Release of Panama Papers Ties Together Offshore Financial Structures and Practices

Since the release of the Panama Papers earlier this week, some of the world’s most powerful people have been implicated in the use of offshore shell companies to hide billions of dollars from standard tracking methods. These papers have also provided insight into the ways in which global wealth accumulates in tax havens.

Most of the entities involved in the release of the Panama Papers have been either individuals or groups of individuals, with major corporations thus far not having been found to have hidden money via shell companies established through Mossack Fonseca. The money that was hidden via these shell companies, however, has been sourced from across the entire world. Many of the transactions detailed in the papers also involve legitimate global banks. In particular, the Russian banking entity Bank Rossiya has been implicated in transactions totaling more than $2 billion to close personal friends of Russian President Vladimir Putin. Other major world leaders involved in the transaction records include former Libyan ruler Moammar Gadhafi, embattled Syrian President Bashar al-Assad and the family of current Azeri President Illham Aliyev.


At present, no single total for the amount of assets that the transactions detailed in the Panama Papers represent has been arrived at, largely due to the high number of individual documents spanning more than 40 years of business. What is known, however, is that the assets are tied to individuals in more than 200 territories and countries around the world and represent more than 214,000 individual legal entities set up to hold money in difficult to trace accounts. Of these, several are already known to have involved multi-national sources of revenue, as in the case of the Aliyev family, which set up legal entities to allow the Azeri first family to participate in real estate business deals in the United Kingdom. One friend of Vladimir Putin was estimated to be in possession of more than $100 million in personal assets following a series of transactions involving the shell company set up to house his wealth. Given these factors and the long history of assets that are described in these papers, totals could range well into the hundreds of billions or higher, though a comprehensive investigation of each entity and its assets has yet to be made.


Though these assets stored under shell companies are certainly massive, they are estimated to represent only a portion of the wealth that is kept in difficult to trace accounts in tax havens worldwide. Some estimates have pegged the total amount of hidden wealth in the world as exceeding $7.5 trillion, though these numbers are, by their very nature, difficult to verify. Though the use of such practices to hide wealth is not in and of itself illegal, many of the shell companies detailed in the Panama Papers were owned by known leaders of drug cartels and other criminal organizations, while many more are under scrutiny as having been used to evade relevant national taxes.





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