The Panama Papers — A New International Scandal

The Panama Papers -- A New International Scandal

Every time we think we have seen the worst scandal involving some of the world's most powerful people or companies, something comes along to make you wonder if anyone "plays by the rules" anymore.

The latest scandal, referred to as the Panama Papers, documents the use of offshore bank accounts and shell companies by powerful people to hide their wealth and/or avoid taxes.  Some of those mentioned are close to or relatives of the heads of several nations. The information comes from confidential documents obtained from the law firm of Mossack Fonseca in Panama City, Panama. And, according to an article in the New York Times, the revelations have raised questions about secrecy and corruption in the global financial system.

Among those named in the documents are close associates of Russian President Vladimir Putin; the father of Great Britain's Prime Minister David Cameron, and relatives of China's President Xi Jinping, as well as members of the Chinese Communist Party Pollitburo Standing Committee.

Articles published by news organizations in cooperation with the International Consortium of Investigative Journalists also named King Salman of Saudi Arabia; Sigmundur David Gunnlaugsson, who resigned as prime minister of Iceland after these revelations; President Mauricio Macri of Argentina, and soccer star Lionel Messi, one of the world's wealthiest athletes. They were among the hundreds of people that the Panama Papers tie to thousands of offshore shell companies, which can be used to shield vast wealth from tax collectors, regulators and creditors.

The Times article said it's not clear how many US citizens may have been involved with Mossack Fonseca, but so far the documents cited have not connected any prominent American politicians or influential people to the Panamanian law firm.

According to the German newspaper Suddeutsche Zeitung, of the 11.5 million documents that were leaked to that newspaper from Mossack Fonseca last year, many of the transactions documented in those emails and bank records "are criminal; some are merely questionable."

That newspaper added that many of the world's top banks apparently helped clients do shady business with Mossack Fonseca — and that the clients knew the banks "could be trusted for criminal transactions" undermines confidence in our global financial system.

It's important to note that the holding of money in an offshore company is not generally illegal by itself. There are valid reasons for multinational corporations, joint ventures or wealthy people to set up and use such companies, but they can be used for money laundering or tax evasion.

One thing is for sure. We have not heard the last of this affair.