The Panama Papers – 11.5 million leaked documents that detail the inner workings of Mossack Fonseca, a law firm accused of helping drug lords, sports stars, Ponzi schemers, kings, presidents, prime ministers, FIFA officials, Mafia members, high-profile thieves, high-ranking politicians and at least one convicted sex offender launder money, evade taxes and escape criminal prosecution – are a big deal.
Mossack Fonseca has ties to the £26 million Brink's-MAT robbery of 1983, which British media called "the crime of the century". Thirty three of its clients have been blacklisted by the US government for allegedly doing business with Mexican drug lords, terrorist organisations and "rogue nations" like North Korea and Iran. Its files have unearthed a secret, shady $2 billion (£1.3 billion) trail of money that leads to Vladimir Putin. One of its clients played a crucial role in the Watergate scandal. Another was convicted for the torture and murder of a US drug enforcement agent.
With a story this big – dubbed by Edward Snowden as "the biggest leak in the history of data journalism" – it can be difficult to understand exactly what's at stake. The Panama Papers are, unquestionably, insane. But what do they have to do with you?
If you live in one of the 200 countries and territories that Mossack Fonseca's clients call home – and, given the fact you're reading this article, you probably do – the story of the Panama Papers is your story. The money the law firm helps to hide should be used to pay for your schools, your highways, your hospitals. The criminals it works with run the most violent illegal organisations your country has ever seen. The politicians who have taken and made bribes, dodged taxes and amassed fortunes of unimaginable scale are your politicians.
Not long after the story broke, people started posting tweets along the lines of: "Shock, horror: wealthy, powerful people are corrupt – why should I give a shit?" Well, because of course you should give a shit. To know this story – of hidden millions, of corruption, of murder and bribery and power and betrayal – is to know your own. Here's how the revelations came to be, and why you should care.
A little over a year ago, an anonymous source reached out to the German newspaper Süeddeutsche Zeitung (SZ) and offered them heaps of internal documents from Mossack Fonseca, which specialises in selling offshore companies based in tax havens across the globe. The source didn't ask for compensation. Instead, he wrote in an email to the paper that he wanted one thing: "To make these crimes public."
Over the next several months, SZ found themselves with about 2.6 terrabytes of data. They shared it with the International Consortium of Investigative Journalists (ICIJ), allowing hundreds of reporters from more than 100 media organisations in 80 countries to sift through the documents. After a year of research, they've finally begun to figure out how Mossack Fonseca works – and to uncover how a business that's never faced criminal prosecution could have a bigger hand in corruption, bribery and crime than anyone ever imagined.
Offshore companies aren't illegal – not inherently, anyway. But using them to hide assets from tax authorities, thwart investigations and and protect criminals is.
Here's how this whole mess of a situation works:
An individual, often through a middle-man they're close to, pays Mossack Fonseca to create a "shell company" – a business on paper, but in reality, a storehouse for a shit-ton of money, whether in cold hard cash or tied up in shares. Mossack Fonseca sets up the shell company offshore in a place like Panama (where the firm is based), the British Virgin Islands, or any other "tax haven" – a place where the true owner of a company can be anonymous and their home country (which, typically, doesn't know about the company in the first place) can't tax it.
Say a politician makes £100,000 pounds per year on salary, and for some reason – bribes, business deals, all manner of shady shit – also makes upwards of £1 million in some other way. If they put that money in an offshore shell company, they can access it without being taxed for it. Even if the shell company is discovered, it can't be tied directly to the politician because the company is technically owned by someone else – a stand-in owner who's appointed by Mossack Fonseca to run the company on paper, but, in reality, doesn't own anything. To move the money, the company pretends to make business deals: the Panama Papers reveal thousands of fake share trades, million-dollar payments for "consultancy" and huge payouts in "compensation" for cancelled transactions.
"This is not business," money-laundering expert Andrew Mitchell QC told BBC Panorama. "This is creating the appearance of business in order to continually move and hide assets."
Let's start with the big one: Vladimir Putin.
His boyhood friend, Sergei Roldugin – a major-league cellist and the godfather of Putin's firstborn daughter – is listed as the owner of a slew of offshore companies. They've been set up by Mossack Fonseca, and they've received innumerable payments worth tens of millions, the Papers revealed. However, it appears that the money's not actually going to Roldugin. Instead, the ICIJ believes, it's going to Putin's closest associates – and maybe even Putin himself.
The way that works is tricky. It's best explained, I think, by a mind-blowing example that the ICIJ highlighted in their reporting:
On the 10th of February, 2011, an anonymous company in the British Virgin Islands named Sandalwood Continental Ltd. loaned $200 million (£140 million) to an equally shadowy firm based in Cyprus called Horwich Trading Ltd.
The following day, Sandalwood assigned the rights to collect payments on the loan – including interest – to Ove Financial Corp., a mysterious company in the British Virgin Islands.
For those rights, Ove paid $1 (70p).
But the money trail didn't end there.
The same day, Ove reassigned its rights to collect on the loan to a Panama company called International Media Overseas.
It too paid $1.
In the space of 24 hours, the loan had, on paper, traversed three countries, two banks and four companies, making the money all but untraceable in the process. St. Petersburg-based Bank Rossiya, an institution whose majority owner and chairman has been called one of Putin's "cashiers", established Sandalwood Continental and directed the money flow.
International Media Overseas, where rights to the interest payments from the $200 million appear to have landed, was controlled, on paper, by one of Putin's oldest friends: Sergei Roldugin.
The point is this: here, somebody with extremely close ties to Putin traded $200 million for $1. That's just one of several transactions ICIJ uncovered in Mossack Fonseca's files – totalling at least $2 billion – that involves companies or individuals "uncomfortably close" to Putin. As ICIJ points out, the money might be changing hands in secret because it's being used as "payoffs" for aid from the Russian government or big-ticket contracts. To boil what's at hand down to a word: corruption.
FIFA, it turns out, is more fucked up than we thought – and Mossack Fonseca is involved. Four of the football organisation's 16 officials indicted in the US for corruption used Mossack Fonseca to create offshore companies. A member of FIFA's Independent Ethics Committee, Pedro Damiani, did work for seven MF offshore companies tied to former FIFA Vice President Eugenio Figueredo – the guy who was charged for wire fraud, money laundering and racketeering in May of last year. Additionally, it looks like there's no way Damiani didn't know that Hugo and Mariano Jinkis – a father-son duo who allegedly bribed FIFA officials with tens of millions for broadcasting rights to Latin American matches – were doing something dirty. Damiani is now the subject of an internal investigation by the very ethics committee he helps to run.
Iceland's Prime Minister, who came to power after the collapse of several major banks in his country, effectively owned an offshore company (yep, you guessed it, set up by our friends at Mossack Fonseca) that had major holdings in those same banks. I say "effectively" because, though he once owned half of the company's shares, he's since sold the rest to his wife. For $1. While it's unclear if the PM, Sigmundur Gunnlaugsson, did anything illegal, he and his government negotiated settlements with the same banks he held shares in. Since the Panama Papers story broke, he's been called on to step down.
Every major scandal that the Panama Papers have brought to light is equally (if not more) tricky to understand as this whole Putin business. If you're interested in the evidence behind each shit-show, I'd highly recommend exploring the ICIJ's website.
I could keep listing these scandals for days – exposing the questionable financial affairs of the prime minister of Pakistan; the king of Saudi Arabia; the children of Azerbaijan's president; the son of former Egyptian President Hosni Mubarak; eight members of the Politburo, China's main ruling body; even the shady dealings of Jackie Chan – but for now, I think it's enough for you to know the numbers.
The Panama Papers uncovered a total of 61 family members and associates of prime ministers, presidents or kings who use Mossack Fonseca's services. The firm has helped hide billions of dollars from governments across the globe – dollars that, ordinarily, would be subject to taxation. It's done business with folks who looted millions from a death benefits pool that was supposed to go to widows and orphans. And it's been doing all this for 40 years now, undetected – until that anonymous source got in touch with Süeddeutsche Zeitung.
We all have content nausea. Every day, hundreds of advertisements scream at us from billboards and phone screens and televisions. We couldn't listen to all the music released in the past six months over the course of our entire lifetimes. We are buried in headlines, overwhelmed by the amount of news we have access to and unsure, sometimes, of the best place to turn for it. In an era where information is so abundant, it's exhausting to try to consume it all.
The Panama Papers – more so, perhaps, than any piece of news you'll come across in the next decade – isn't an easy story to understand. It'll take a long while to figure it out – the dozens of media outlets covering it haven't even sorted through all the documents they've been given. But it's a story worth spending time on. Because, unlike so much of what this world is inundated with, it is a story that applies to you.
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