A little over a year ago, an anonymous source contacted the German newspaper S�ddeutsche Zeitung and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm. This was the inception of what is now famously known the world over as the �Panama Papers�. Touted as one of the biggest leaks in investigative journalistic history, the data contains 11.5 million documents and 2.6 terabytes of information from the internal database of the law firm. This makes it larger than the US diplomatic cables released by Wikileaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013.[i]

The unprecedented expos� allows us a peek inside the underbelly of the offshore world. As the data spans nearly four decades, from 1977 through the end of 2015, it provides a thorough look at how dark money flows through the global economy, breeding crime and depriving national treasuries of tax revenues. The yearlong investigation that was conducted by the International Consortium of Investigative Journalists, S�ddeutsche Zeitung, and more than a hundred other news organisations, shows how financial secrecy is sold to politicians, fraudsters, drug traffickers, billionaires, celebrities and sports stars. It exposes a system that enables crime, corruption, and wrongdoing, hidden by secretive offshore companies.[ii]

The law firm at the forefront of this all, Mossack Fonseca, is the world�s fourth biggest provider of offshore services and boasts of a global network with six hundred people working in forty-two countries. It has been operating in tax havens including Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies of Guernsey, Jersey, and the Isle of Man. It sold unnamed offshore companies (shell companies) around the world which enabled their owners to cover up their business dealings, no matter how shady[iii]. The firm has also been administering offshore firms for its clients for the payment of a yearly fee. It has been reported that clients could buy an anonymous company from Mossack Fonseca for as little as USD 1,000. This being just an empty shell, for a little extra fee, the firm would also provide a sham director and conceal the company�s true shareholder. The result was an offshore company whose real ownership structure and purpose could not be deciphered from the outside[iv]. Post the leak, the firm has shuttered offices in three prominent tax havens (Jersey, Gibraltar, and the Isle of Man), after enjoying a presence in these locations for over twenty years.

It must be clarified though, that the term �offshore� is not to be associated only with illicit activities of the world�s rich and famous. The most important thing to understand is that offshore entities are not illegal, neither to set up nor to use[v]. Offshore entities can legitimately be used to hold property in another country, minimise probate on death, provide asset protection, provide investment diversification, and operate an active business. What breaks the law, is the activities of the entities and the shareholders.

The leaked Panama files show how associates of Russian President Vladimir Putin secretly shuffled around USD 2 billion through banks and shadow companies; how the erstwhile Prime Minister of Iceland[vi], Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during the country�s financial crisis. They provide details of the hidden financial dealings of about 130 politicians and public officials around the world, apart from celebrities, sports stars and the like. Even world leaders who have publicly declared their stance on anti-corruption, such as the Chinese President Xi Jinping, Ukrainian President Petro Poroshenko, and British Prime Minister David Cameron, find their names directly or indirectly linked to these documents.

The �Panama Papers� provide a compelling explanation to the growing phenomenon of income inequality in our times � pervasive corruption[vii]. The source of the leak has stated that this was done not for any specific political purpose, but because they understood enough about the contents to realise the scale of injustices described therein. If law enforcement agencies are able to access the documents, thousands of prosecutions could emerge.

That being said, an important point to be considered from such leakages of internal documents is whistleblower protection. Whistleblowers are likely to find themselves in extremely challenging circumstances after turning the spotlight on obvious wrongdoing. It is imperative that governments codify protections for whistleblowers into law; else, enforcement agencies will only have their own resources to depend on, which could very well be insufficient to say the least[viii].

— Anandita Bagchi


[i] http://www.thecitizen.in/index.php/NewsDetail/index/6/7327/Panama-Papers-Hit-Bachchan-Adani-But-Also-Xi-Putin-Cameron-Football-Star-Messi

[ii] http://anticorruption-intl.org/criticising-shell-companies/


[iv] http://panamapapers.sueddeutsche.de/articles/56febff0a1bb8d3c3495adf4/

[v] http://www.huffingtonpost.com/entry/five-legitimate-reasons-t_b_9620364.html?section=india

[vi] Prime Minister Gunnlaugsson resigned after being implicated in the �Panama Papers� investigation

[vii] http://panamapapers.sueddeutsche.de/articles/572c897a5632a39742ed34ef/

[viii] http://panamapapers.sueddeutsche.de/articles/572c897a5632a39742ed34ef/