It is being called the biggest data leak in history. 11.5 million data files consisting of over 2 terabytes of memory from the computers of the world's 4th largest offshore financial company named Mossack Fonseca have been leaked to the public and is likely to have global ramifications. How much accountability will be dished out remains to be seen, but by the end of this conspiracy we may question everything we've ever been told.
The story of Mossack Fonseca is really the story of the industry behind the offshore system itself. Based in Panama, Mossack Fonseca is a little-known but powerful law firm that is a global leader in the creation of shell companies. It has branches in Hong Kong, Zurich, Miami and 35 other places around the globe. Their collection of services include over 214,488 offshore entities in more than 200 nations. The Panama Papers show that not only do major banks work together to perform corrupt acts, many of them actively work against law enforcement investigations. Mossack Fonseca have their hands in Africa's diamond trade and the international art market and other “industries” where people look to hide large amounts of money that comes from illegal or shady sources. Mossack Fonseca co-founder Jurgen Mossack laundered money for a group of criminals who carried out a heist in 1983 in London at an airport warehouse. 7,000 gold bars, diamonds and cash were stolen. Much of the loot was never recovered and no one ever knew what happened to that loot...until now. Jurgen Mossack is implicated in the Panama Papers because he is tied to the man who laundered the money and may have “overseen” the shell company that was named Feberion Inc and set up 16 months after the heist. It should also be noted that Jurgen Mossack is the son of a German soldier who fought for the Nazis in WWII as a member of the SS. Why am I not surprised that the son of a former SS officer would be at the center of a global conspiracy?
What is a shell company though and how exactly do tax havens work is a question you may be wondering. A shell company (also known as a dummy corporation) is a corporate structure that allows one to hide the ownership of assets. The actual owner of a shell company is not registered in any public records and is actually protected by the financial institution who use secrecy laws to sometimes buck investigations. In the wake of the fallout from this massive leak, you're now seeing people make arguments for why a shell company can be good in certain cases, but overall I think most understand that the industry is ripe with corruption and due to the secrecy can allow for all sorts of unethical and sometimes illegal activities to take place. Many people are not setting up shell companies to protect against blackmail or a potentially ugly divorce settlement, many are simply evading the payment of taxes.
So then how do shell companies exist in tax havens and what is a tax haven anyway? A tax haven is a country or territory that offers little to no taxes and regulations and offers a substantial amount of privacy and secrecy to foreign individuals and businesses. According to a quote in the International Business Times by Rebecca Wilkins of Citizens for Tax Justice (see link below for article), "A tax haven ... has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of noncooperation with other countries on exchanging information about tax matters...Panama has all three of those...they’re probably the worst.” In countries like Panama and the British Virgin Islands, offshore companies can operate with total anonymity and in Panama there is no income tax on large international transactions. So when the Panama Papers show how debit/credit transactions can go as high as $200 million you then begin to see why this is appealing to the wealthy. It goes deeper than not paying taxes though. The offshore industry is how terrorist organizations, drug kingpins and dictators keep their wealth intact. The leaks have revealed that over 33 people and companies that have been blacklisted by the United States because of ties to Mexican drug cartels and terrorist organizations set up shell companies with Mossack Fonseca. These are unsavory characters that would have tripped any red flag the law firm had set up if they didn't really want to do business with shady and potentially dangerous people.
HSBC is in the news once again with their illegal and unethical practices being put on full display for the rest of the world to see. HSBC is one of the two largest wealth management firms in the world and it has been revealed that they are Mossack Fonseca's biggest banking clients with the creation of over 2,000 offshore companies for their clients. In case you forgot or were unaware, in 2011 HSBC was implicated in laundering drug money from Mexican cartels and terrorist organizations. This bank was caught doing something that would get some people sent to prison for the rest of their lives. The Guardian wrote a great lengthy article about it in April of 2011 that can be read by clicking link #2 below. They were forced to pay the largest penalty ever imposed on a bank in 2012 to the tune of $1.9 billion. However when you take into account the amount of money that was going through HSBC and the fact that no one went to jail...it's not hard to claim that money laundering is still likely ongoing. The exposure of their ties to the Syrian regime and Bashar al-Assad via the Panama Papers is not doing their public image any favors either. This is on top of the fact that HSBC has been scandel-ridden since the initial exposure from several years back. The leaks reveal that thanks to the lobbying of HSBC, Rami Makhlouf, cousin of Bashar al-Assad, was able to keep his Swiss bank accounts open during the initial beginning stages of the Syrian Civil War. Mossack Fonseca and HSBC continued doing business with Rami and his brother Hafez Makhlouf (who had been blacklisted by the U.S. in 2007) for years after coming under global scrutiny. We'll watch what happens with HSBC going forward to see if anything else comes to light.
It is important to note that Hillary Clinton was a major proponent of the passing of the Panama Free Trade deal that was negotiated by the Bush Administration but supported and pushed by Obama when she was Secretary of State. Barack Obama signed the treaty into law in 2011 despite warnings from the Left including Senator Bernie Sanders that it would make tax evasion and money laundering worse.
Now one cannot blame Barack Obama and Hillary Clinton for creating the problem inherent in the existence of tax havens like Panama. However you can blame them for making the problem worse and not having the foresight to see something like this happening down the road. This is ultimately the problem many have with Obama, Clinton and the Democratic establishment in general. Even though Hillary Clinton's name hasn't come up per se in any documents revealed as of the writing of this blog entry, her supporters must prepare themselves for the possibility that her name may one day come up. What is going to be the defense then? Are we about to start arguing in favor of tax havens and offshore shell companies now? I myself am not prepared for that.
The idea of a political revolution doesn't seem so far-fetched and pointless now does it? One has to understand that a system as corrupted as this won't just willingly give away power the power it's amassed. A political revolution at this point makes the most sense if you want to have any hope of living in a better society. This is an important message for all, but especially for young millennials and those of us who have yet to reach the age of 35. Follow Black and Intellectual on Twitter, Instagram, Pinterest and Facebook by clicking the social icons at the bottom of the page. We're going to stay on top of this and update you with major developments in this story.
Other Revelations from the Panama Papers
- Jackie Chan has at least 6 shell companies through Mossack Fonseca. However the purpose of those shell companies remains to be seen and as stated above...simply owning one doesn't make you a criminal. Chan isn't the only celebrity that has been exposed, but also a series of other entertainers and athletes such as Simon Cowell of 'American Idol' fame.
- Lionel Messi, the soccer star from Argentina who plays for Barcelona, was also caught up in the controversy. Even though as of right now it doesn't seem to have hurt his brand or endorsement deals, this couldn't have come at a worst time. Messi has been implicated during a time when he's under investigation in Spain on tax evasion and one of his numerous shell companies (Mega Star Enterprises) has been exposed. That there appears to be heavy involvement among soccer players both past and present in the use of offshore shell companies is a fact that has been made clear from these leaks.
1. Panama Papers: Obama, Clinton Pushed Trade Deal Amid Warnings It Would Make Money Laundering, Tax Evasion Worse - International Business Times
2. How A Big US Bank Laundered Billions From Mexico's Murderous Drug Gangs - The Guardian