Panama Papers and the Need for Tax Haven Reform

In the Panama Papers, the unprecedented release of 11 million documents from a law firm in Panama, we see in great detail how the secret accounts of the global elite launder money and hide corruption.

After initial coverage focused on international figures like Vladimir Putin and Lionel Messi and their connections to secretive accounts, a June 5 New York Times article shed yet more light on how individual U.S. citizens are among those hiding their millions abroad.

The Times showed that over the past decade, the now famous Mossack Fonseca had at least 2,400 U.S. based clients, some with criminal records, for whom they set up over 2,800 (shell) companies.

Among their findings:

• Mossack Fonseca helped the manager of one of the biggest hedge funds in the world hide $134 million in six countries, through seven banks. If one bank asked too many questions, they used another.
• The firm set up an offshore account called April Fool for the then chief of Citigroup. It was for his yacht. 
• The firm helped the founder of Boston Capital Ventures falsely retain Guatemalan residency to evade U.S. taxes. The beneficial owners of all his accounts and trusts was his 100 year old mother.

There are many more examples.

As you look through the files, it is striking the plain language by which company executives discussed tax avoidance and evasion.  In an email to clients, Ramsés Owens, a partner in Mossack Fonseca, laid out the process of evading U.S. taxes, step by step.

First, set up a private offshore company using nominee directors. Then open a bank account using the new company. Finally, deposit money in these bank accounts, which are now private and act as a ‘black hole’. Easy.

“You can take the money in cash, you can do a bad investment; you can purchase something and not receive anything (an expensive piano, an expensive software),” Mr. Owens wrote. “You can receive an invoice from Panama or any other location and that would justify some of the outgoing moneys. You can also declare everything to the tax administration.”

Despite all this, it seems unclear what laws, if any, Mossack Fonseca has broken.

The elaborate shell games which both individuals and large multinational companies use to avoid taxes and accountability are not limited to Panama.

In fact, it’s just as easy to set up an anonymous shell company in America as it is in Panama.

That anonymous company could win a state contract, buy a farm or rent a store without anyone knowing who is behind it.

Anonymous shell companies have been used to finance human trafficking rings, defraud local government, launder bribes, skirt international sanctions and fund Super PACs. Even if we know there are crimes being committed, law enforcement has trouble figuring out who to arrest, as the identities of the criminals are shielded by layer after layer of anonymous companies.

Earlier this year, Congress introduced bipartisan legislation to end anonymous shell companies, requiring that the actual owner of a company be listed somewhere available to law enforcement. Fair Share is working to support this reform, and you can join us here.

We’re also getting behind legislation to end the loopholes which allow companies to hide their profits in offshore tax havens like Panama and the Cayman Islands to avoid paying U.S. taxes. You can take action to support our campaign, here.