The release of the Panama Papers—a treasure trove of 11.5 million confidential documents from the Panama wealth management firm Mossack Fonseca—has attracted headlines around the world.
Leaked to the German newspaper Süddeutsche Zeitung, which then shared them with the International Consortium of Investigative Journalists, they show how some of world’s richest people have used offshore bank accounts to conceal their wealth or avoid taxes. All in all, news reports link hundreds of public officials, business leaders, and celebrities to the use of tax havens to protect their assets.
We asked criminal justice professor Nikos Passas, an expert in the study of corruption and illicit financial flows, to discuss the international fallout after the papers’ release last week.
“Some of the activity uncovered in the Panama Papers will turn out to be illegal,” writes The Atlantic. “But if past is prologue, then the majority of what we learn from the leak will merely be embarrassing for those exposed—showing them to be opportunistic and perhaps unethical, but not criminal.” Do you agree with this assessment?
The leak has been massive, but the data remain in possession of reporters and this question cannot be answered before the raw data become available. A different precedent to documents leaks is that of the Bank of Credit and Commerce International. This became the most investigated bank in the world after it was globally closed down and generated more than 3,000 legal cases and investigations in the U.S. Congress and scores of other countries. The access to internal documents was unprecedented and revealed how the world really works. It showed how many individual and organizational actors had committed crimes as well as unethical and illicit acts for a very long time. Past work shows that the legal and the illegal interface and mix much more than we usually assume. I hope that these papers from Panama can add substantially to our understanding of this and the methods employed over time.
How, if at all, might the rules governing offshore tax havens change as a result of the release of the Panama Papers?
The biggest problem is not the tax havens but the secrecy of these jurisdictions. If there is more openness and transparency, let people to their tax planning and lawmakers to their rules. These havens exist because there is a market for secrecy. When demand is strong, resistance to reform and sunshine is powerful. Scandals of this magnitude, however, present an opportunity for reform. One would hope that these resistances will weaken and a proper cost-benefit analysis of secrecy havens can be conducted and lead to an informed debate on how to go about it.
In the wake of the documents’ release, several public officials have come under heavy scrutiny for allegedly using tax havens to shield their wealth or enlisting their friends to launder money for them, including Iceland’s Prime Minister Sigmundur David Gunnlaugsson, who stepped down amid the scandal. Who’s next?
Without access to the documents, any answer to this is speculative. Several reporters have intimated that this will broaden and deepen with many players from numerous countries being affected directly and indirectly. Moreover, this leak and the attention it generates may encourage and empower more insiders to disclose further documents from other parts of the world. The Panama firm was not the biggest player offering these services to the rich and powerful. There is room for more disclosures and additional networks and players that may come out.