Panama Papers

• 1. Eleven Million Files

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  The Panama Papers amounted to 11.5 million leaked documents, or 2.6 terabytes of data, and the first stories built on them ran on the 3rd of April 2016. All of it was taken from Mossack Fonseca, a Panamanian offshore law firm and corporate service provider. Some of the records reached back to the 1970s. Together they detailed financial and attorney-client information for more than 214,488 offshore entities.

  The name itself caused a quarrel, because the government of Panama objected strongly to it. Some outlets chose to say "Mossack Fonseca papers" instead.

  Who sent the files, and why did he say his life was in danger? How do reporters in dozens of countries read millions of documents without letting a word escape? And what did the wealthy, the banks and the governments do once the secrecy cracked?

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• 2. The Anonymous Source

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  The leaker calls himself John Doe, and even the journalists who worked with him do not know his name. He sent the material to Bastian Obermayer, a German reporter at the newspaper Süddeutsche Zeitung, known as SZ. His message to the reporters was stark: "My life is in danger". He insisted that all contact run over encrypted channels, and the two sides agreed they would never meet face-to-face.

  A statement from Doe was released on the 6th of May 2016. In it he named income inequality as his reason for acting. He said he leaked the files "simply because I understood enough about their contents to realize the scale of the injustices they described". He also said he had never worked for any government or intelligence agency. He added that he would help prosecutors if he were granted immunity from prosecution. SZ first checked that the statement really came from the source. Then the International Consortium of Investigative Journalists, or ICIJ, posted the full document on its website.

  Doe had remarked that New Zealand's prime minister, John Key, had been "curiously quiet" about tax evasion in the Cook Islands. On the 7th of May Key replied that the whistleblower was confused and probably European. He pointed out that the Cook Islands use New Zealand currency. Even so, he said, "I have as much responsibility for tax in the Cook Islands as I do for taxing Russia."

  The murders of the journalists Daphne Caruana Galizia in 2017 and Ján Kuciak in 2018 later weighed on the source. He said they were killed because of their investigations of the Panama Papers. He told the public both deaths had deeply affected him and called on the European Union to deliver justice.

  Verifying and reading the files was a task far too large for one newspaper to carry alone.

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• 3. Inside the Newsroom

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  Journalists from 107 media organizations in 80 countries eventually worked through the files. The ICIJ helped organize the research and document review. Partners included The Guardian, the BBC, Le Monde, SonntagsZeitung, Falter, La Nación, the German broadcasters NDR and WDR, and the Austrian broadcaster ORF. More than a year of analysis passed before the first stories appeared, together with 150 of the documents themselves.

  Glitter nail polish was part of the security plan at Süddeutsche Zeitung. SZ kept the data in a room with limited physical access, on air-gapped computers that were never connected to the Internet. Its journalists painted the screws holding the drives in place, so that any tampering would show. The paper worried about the safety of its source and its data. It also worried about partners living under corrupt regimes, whose own money-handling might be exposed. The Guardian likewise restricted access to its project work area.

  Reporters sorted everything into a huge file structure with one folder for each shell company. Each folder held the emails, contracts, transcripts and scanned documents that Mossack Fonseca generated while serving that company. About 4.8 million of the files were emails. Another 3 million were database entries, 2.2 million were PDFs, 1.2 million were images and 320,000 were text files. A further 2242 files came in other formats.

  Journalists indexed the documents with the open software packages Apache Solr and Apache Tika. They reached them through a custom interface built on Blacklight. SZ reporters also used Nuix, proprietary software donated by an Australian company of the same name. With it they ran optical character recognition on millions of scanned pages, turning pictures of text into searchable words. Most reporters then used Neo4J and Linkurious to pull out the names of people and companies. They cross-referenced those lists against the processed documents, trying to connect people, roles, flows of money and the legality of each structure. David P. Weber, a US banking and SEC expert, helped them review the information.

  The Cablegate leak of 2010 totaled 1.7 GB. Offshore Leaks in 2013 reached 260 GB, Lux Leaks in 2014 came to 4 GB, and Swiss Leaks in 2015 amounted to 3.3 GB. The Panama Papers, at roughly 2,660 GB, dwarfed all of them.

  Gerard Ryle, director of the ICIJ, called the leak "probably the biggest blow the offshore world has ever taken because of the extent of the documents". Edward Snowden described it in a Twitter message as the "biggest leak in the history of data journalism". Micah White, a co-founder of Occupy, said that "The days of WikiLeaks amateurism are over." WikiLeaks hit back. Its spokesperson Kristinn Hrafnsson, an Icelandic journalist who worked on Cablegate, eventually wanted full online publication. A WikiLeaks tweet charged: "If you censor more than 99% of the documents you are engaged in 1% journalism by definition."

  Mossack Fonseca sent a cease and desist letter to the ICIJ on the 5th of May 2016. The ICIJ went ahead on the 9th of May with a searchable database. It covered over 200,000 offshore entities from the Panama Papers and more than 100,000 additional companies from the 2013 Offshore Leaks investigation. Meanwhile the firm's own computer defenses were coming under scrutiny.

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• 4. A Firm Built on Secrecy

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  Mossack Fonseca managed more than 300,000 companies over the years, and its active roster peaked above 80,000 in 2009. More than 210,000 companies in twenty-one jurisdictions figure in the leaks. Over half were incorporated in the British Virgin Islands, with others in Panama, the Bahamas, the Seychelles, Niue and Samoa. Clients came from more than 100 countries. Most corporate clients were based in Hong Kong, Switzerland, the United Kingdom, Luxembourg, Panama and Cyprus. The firm worked with more than 14,000 banks, law firms and incorporators, and it kept offices in Nevada and Wyoming.

  Its core service was incorporating and operating shell companies in friendly jurisdictions on behalf of clients. Such structures can be legal and still let clients operate "behind an often impenetrable wall of secrecy". The leaked documents indicate that about US$2 trillion passed through the firm's hands.

  More than 500 banks registered nearly 15,600 shell companies with the firm. HSBC and its affiliates accounted for more than 2,300 of them. Dexia, J. Safra Sarasin of Luxembourg, Credit Suisse from the Channel Islands and the Swiss UBS each requested at least 500 offshore companies for their clients. An HSBC spokesman answered that the allegations were "historical, in some cases dating back 20 years" and predated the bank's reforms.

  A 2007 email exchange in the leak shows the firm would backdate documents on request. It did so routinely enough to establish a price structure, with $8.75 per month among the figures cited. In 2008 the firm hired a 90-year-old British man to pose as the owner of an offshore company belonging to Marianna Olszewski, a US businesswoman. The BBC called this "a blatant breach of anti-money laundering rules".

  In 1996 Mossack Fonseca approached the tiny Pacific island of Niue and offered to help it set up a tax haven. The firm drafted the legislation, which allowed offshore companies to operate in total secrecy. It handled the paperwork, and the island collected a modest fee for each filing. The law even required banking paperwork to be supplied in Russian and Chinese as well as English. Soon the filings almost covered the island's yearly budget. In 2001 the US government made official noises about laundering criminal proceeds. Chase Bank blacklisted the island and Bank of New York followed. Niue let its contract with the firm expire. Yet the database still lists nearly 10,000 companies and trusts set up on Niue, population 1200. Samoa, population roughly 200,000, shows more than 13,000, and the Cook Islands, population 10,000, show about 500.

  On the 1st of April 2016, two days before publication, Mossack Fonseca told its clients it had suffered an email hack. It also told news sources that it had been hacked and always operated within the law. Security experts noted that the company did not encrypt its emails. It also seemed to be running a three-year-old version of Drupal with several known vulnerabilities. The email and web servers were not separated from the client database in any way.

  On the 12th of April a grey hat hacker calling himself 1×0123 announced that the firm's content management system was open to SQL injection, a well-known database attack. He said he had reached the customer database through it. On the 24th of May the computer security expert Chris Kubecka announced that the client login portal was running four different government-grade remote access trojans. Kubecka also found too many open ports and weak security on the archive server. The details are laid out in a book titled Down the Rabbit Hole: An OSINT Journey.

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• 5. Names in the Files

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  Twelve current or former world leaders were named in the leak, along with 128 other public officials and politicians. So were hundreds of celebrities, businessmen and other wealthy individuals from over 200 countries. Initial reports identified five then-heads of state or government from Argentina, Iceland, Saudi Arabia, Ukraine and the United Arab Emirates. They also found officials, relatives and associates of leaders in more than forty other countries. Among sitting leaders were President Khalifa bin Zayed Al Nahyan of the United Arab Emirates, Petro Poroshenko of Ukraine, King Salman of Saudi Arabia and Iceland's prime minister.

  Sigmundur Davíð Gunnlaugsson, the Icelandic prime minister, became the best-known casualty. He and his wife held a secret offshore stake in a shell company called Wintris Inc. When he was elected in 2013, he had promised to be tougher on Iceland's foreign creditors. The papers showed that Wintris was itself one of those creditors. That conflict of interest ultimately led to his resignation in 2016. The business dealings of British prime minister David Cameron were also heavily covered.

  Among former leaders, Argentina's Mauricio Macri, president from December 2015 to December 2019, was linked to Fleg Trading Ltd. His spokesman Ivan Pavlovsky said Macri was occasionally a director but never a shareholder. Qatar's former Emir Hamad bin Khalifa Al Thani owned Afrodille S.A., which held a bank account in Luxembourg and shares in two South African companies. Ayad Allawi, a former vice president of Iraq, owned property through shell companies registered in Panama and the British Virgin Islands. His spokesman said this followed an assassination attempt and that taxes on any income were paid "promptly and on time". Former prime ministers named included Bidzina Ivanishvili of Georgia, Pavlo Lazarenko of Ukraine, Ion Sturza of Moldova and Ali Abu al-Ragheb of Jordan.

  The files identified 61 family members and associates of prime ministers, presidents and kings. They included the brother-in-law of China's paramount leader Xi Jinping and the son of former Malaysian Prime Minister Najib Razak. Children of Pakistan's Nawaz Sharif and Azerbaijan's Ilham Aliyev appeared too. So did Kojo Annan, son of former United Nations Secretary-General Kofi Annan, and Mark Thatcher, son of Margaret Thatcher. Mounir Majidi, personal secretary to Morocco's King Mohammed VI, was listed. Juan Armando Hinojosa, the "favourite contractor" of Mexican President Enrique Peña Nieto, appeared as well. Around the Spanish royal family, the papers named Infanta Pilar and Corinna Larsen, the mistress of former King Juan Carlos I.

  The actor Jackie Chan was mentioned as a shareholder in six companies based in the British Virgin Islands. In Australia, the names of Malcolm Turnbull and the former New South Wales premier Neville Wran surfaced next to a company called Star Technology Systems Limited. Both had resigned as directors in 1995. Turnbull denied any impropriety, noting that the company never made a profit.

  Football's governing bodies were touched as well. Names in the papers included Eugenio Figueredo, Michel Platini, Jérôme Valcke and Lionel Messi. The leak revealed a conflict of interest between a member of the FIFA Ethics Committee and Figueredo, a former FIFA vice president. Swiss police searched the offices of UEFA after Gianni Infantino, its former secretary-general, became FIFA president. A television deal he had signed with a company called Cross Trading emerged in the documents, and the FBI has since accused that company of bribery. Infantino denied wrongdoing.

  Some of the clients carried more than embarrassment. The United States Treasury had put them on a blacklist.

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• 6. Sanctions and Shell Companies

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  More than 30 Mossack Fonseca clients were at some point blacklisted by the US Treasury Department. They included businesses linked to senior figures in Russia, Syria and North Korea. Anonymity was the attraction, and many firms and individuals used it to get around international sanctions.

  Pangates International Corporation, a Seychelles company, was accused in July 2014 of supplying the Syrian government with "a large amount of specialty petroleum products". The Treasury noted these had "limited civilian application in Syria". Two more companies, Maxima Middle East Trading and Morgan Additives Manufacturing Co, were also sanctioned. All three had been started for clients of Helene Mathieu Legal Consultants. Their owners Wael Abdulkarim and Ahmad Barqawi were said to have "engaged in deceptive measures" to supply oil products to Syria. Still, the firm kept handling Pangates's paperwork and certifying it in good standing until August 2015.

  Rami Makhlouf, a cousin of former Syrian President Bashar al-Assad, was another case. Mossack Fonseca ran six businesses for him despite US sanctions against him. Internal documents show that in 2011 the firm rejected its own compliance team's advice to cut ties with him. It agreed to do so only months later. Frederik Obermaier, a co-author of the Panama Papers story, argued the firm knew exactly who Makhlouf was. He said it kept him partly because a bank still did business with him. HSBC appeared to reassure the firm that it was "comfortable" with Makhlouf as a client. He held at least $15 million in multiple accounts at HSBC's Swiss private bank in 2006. The firm has said it never knowingly allowed anyone connected with rogue regimes to use its companies.

  DCB Finance, a Virgin Islands shell company founded by the North Korean banker Kim Chol-sam and the British banker Nigel Cowie, kept doing business with North Korea. In 2013 the US Treasury called it a front company for Daedong Credit Bank and sanctioned both. It accused them of providing banking services to the arms dealer Korea Mining and Development Trading Corporation. Cowie said the holding company was used for legitimate business.

  The Australian broadcaster ABC reported that leaked documents linked a Sydney businessman and a Brisbane geologist to mining deals in North Korea. David Sutton was director of AAT Corporation and EHG Corporation, which held mineral licenses there. The geologist, Louis Schurmann, said the British billionaire Kevin Leech was key to the deal. The Department of Foreign Affairs and Trade knew of these deals, yet nobody referred the matter to the Australian Federal Police. Elsewhere, the Australian Taxation Office said it was investigating 800 individual taxpayers from the client list. Eighty of the names match an organized crime intelligence database.

  Tareq Abbas shares a family name with the president of Palestine. He sat on the board of a company whose four fellow directors the firm did classify as politically exposed persons. Somehow Abbas raised no red flags, even though the firm documented its due diligence, which included a Google search.

  Feberion Inc. had a far older story. Over £10 million of cash from the sale of the gold stolen in the 1983 Brink's-Mat robbery was laundered through this Panamanian company, first unwittingly and later with the firm's complicity. It was set up for an unnamed client twelve months after the robbery and issued bearer shares only. Two nominee directors from Sark were appointed by the Jersey-based specialist Centre Services. The money moved through front companies and banks in Switzerland, Liechtenstein, Jersey and the Isle of Man before being recycled through British land and property. The Metropolitan Police raided Centre Services in late 1986, but only in 1995 did the solicitors for Brink's-Mat finally take control of Feberion and its assets.

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• 7. Legal Secrecy, Real Costs

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  Stanley Kubrick had an estimated personal worth of $20 million when he died in 1999, much of it invested in an 18th-century English manor he bought in 1978. He filmed scenes from The Shining, Full Metal Jacket and Eyes Wide Shut there. Three holding companies set up by Mossack Fonseca now own the property, and trusts for his children and grandchildren own those companies. As an American living in Britain, Kubrick would otherwise have exposed his estate to transfer taxes from both governments. His heirs might even have had to sell the manor to raise the cash. He is buried on the grounds with one of his daughters.

  A Canadian lawyer based in Dubai noted that offshore structures can keep a business out of Islamic inheritance jurisprudence if an owner dies. A Brazilian lawyer said companies in some countries want to hold part of their funds in dollars. Other uses are murkier. Chinese companies may incorporate offshore to raise foreign capital, which is normally illegal in China. In some hereditary dictatorships, elites use offshore companies to award themselves oil contracts or give their children gold concessions. The Panamanian lawyer and former comptroller Alvin Weeden said offshore companies are legal. Illegality begins when they are used for money laundering, arms smuggling, terrorism or tax evasion.

  No standard official definition of a tax haven exists. The Economist and the International Monetary Fund describe an offshore financial center as a jurisdiction that mainly serves people who do not live there. It requires little or no disclosure and offers low taxes. The Economist added that "The most obvious use of offshore financial centers is to avoid taxes". Oxfam, in its 2016 report on income inequality, blamed tax havens for much of the widening gap between rich and poor. Its US president Raymond C. Offenheiser said they sit "at the core of a global system" that lets the wealthy avoid their fair share. IMF researchers estimated in July 2015 that profit shifting by multinational companies costs developing countries US$213 billion a year. That is almost two percent of their national income.

  The shell company Octea is registered to Beny Steinmetz, whose personal worth is $6 billion. It owes more than US$700,000 in property taxes to the city of Koidu in Sierra Leone. It is also $150 million in debt, although its exports in an average month of 2012-2015 were more than twice that sum. Former South African president Thabo Mbeki, who headed an African Union panel on illicit financial flows, called the leak "most welcome" on the 9th of April 2016. He said Africa loses $50 billion a year to tax evasion and other illicit practices. He added that the Seychelles is the fourth most mentioned tax haven in the documents.

  Housing markets felt the effects. London prices rose 50% from 2007 to 2016. Donald Toon, then head of Britain's National Crime Agency, said in 2015 that "the London property market has been skewed by laundered money". Three-quarters of Londoners under 35 cannot afford a home. In Vancouver, the researcher Andy Yan found that 18% of transactions in the most expensive neighborhoods were cash purchases. About 66% of the owners appeared to be Chinese nationals or recent arrivals from China. On the 24th of June 2016 China CITIC Bank sued a Chinese citizen who had borrowed CN¥50 million for a lumber business. He withdrew roughly CA$7.5 million, left China and bought three houses in the Vancouver area worth CA$7.3 million.

  Miami's Association of Realtors reported that cash sales made up 90% of new home sales in 2015. Former congressional investigator Jack Blum put it bluntly: "There is a huge amount of dirty money flowing into Miami that's disguised as investment." In 2016-76% of Miami condo owners paid cash, a practice considered a red flag for money laundering. By 2022 Redfin found that 31.9% of houses across the 39 largest US metropolitan areas were bought with cash, higher than the sub-25% rate in the Panama Papers period.

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• 8. Panama Answers Back

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  At 5:00 am on the 3rd of April 2016, as the story broke, Ramón Fonseca Mora went on the channel TVN. He said he had not been accused in any tribunal. He called the firm a victim of a hack and said it was not responsible for what clients did with their companies. In response to the Miami Herald and the ICIJ, the firm issued a 2,900-word statement on the legal limits of offshore secrecy. The Herald printed it with an editor's note saying it "did not address any of the specific due diligence failings uncovered by reporters". On Monday, the 4th of April, the firm declared that nothing in the "illegally obtained cache of documents" suggested it had done anything illegal. An official statement on the 6th of April said about 90% of its clientele were regulated professional intermediaries with their own due diligence duties. Jürgen Mossack told Bloomberg: "The cat's out of the bag, so now we have to deal with the aftermath." He denied an inside job and resigned from Panama's Council on Foreign Relations on the 7th of April.

  President Juan Carlos Varela met CANDIF, a committee of Panama's economic sectors, on the 7th of April and entered full crisis management mode. He announced a new judiciary tribunal and a high-level commission led by the Nobel laureate Joseph Stiglitz. Stiglitz resigned in early August 2016 because the government would not commit to publishing the final report. On the 8th of April Minister of the Presidency Alvaro Alemán denied that Panama is a tax haven. On the 25th of April the finance ministers of Panama and France agreed that Panama would give France information about French nationals holding taxable assets there. Asked in October 2016 about Fonseca Mora, Varela acknowledged that he is a friend.

  Anger over the name ran deep. Panama's Lawyers Movement called the leak "cyber bullying" and an attack on the 'Panama' brand. Samid Dan Sandoval, a former mayoral candidate, filed legal action against the journalists. A Change.org petition asked the ICIJ to stop using the country's name. On the 19th of October 2016 it became known that a government executive had spent 370 million US dollars to "clean" the country's image.

  In July 2016 the OECD re-activated, at the request of G20 nations, a list of uncooperative tax havens. Le Monde warned that Panama, Vanuatu and Lebanon, which met none of its three cooperation guidelines, might land on it.

  On the 4th of April the Attorney General's office announced an investigation. On the 12th of April a newly formed prosecutor unit searched the Panama City and Bella Vista offices of the firm for 27 hours. A second search followed on the 22nd of April. Then on the 24th of January 2017 Attorney General Kenia Isolda Porcell Diaz suspended the investigations while the firm pursued a constitutional appeal. Mossack and Fonseca were detained on the 8th of February 2017 on money-laundering charges. They were refused bail at first because of a flight risk, but were released on the 21st of April 2017 after paying $500,000 each.

  In March 2018 the firm announced it would close, citing "irreversible damage" to its image. In October 2020 German prosecutors in Cologne sought Jürgen Mossack and Ramón Fonseca on charges of accessory to tax evasion and forming a criminal organization. Then on the 28th of June 2024 Judge Baloísa Marquínez acquitted all 28 accused. She said the evidence against Mossack and Fonseca was insufficient and the chain of evidence was not comprehensible.

  The leak did have effects elsewhere. Its publication made it possible to prosecute Jan Marsalek and revealed his links with Russian intelligence. It also made possible a case against the financial fraudster Harald Joachim von der Goltz. In April 2019 the ICIJ and European newspapers reported that litigation, fines and back taxes had recovered more than $1.2 billion. Britain recovered the most at $253 million, followed by Denmark at $237 million, Germany at $183 million, Spain at $164 million, France at $136 million and Australia at $93 million. Colombia recovered $89 million. Investigations were still ongoing in Austria, Canada and Switzerland.

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