Eight years after the Panama Papers were unlawfully leaked from the offices of Mossack Fonseca, the aftershocks continue to be felt.
Currently, 27 people, including the two principals of the disgraced law firm, are standing trial in a Panamanian criminal court accused of money laundering. We are currently awaiting the judge’s verdict in this case.
The leaks
Hitherto, the biggest scalp obtained through disclosure of the Panama Papers belonged to the former prime minister of Pakistan, Nawaz Sharif. In 2017, Sharif was ignominiously disqualified from office and later convicted on corruption charges relating to undeclared offshore assets.
Closer to home, in the UK, the leaked Panamanian information triggered numerous criminal and civil tax investigations into tax evasion and aggressive tax avoidance. HMRC had plenty of material to review.
The leaks from Mossack Fonseca included around 11mn documents that were associated with approximately 240,000 offshore companies and trusts.
The leaked information was passed to the International Consortium of Investigative Journalists. The ICIJ in turn organised a collaborative effort to publish the information and make it available to governments and the general public.
As a result of the investigations into the Panama Papers, HMRC is thought to have recovered more than £200mn in unpaid taxes and penalties.
Two further leaks of confidential information from offshore service providers were prompted by the Panama Papers. In 2017, approximately 6mn documents known as the Paradise Papers were leaked from Appleby, an international law firm based in Bermuda.
This was followed at the end of 2021 by the leak of around 12mn documents, known as the Pandora Papers, from 14 different and largely still unidentified offshore service providers.
In June last year, HMRC wrote to UK residents named in the leaked Pandora Papers to give them the chance to correct their tax affairs. The letter warned recipients to report all their overseas income or gains on which they owed UK tax, or face penalties of up to 200 per cent of any tax due or prosecution.
Lessons learnt
With the present pursuit of criminal charges against Mossack Fonseca and their associates sending a chill down the spines of offshore financial services providers, important lessons have been learnt.
Today, there is increased scrutiny of the source of funds held by offshore companies, and additional regulation to ensure transparency in the beneficial ownership of company shares and trusts. The demand for transparency is not negotiable.
The single most important lesson to emerge from the leak of the Panama Papers is that opacity in financial dealings provides a platform for criminals and their launderers to facilitate corruption, tax evasion and other illegal activities.
The impetus for regulatory changes to compel transparency has come from international bodies such as the OECD and FATF, the authority responsible for setting anti-money laundering standards across the globe.
