#PanamaPapers | Offshore and off the chart

Two days after the release of the Panama Papers by the International Consortium for Investigative Journalists (ICIJ), the world can begin to process its fallout. The ICIJ published some charts on Mossack Fonseca, the law firm responsible for providing offshore financial constructions to thousands of companies.

2016-02-15 15-31-20 Ekran görüntüsü
By Laurens Bammens*

The history of Mossack Fonseca goes back 40 years. It was started by Jürgen Mossack, the son of a German immigrant who started a new life in Panama after he had served in the Waffen-SS, the armed wing of the Hitler’s Nazi party.

ICIJ put together a graph of the amount of companies Mossack Fonseca associated with since 1977. On the peak in 2005, the law firm represented 13 287 companies from all over the world. After the 2008 financial crisis there was a steady decline in the amount of companies. In 2015, Mossack Fonseca only had 4 341 clients.

Since 2009, there is a clear trend of companies deactivating their offshore companies. The blue bars on the graph are way smaller than the red bars in the latest years.

Mossack Fonseca provided a service to banks, law firms and other kinds of companies to provide their clients with an offshore bank account. Hong Kong is the champion with over 2000 companies with middle men that set up offshore accounts. The United Kingdom is second with almost 2000 companies. Switzerland is third. Others in the list are the United States, Panama, Luxemburg and Brazil.

Offshore banks mostly deal in bearer shares. Those are shares that are not registered to one person, but rather to a physical certificate. The ownership can thus be passed around to whoever. It cannot be tracked and the owner stays anonymous. Bearer shares have been abolished in most Western countries to promote transparency.

Panama became the absolute number one in bearer shares after the British Virgin Islands abolished bearer shares in 2005. Mossack Fonseca simply moved their companies from the Islands to Panama.

Yet the British Virgin Islands is still the most used tax haven by Mossack Fonseca. Panama is second since 2005 because of what was said just before. Others are the Seychelles, Samoa and British Anguilla.

The banks used by Mossack Fonseca are, to no-one’s surprise, mostly Swiss and Luxembourg banks. HSBC shows up twice in the top 10 list by ICIJ. Experta Corporate & Trust Services is our number one most used bank with 1659 clients. Also Landsbanki Luxembourg, which is an Icelandic bank is number 9. Landsbanki was used by the Icelandic prime minister for his offshore construction.

There do not seem to be that many advantages to opening an offshore bank account other than to stay anonymous. One of the reasons might be to outrun political or financial instability. Yet the main gist seems to be to outrun taxation. Although for companies that do a lot of international business, it might even be a logical choice to have offshore accounts. As long as they play by the rules.

ICIJ released a list of all the Panama Papers power players. Those in power that have offshore bank accounts. Important to mention is that offshore bank accounts do not imply these people have done anything illegal. Referring to the previous paragraph, it can only raise concern about the complicated constructions they have set up. Every person is clickable and will reveal more information as well as a visualization of the offshore construction. It also includes letters and reports on the companies mentioned.

For example the family of the Azerbaijan President Ilham Aliyev. The Azeri President build the offshore accounts around his wife, children and senior members of his tax office.

Also the Icelandic prime minister Sigmundur Davíð Gunnlaugsson has some curious offshore accounts. Ironically he came to power after the financial crisis in 2008 which bankrupted three of Iceland’s biggest banks. He lead a campaing against bank bailouts and became president of the Progressive Party not long after.

When Gunnlaugsson was asked about the scandal, he became very nervous and even left the interview. See the video below.

Government investigations are on their way in many countries. The world and the public will have to wait and see whether indeed something will change. Although it is likely that the power players might suddenly not be as popular anymore.



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