Panama Papers is the unofficial name given to some 11.5 million confidential documents leaked to the German newspaper Süddeutsche Zeitung by an anonymous source in early 2015. The documents, containing private financial information, were owned by the law firm Mossack Fonseca. They linked many businesspeople, celebrities, politicians, star athletes, and other wealthy people to foreign bank accounts and shell companies, which can be used to conceal wealth and illegal activities. Süddeutsche Zeitung enlisted the help of the International Consortium of Investigative Journalists (ICIJ) to analyze the papers and published them in early 2016. The ICIJ is a worldwide network of journalists who cooperate to investigate important news stories.
Mossack Fonseca was a law firm based in Panama that managed shell companies. A shell company is a business that has no operations (day-to-day activities) or assets (property). Many such companies exist and function entirely on paper. They are usually established offshore—that is, in countries other than those where their owners live, often small island nations or dependencies. Owners of shell companies can open bank accounts and control assets without revealing their own names. In this way, they can protect themselves from being sued and avoid paying high taxes. Shell companies are frequently used to conceal money or illegal activities. The Panama Papers included the internal documents of more than 200,000 shell companies and accounts. The documents dated from 1977 to the mid-2010’s.
Although it was not initially clear whether the Panama Papers documented any illegal activities, the level of potential fraud demonstrated by the papers shocked people worldwide. The confidential files revealed activities conducted by dozens of current and former politicians, public officials, and world leaders. Russian president Vladimir Putin, Pakistani prime minister Nawaz Sharif, and British prime minister David Cameron were among those linked directly, or indirectly through family or associates, with offshore accounts and shell companies. Simply being named in connection with the papers did not constitute wrongdoing. But the negative reaction against these political leaders and others was significant, particularly in countries where people already were angry about political corruption and wealth inequality.
Prime Minister Sigmundur Davíð Gunnlaugsson of Iceland faced widespread public hostility after the Panama Papers revealed that he and his wife had an offshore account. The scandal prompted Gunnlaugsson’s resignation. Juan Pedro Damiani, a member of the FIFA ethics committee, stepped down from his position after the papers linked him to a FIFA corruption investigation. FIFA is the world governing body for soccer.
Compared with individuals from other industrialized nations, relatively few Americans were connected with the Panama Papers. But the documents highlighted gaps in United States policy. They demonstrated how easily shell companies could be created in the United States. Shell companies enable the easy distribution of money for all kinds of organizations, potentially even for terrorist groups. During the early 2000’s, many countries recognized the need for greater transparency regarding financial transactions in order to lower the risk of corruption and other crime.
