They’re called the “Panama Papers” a massive leak of confidential documents from Mossack Fonseca, a law firm in Panama specializing in untraceable offshore accounts. The document dump, consisting of over eleven million documents, opens up to the daylight how the global offshore corporation industry helps the wealthy and powerful hide money.
The term “offshore” itself can be confusing because it’s not necessarily a physical location. A bank account might be located in Switzerland but the legal entity that owns it might be in another country. You might remember the U.S. cracking down on individuals stashing money in overseas bank accounts a couple years ago. If the account owner is masked by a foreign corporation, then the Swiss are not obligated to play along with American rules. Offshore these days isn’t so much a location as a set of capabilities.
It’s Not All Criminal
I should point out, right up front, that not everyone with an offshore corporation is trying to do something shady. A business presence in many countries can ease travel, make it easier to buy property and apply for residency. Even if a company or individual wants to use its offshore corporation to hide cash, that doesn’t necessarily mean they’re doing it illegally or that the funds were obtained illegally. Sometimes offshore corporations are utilized by the rich and famous for nothing more than to keep the media and family members out of their financial business. You should not assume that someone with an offshore account is doing something illegal. By some estimates nearly $32 trillion dollars exists in offshore accounts.
There Is a Dark Side
There is, however, a dark side to offshore corporations and it would be naive not to recognize that many are being used for both illegal and unethical activities. Many documents in the Panama Papers reviewed so far point to a range of criminal activities including money laundering, bribery and tax evasion.
Mirror, Mirror On The Wall
Before we get all up about what’s going on in Panama, it might be good to look at just who really is one of the biggest offshore offenders of them all. The answer, which might come as a surprise to many, is the United States. In a 2012 study (PDF) researchers impersonating money launderers, terrorist financiers and corrupt officials were able to set up shell corporations in several U.S. states with very little difficulty. Delaware is notorious but less known and just as secretive are Nevada and Wyoming. It may also come as a surprise to learn that the U.S. did not sign the new global disclosure standards that force shell companies to disclose their owners around the world. When it comes to enabling criminal and corrupt activity, it’s easier to set up a dummy corporate front in the United States than it is in Kenya.
Physician Heal Thyself
Instead of throwing rocks at Panama, maybe the U.S. should take a good hard look at its own part in financing the drug trade, funding terrorism and enabling corruption. It would be trivial for a foreign government or corporation to stand up a dummy U.S. corporation and use it to funnel bribes and lobbying money to U.S. politicians at the state and federal level. We already know that charities are being used as political fronts so it’s hardly a stretch to suggest that dummy corporations and corporate accounts are being used the same way.
Perhaps this is one time we ought to start with the log in our own collective eye before we start picking at sawdust somewhere else.