Mossack Fonseca — the shadowy law firm behind the Panama Papers leaks — has announced plans to close its offices in the British-dependent territories of Jersey and the Isle of Man, and the British overseas territory of Gibraltar, which sits at the southern end of the Iberian peninsula.
All three islands are self-governing and have their own legal and financial systems. What makes them attractive to a law firm like Mossack Fonseca and their clients is that all three islands are tax havens, where companies are exempt from corporation or income taxes, and where strict financial privacy laws mean a wealthy oligarch can hide millions in shell companies and nobody ever has to know who the money belongs to.
According to Boston Consulting Group's 2012 global wealth report, UK-dependants like Jersey and Isle of Man are incredibly rich — yachts, diamond shops, champagne bars — you name it. Jersey has embraced people looking to hide their money with open arms for decades.
"When officials in Moscow wanted to hide the Communist party's funds in the last days of the Soviet Union, they put them in Jersey" Oliver Bullough wrote for the Guardian two years ago. "When post-Soviet oligarchs wanted to obscure their ownership of assets, they structured them through Jersey. When South Africans wanted to avoid apartheid-related sanctions, they did so through Jersey."
Gibraltar isn't quite as moneyed as the Isle of Man and Jersey, but its finance minister has made overtures toward Britain's hedge-fund managers by touting the islands tax haven qualities.
The Isle of Man is mentioned 8,295 times in the International Consortium of Investigative Journalists' database of the Panama Paper documents. Gibraltar turns up 2113 hits. Jersey turns up 14,562. Most accounts or companies affiliated with the countries are also linked to accounts in the British Virgin Islands, where Mossack Fonseca is currently under investigation.
The investigation into Mossack Fonseca's Jersey offices wrapped up recently, as did similar investigations into the firm's US outposts in Nevada. Earlier this week, the law firm announced that they were resigning as the agent for more than 1,000 companies it incorporated in Nevada.
Mossack Fonseca put out a statement regarding their plans to "cease operations" in Jersey, Isle of Man, and Gibraltar, but said that the firm would "continue serving all of our clients."
"This decision has been taken with great regret as Mossack Fonseca has had a presence in these locations for more than 20 years," the firm said, adding that the closures were part of a company strategy to "consolidate our service office network."
All 11.5 million confidential documents were originally leaked to German newspaper Suddeutsche Zeitung (SZ) and shared with the International Consortium of Investigative Journalists. A coordinated effort by media outlets around the world sifted through those documents, connecting the dots inside the murky world of offshore shell companies and revealed elaborate tax evasion schemes, many linked to the world's rich and powerful.
The documents, which were first reported on in April, linked offshore accounts to 72 former and current heads of state.
The Panama Papers stoked new global awareness and anger over wealth inequality, and many governments have pledged to find ways to close the loopholes which enable such tax evasion arrangements. Oxfam America's recent report "Broken at the Top" found that 50 of the United States' largest companies' have $1.4 trillion hidden in tax havens. Oxfam determined that the tax practices of these corporate behemoths were costing Americans an estimated $111 billion per year, and costing developing countries another $100 billion a year.
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Photo via Wikimedia Commons