholders and directors of the companies. These documents showed the daily business operation of Mossack Fonseca over the past 40 years and how the Panamanian firm has helped clients all over the world to launder money and avoid taxes.
What is Mossack Fonseca?
It is a Panama-based law firm whose services include incorporating companies in tax havens such as Switzerland, British Virgin Islands, Cyprus, Guernsey, Jersey and the Isle of Man. It has franchises around the world and has its network working in around 42 countries. A tax haven is a state, country or territory where certain taxes are levied at a lower rate or not levied at all. Financial secrecy prevails in these territories which can be used by foreign individuals to avoid tax
Sources of Leakage of Panama Papers
The records were obtained from an anonymous source by German newspaper Süddeutsche Zeitung(SZ’s), which was later handed over to The International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.
What do they reveal?
Around 140 politicians, their families, and close associates from more than 50 countries, connected to offshore companies in 21 different tax havens.
A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the center of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.
Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s Prime Minister; Ayad Allawi, Ex-Interim Prime Minister and former Vice-President of Iraq; Petro Poroshenko, President of Ukraine; Alaa Mubarak, son of Egypt’s former President; and the Prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
These documents also feature over 500 Indians linked to offshore firms. The Big names in the list include celebrities like Amitabh Bachchan, Aishwarya Rai, Kareena Kapoor Khan, Saif Ali Khan; K P Singh, DLF owner and nine members of his family; Sameer Gehlaut, Indiabulls owner, Gautam Adani, Vinod Adani elder brother, Iqbal Mirchi etc.
Mossack Fonseca replies to this allegation, saying that the firm complies with anti-money laundering laws and tries actively to prevent and it cannot be blamed for the failings by intermediaries, which include banks, law firm accountants. But how much truth is present in it no one knows.
It is not illegal to engage into an offshore structure. But few corrupt take advantage of this structure and use it as a tool to make the illegal activity by converting the black money into white. Since these offshore structures are not taxable, wealthy people take advantage over this to lock their money in a tax-free asset. It should not be misused.