Panama Papers: What you need to know

Panama Papers: What you need to know

What are the Panama Papers?

Good start. A Panama-based law firm, Mossack Fonseca, is one of the biggest makers of shell companies in the world. We'll tell you what a shell company is just now. It says that its account was hacked. Some 11.5 million documents to do with the financial dealings of the rich and famous have fallen into the hands of the media. More than 100 media companies joined forces to publish an investigation over the papers.

Why is this such a big deal?

Well, we still need to know how much of a deal it is, but what these papers do is lay bare the financial transactions of some of the world's wealthiest and most important people. They might be hiding something.

Alright, what are offshore accounts?

Offshore means outside of a country, and usually it means a country that does not have very strict banking laws. People have these accounts to hide information about who really owns certain assets. They can also be used to get away with not paying taxes in other countries, and to get around laws that might stop people from carrying out business, eg trading with countries which are sanctioned.

So where are these accounts?

Panama, the Cayman Islands and Bermuda are among more than a dozen small, low-tax places that specialise in handling business services and investments for companies which don't actually belong there. 

Hmm, so can you use offshore accounts for legit business?

Well, the Financial Action Task Force says that companies or trusts can set up in offshore places for legal uses such as business finance, mergers and acquisitions (when one company buys another), estate or tax planning. 

And unlawfully?

Phew, quite a lot of ways. But the one that most people would be worried about would be that they can be used terrorists to move money around or to commit financial crimes, to bribe people and to clean money which has been gained through crime.

The media groups says the files from Mossack Fonseca include information on 214,488 offshore companies linked to 14,153 clients in 200 countries and territories.


Yep, Hong Kong too.

Has anything been done to stop this kind of thing?

The Financial Action Task Force and other law agencies publish reports that point out weaknesses in enforcement of anti-money laundering and counter-terrorism financing efforts of specific countries and territories. Financial and legal professionals get training on how to spot potential violations, since in some cases lawyers and bankers are unaware they are handling illicit transactions. The EU has stepped up efforts to crack down on tax avoidance by multinational corporations. 

So, what sort of things have we found out about dirty dealings?

Banking secrecy laws can hide offshore financial dealings. But leaked documents in late 2014 drew attention to sweet tax deals offered by the tiny European country of Luxembourg to multinational companies and ultra-wealthy individuals. In the 1980s, the Bank of Credit and Commerce International, an international bank founded by a Pakistani financier, was implicated in wide-scale money laundering and other illegal financial dealings.  

So who has been caught, and what do they do wrong?



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