Panama Papers: The biggest exposure in history by investigative journalists

When Daniel Ellsberg leaked the Pentagon Papers to the New York Times in 1971, the 7000 papers of top-secret Vietnam War documents were the biggest leak in history, which consisted of only about a dozen megabytes as compared to the modern computer text files. About 40 years later, WikiLeaks in 2010 published Cablegate, with an astonishing 1.73 gigabyte collection of classified State Department communications that was supposed to be 1200 times bigger.
After almost five years since WikiLeaks, the world has been shocked with the Panama Leaks on a scale never experienced before with a total 2.6 terabytes, which is over 1000 times larger than WikiLeaks. The documents exposed a well interwoven system of global tax evasion and included 4.8 million emails, three million database files, 2.1 million PDFs from the Panamanian law firm Mossack Fonseca (MF).
After a close analysis of the leaked information by a team of 400 reporters around the world, coordinated by the International Consortium of Investigative Journalists (ICIJ), it has been revealed that the law firm MF had specialized in creating shell companies on behalf of its clients to hide their assets.
ICIJ Director Gerard Ryle told the ‘Wired’ magazine that the leak included pretty much every document from this firm over a 40-year period and about 2000 times larger than the WikiLeaks State Department cables, “It is indeed the biggest leak in history,” he was quoted as saying. 

Giant leak
The ICIJ has published all the files that the investigative journalists studied and they could be accessed on the Internet. 
In summary: 

• The files reveal the offshore holdings of 140 politicians and public officers from around the world.
• World leaders of the past and present in the data files include prime ministers of Iceland and Pakistan the president of Ukraine and the king of Saudi Arabia.
• More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories.
• Major banks have created hard-to-trace companies in offshore tax heavens.

The unprecedented amount of leaked documents expose the offshore holdings of 12 present and former world leaders and  exposes how Russian President Vladimir Putin allegedly moved as much as US $ 2 billion through banks and shell companies.
The leaks also give details of the hidden financial transactions of 128 more politicians and public officials around the world.
The leaked records totalling to over 11.5 million show how a global industry of law firms and big banks sell financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities like film stars, etc.
The ICIJ published its findings after carrying out an investigation for over one year together with the German newspaper Suddueutsche Zeitung (SZ) and over 100 other news organisations in the world. 
According to foreign media, the whistleblower, who is only known as ‘John Doe’, sends an email to SZ offering them 11.5 million documents from the Panamian law firm MF. However, the whistleblower was willing to communicate only via encrypted channels and refused to meet in person as his life was in danger. The files also included at least 55 people and companies blacklisted by the US government because of their involvement in illegally doing business with Mexican drug lords, terrorist organisations such as Hezbollah or rogue nations like North Korea and earlier Iran. One of these companies supplied fuel for the aircraft that the Syrian government used to bomb and kill thousands of its own citizens, according to US authorities. 
Gabriel Zucman, an economist from the University of California, Berkeley and the author of ‘Hidden Wealth of the Nations: The Scourge of Tax Havens’, who was briefed on the investigation, stated, “These findings show how deeply ingrained harmful practices and criminality are in the offshore world.”
I shall now summarize a few findings which will be of interest to the reader and would request them to refer the other files available on the ICIJ website.
Interestingly, world leaders who are promoting anti-corruption measures feature in the documents. The files reveal offshore companies linked to the family of China’s leader, Xi Jinping, who  is determined to fight “armies of  corruption” as well as Ukrainian President Petro Poroshenko, who identifies himself as a reformer in a country rocked by corruption scandals.
The files also contain new findings of the late father of British Prime Minister David Cameron, a leader in a new policy for tax reforms especially in British overseas territories such as British Virgin Islands and Jersey.
It must be stressed that the Panama leaks cover a 40-year period from 1977 through the end of 2015 and reveal a never earlier exposed view of the offshore world and provide a day-to-day, decade by decade look at how dark money flows through the global financial system, breeding crime drug trafficking and most importantly stripping national treasuries of tax revenue.
However, it must be emphasized that most of the services provided by the offshore industry are legal if used by the law-abiding entities and individuals. 
But the leaked documents reveal that the banks, law firms and other offshore players have very often failed to follow the legal requirements so as to be certain that their clients are not involved in any criminality, tax dodging or very frequently noted political corruption. In some cases, the files reveal that offshore middlemen have protected themselves and their clients by overlooking suspect transactions or manipulating official records.
The documents also point to the fact that major banks are the big players behind the creation of untraceable companies in the British Virgin Islands (BVI), Panama and other offshore havens. 
The files list nearly 15,600 paper companies that the banks set up for clients who wanted to keep their financial transactions confidential. These include thousands created by two international banking giants.

Mossack Fonseca 
The leaked records that were reviewed by over 370 investigative journalists from 76 countries originated from MF in Panama, which has branches in Hong Kong, Miami, Zurich and over 35 other branches around the world.
MF is one of the world’s top creators of shell companies, a corporate structure that can be used to hide ownership of assets. The law firm’s leaked internal files contain information on 214,488 offshore entities connected to people from 200 countries and territories. The ICIJ is expected to release the full list of companies and individuals linked to them in early May this year.
The data include emails, financial spreadsheets, passports and corporate records that expose secret owners of bank accounts in 21 offshore jurisdictions from Nevada to Singapore to the British Virgin Islands.
The files also reveal the MF involvement in Africa’s diamond trade, the international art market and other businesses that prosper on secrecy. The MF documents indicate that the company’s customers have included Ponzi schemers, drug kin pins, tax evaders and at least one jailed sex offender, a US businessman - convicted of travelling to Russia to have sex with underage orphans - signed papers for an offshore company while he was serving a prison sentence in New Jersey. 
In a written response to questions from the ICIJ and its other media partners, MF said it did not foster or promote illegal acts. “Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false.”
MF said it could not answer the questions about specific customers because of its obligation to maintain client confidentiality.
It is thus concluded that MF operates within a thin cover of confidentiality and the question that should be asked is – what is the limit of such confidence when money launderers are active through shell companies MF has established?
The above is quite evident when the law firm’s cofounder Ramon Fonseca said in a recent interview that the firm had no responsibility for what the clients did with the offshore companies that the firm sold. Further, he compared the firm to a “car factory” whose liability ends once the car is produced. Blaming MF for what people do with their companies, would be like “blaming a carmaker if the car used in a robbery,” he said.

Crime of the Century
Before I conclude over the MF leaks, I would like to mention the alleged involvement of MF in the “Crime of the Century”, which is worth reporting.
“Before dawn on November 26, 1983, six robbers slipped into the Brink’s-Mat warehouse at London’s Heathrow Airport. The thugs tied up the security guards, doused them in gasoline, lit a match and threatened to set them afire unless they opened the warehouse’s vault. Inside, the thieves found nearly 7,000 gold bars, diamonds and cash. Thanks ever so much for your help. Have a nice Christmas,” one of the crooks said as they departed.
British media dubbed the heist the “Crime of the Century”. Much of the loot — including the cash reaped by melting the gold and selling it — was never recovered. Where the missing money went is a mystery that continues to fascinate the students of England’s underworld.
Now documents within Mossack Fonseca’s files reveal that the law firm and its cofounder Jürgen Mossack may have helped the conspirators keep the spoils out of the hands of authorities by protecting a company tied to Gordon Parry, a London wheeler-dealer who laundered money for the Brink’s-Mat plotters.” (https://panamapapers.icij.org)

Global Financial Integrity Report 
The above 72-page report released in 2015 was highlighted in the local media recently. This report showed that over 38.8 percent of total illicit financial flows from the developing world were from the Asian region.
The illicit financial outflows from Sri Lanka gave a cumulative total for the 10-year period as US $ 19,967 million with an average of US $ 1,1997 million for a year. There was a notable increase since 2009, after the end of the civil war, when the figure jumped to US $ 4602 million in 2011.
However, what the local news media, which had criticized the present government to be lethargic and not initiating action to probe into these illicit financial flows, missed the fact that the cumulative outflow of such funds for the 10-year period were accounted by trade misinvoicing outflows which gave a cumulative total of US $ 17,302 with an average of US $ 1730 million per year – this account for over 86 percent of the total illicit outflows of money from Sri Lanka. Investigations should be initiated as to how such illicit outflows took place in over invoicing, etc., of costs related to megaprojects, etc.

The blunder 
It is inconceivable as to how the local media have tied up the Panama Papers with the list of companies and individuals holding offshore accounts in international financial centres.
The 46 names published on the ICIJ website in 2013 and reported on local websites were identified as ICIJ ‘Offshore Leaks’. It is not illegal for a company or an individual to hold an offshore account if it is legal. It is also learnt that some of our reporters – both in the electronic and print media – are accusing the present government for not taking any action on these companies and individuals.
In this regard, I would like to query whether the persons or the companies concerned, whose names have been given wide publicity, have reported to the appropriate focal points of the government about their legality in holding these offshore accounts. I feel that the government should take necessary action to clear the names of the companies and individuals that are now in the public domain and inform the media that the accounts are illegal or not.
The local media have got confused with the ICIJ lists released in 2013 on offshore account holders and the Panama Leaks and these two independent probes should not be mixed up.
Now, in addition to this confusion, one TV channel has got further confused by highlighting the ICIJ report, Panama Papers and Global Financial Integrity Report published by a group of independent researchers with the financial assistance from Finland. 

Recommendations and conclusions
I would like to draw the attention of the readers to my article published in Mirror Business of December 15, 2015 titled ‘Global financial centres and their impact on banking and finance sectors’. In this article, I had stressed the need of the government retaining a world leading investment consultant group to formulate an effective and appropriate financial centre for Colombo on the guidelines identified by the lawmakers and the financial experts in Sri Lanka.
In view of the Panama Leaks and other issues related to money laundering, the government should seriously consider carrying an in-depth study in launching a financial centre in Colombo and assist the prime minister’s call on making an international investment hub focusing the Colombo Port City within the Western Province Megapolis. A fully operative international financial centre in Colombo within our legal and financial regimes, with adequate laws and regulations for anti-money laundering in conformity with international practices, has to be formulated with an effective enforcing mechanism with advice from international financial experts.
(Dulip Jayawardena, a retired Economic Affairs Officer United Nations ESCAP, can be contacted at [email protected])