A criminal trial of the key players in the Panama Papers affair is now underway.
27 people are facing criminal charges over millions of leaked documents that became known as ‘The Panama Papers’.
The confidential files revealed efforts by a law firm to hide their clients’ wealth so they could avoid paying taxes. Its founders face up to 12 years in jail.
Here’s what you need to know.
Background
Mossack Fonseca was a law firm founded by Jürgen Mossack and Ramón Fonseca in Panama.
The Central American country has a reputation as a ‘tax haven’. Its strict confidentiality laws protect businesses , and it doesn’t tax companies that are set up there but do business internationally.
In 2015, millions of confidential files detailing tax evasion and money laundering by Mossack Fonseca were leaked to German newspaper Süddeutsche Zeitung (SZ). SZ asked the International Consortium of Investigative Journalists (ICIJ) to help it investigate the files.
The 11.5 million files became known as the Panama Papers. They revealed efforts by Mossack Fonseca from 1977 to 2015 to hide their clients’ wealth so they could avoid paying taxes.
ICIJ shared the findings with more than 100 publications around the world, who simultaneously published them in 2016.
It became the biggest data leak in world history.
What were the standout findings from the Papers?
Panama Papers
Mossack Fonesca had clients from over 200 countries. It specialised in helping wealthy clients hide money and avoid paying taxes.
The Panama Papers showed it often achieved this through creating ‘shell companies’ — corporations that appeared legitimate on paper, without running any business operations.
These shell companies were based in countries with low or no taxes for non-residents. Shell companies aren’t illegal, but they can be used as a front to cover up illegal conduct.
Findings
As well as avoiding taxes, the documents exposed the tactics used by wealthy individuals and businesses to cover up different revenue streams, and hide income.
The papers also showed some clients used shell companies to launder money.
Money laundering is the process of moving or ‘cleaning’ criminal money obtained through illicit activities, so that the funds appear to have come from a legitimate source.
Fallout
The Panama Papers prompted legislative reform and public outrage against powerful figures sheltering money offshore.
This included the Prime Minister of Iceland, who resigned after the Panama Papers exposed his ownership of an offshore company.
The Panama Papers also revealed a $US2 billion network of deals and loans that could be traced back to Russian President Vladimir Putin. While the documents didn’t name Putin, it showed his close associates reaped millions from deals that gained advantage from his influence.
Other names
The documents also named an offshore investment fund created by the father of then-UK PM David Cameron.
The younger Cameron – who had previously campaigned against secrecy by offshore companies – admitted to profiting from the offshore fund in the past.
Global football star Lionel Messi was also mentioned in the documents, which were released as he was facing tax evasion charges in Spain.
Panama Papers trial
Mossack and Fonseca, who shut their firm in 2018, are among the 27 defendants now facing money laundering charges in the Panamanian criminal court.
Mossack fronted the courtroom this week, while Fonseca was said to be in hospital.
The pair have faced previous legal action over the papers, including a 2022 money laundering case which did not lead to any charges. Lawsuits against several other Mossack Fonseca workers and clients have been brought since the Panama Papers were published.
What happens now?
Mossack and Fonseca could each face up to 12 years imprisonment if found guilty of the most recent money laundering charges.
They have both consistently denied wrongdoing.
