Over the weekend, journalists announced a leak of 11.5 million files from the law firm of Mossack Fonseca, a Panama-based law firm specializing in corporations designed to take advantage of offshore tax havens.
On April 1st, Mossack Fonseca sent a warning letter to clients suggesting they had suffered a data breach. It was no April Fool’s Day joke.
Two days later, Süddeutsche Zeitung, the largest daily German newspaper, along with the International Consortium of Investigative Journalists, announced the leak.
The leak revealed details about 214,000 offshore accounts, 14,153 clients, and billions of dollars hidden from taxation and public scrutiny. So far the leak has connected 143 global politicians including Russia’s Vladimir Putin, China’s President Xi Jinping, and Iceland’s Prime Minister Sigmundur David Gunnlaugsson, among many others.
Putin’s $2 billion trail of money laundering begins with his long time friend, a cellist. While the connection to Putin is obvious, the evidence may remain circumstantial. If nothing else, the leak reveals how corruption in Russia functions: power begets money. By contrast, in Western democracies, money begets power.
In China, Hong Kong serves as an intermediary to facilitate offshore accounts with the President’s brother-in-law named as well as the daughter of the former premier, Li Peng. China has already begun censoring the internet of references to the Panama Papers.
In Iceland, Sweden’s public broadcast station ambushed the prime minister over his corporate connections to banks that received bailout money during the 2008 financial crisis.
Thousands filled the main city square in Reykjavik, the capital, to protest after the PM refused to resign. The crowd was estimated at 8,000 people in a country of just 320,000, or put another way, 1 out of 40 people in Iceland showed up to protest.
Protesters even hurled globs of skyr, the delicious, sweet Icelandic yogurt. Iceland’s Pirate Party, a “Robin Hood” party of the people, is gaining popularity is preparing to form a government should there be new elections.
Earlier today, Gunnlaugsson resigned as Prime Minister but will continue to lead his party.
Beginning a year ago, a source began providing the German newspaper with documents dating as far back as the 1970s. Since the source first made contact, more than 86 journalists from 46 countries have been involved with processing the information.
WIRED takes a look at how the leak was managed by the journalists, including the special software developed to keep the leak from leaking.
Just how big is 2.6 terabytes? Edward Snowden’s 1.5 million documents is estimated to be only 60 gigabytes, although Chinese hackers may have stolen as much as 50 terabytes of data from the United States.
Not too many Americans have been caught up in the leak so far. American tax rates are much lower than the rest of the world. Also in the US, Limited Liability Corporations—available in 49 states—already act like offshore accounts. But don’t worry, journalists still have tons of data to sort through, and more Americans are likely to turn up.
The leak has so far also revealed the link between offshore corporations and the Miami real estate market bubble.
A British banker has been accused of creating offshore accounts to help North Korea buy and sell weapons.
And perhaps unsurprisingly, a FIFA official on the ethics committee has hundreds of shell companies.
Governments have opened investigations based on allegations in the leak, although the Kremlin so far maintains much of the information is simply ‘Putinphobia.’ Holding money offshore is not, in most cases, illegal, but tax evasion is.
At this point, the only thing certain is that the Panama Papers will continue to be a major irritation for the world’s millionaires and corrupt leaders for weeks to come.
