Panama Papers: Demystified

This one is dedicated to you, Dad.
(My Dad has been like a monkey on my back for me to understand the whole Panama Paper thing. So what could be better motivation to research about it and bring it to you lovely people too.)

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Here’s everything and anything that you need to understand about the Panama Papers- the world’s biggest data leak up till now!

11.5 million Confidential documents that were held by the Panamanian-based law firm Mossack Fonseca have been released by the ICIJ: International Consortium of Investigative Journalists. 

Well, the source of this is still unknown but what they did find is detailed information about over 214,000 offshore companies!

Not simply companies. But FALSE companies!

What is a shell company?

A non-trading firm formed as a vehicle to raise funds before starting operations, attempt a takeover, for going public, or as a front for an illegal business.

With the stake holders of these companies seeming to be Prime Ministers! Presidents, Heads of States, Bollywood actors, business tycoons, Kings! They all appear to be listed. 140 Political links from over 40 countries. Even 30 Mauritians are listed alongside 97 offshore companies!

It almost seems like the secret society of anyone who had figures with at least 10 zeros in their banks and wanted to evade paying tax. So, what makes this the biggest data leak in history? 2.6 Terabytes of data!

Enumerating documents transactions as far back as the 1970s.

Given the scale of the leak, the newspaper enlisted the help of the ICIJ distributed the documents for investigation and analysis to some 400 journalists at 107 media organizations in 76 countries. 

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So, how does this exactly work? How is it possible for the wealthiest people of this society to shield their money and assets from taxation?

What is an offshore company?

Firm registered or incorporated outside the country where it has its main offices and operations, or where its principal investors reside.

The easiest way would be to create an overseas company that imports or exports something. You first need an accomplice, a trusted one. Meet with your ‘fake’ customer or ‘fake’ supplier and arrange with him to either over-pay or under-bill, and then to have your counterpart deposit (MOST OF) the excess into your foreign bank account.

What is Swiss Bank account?

A Swiss Bank account is one in which you can deposit your money without any questions being asked to you. 

Only an account number will be given, neither with your name or address asked nor where you got the money from. So it can be anyone random person’s tax evasion money, corruption money, looted money. Switzerland, Cayman Islands has banking secrecy laws and this is why it is possible. The bank will not give any information on your account to anyone unless the courts ask for it if the account is deemed to have money acquired by criminal activities.

A third option is a fake loan where you "borrow" your own money from said accomplice and then simply fail to pay the money back. 

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They are protests taking place outside the parliament in Iceland where people are throwing yogurt! Why? Because their Prime Minister was caught in money laundering. China has gone and blocked out one of its most popular micro-blogging websites, Weibo,  of any mention of Panama Papers! Why? Because three heads of states are involved. And guess what? Vladimir Putin? Well, he's got a 2 billion trail that follows him in the Panama Papers.

United States president Barack Obama addressed the leak during a press conference and said: "It's not that they're breaking the laws, it's the laws are so poorly designed that they allow people, if they've got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by."

So while it seems that everyone has their favourite holiday spots, and it changes with the moods and the seasons, for some rich people, the place where they put their money and launder it also change. Switzerland is out, and Panama is in. What if there are more on the holiday vacations menu now?

The Panama Papers is a global investigation into the sprawling, secretive industry of offshore that the world's rich and powerful use to hide assets and skirt rules by setting up front companies in far-flung jurisdictions.

I really hope that this was explicit enough for anyone to undertand. 

Until next time, 

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