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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

2.6 terabyte leak: Panama Papers expose global abuse of anonymous shell companies

Documents leaked Sunday from a Panama law firm showed alleged use of anonymous shell companies by world leaders, politicians and others to shield billions of dollars from public view.

The Washington, DC-based International Consortium of Investigative Journalists (ICIJ) published more than 10 million records from the Mossack Fonseca law firm.

Among the banks and countries mentioned in the documents were UBS, HSBC, Société Générale, Cyprus, Switzerland, and the British Virgin Islands.

The documents apparently show the creation of more than 200,000 offshore shell companies.

The companies were linked to a dozen current and former world leaders and more than 140 other politicians from 50 countries, according to the ICIJ.

The group said $2 billion in transactions involved people and companies with ties to Russia leader Vladimir Putin. Four shell companies in one chain were linked to St. Petersburg-based Bank Rossiya.

Andrey Kostin, CEO of Russian finance firm VTB Group and a Putin crony, said allegations about Putin were untrue. In a Bloomberg interview, he called the reports bulls**t.

Four of the FIFA officials indicted in the United States used offshore companies created by Mossack Fonseca, the ICIJ said.

Shruti Shah, a contributing editor of the FCPA Blog and the vice president for programs and operations at Transparency International-USA, said Monday, “The Panama Papers leak highlight the ease with which the global financial system can be accessed by kleptocrats and other criminals using anonymous companies.”

In addition to Putin in Russia, leaders and politicians from Iceland, Argentina, Georgia, Iraq, Jordan, Qatar, Saudi Arabia, Sudan, the United Arab Emirates, and Ukraine were implicated as holding secret investment accounts or undeclared interests in offshore companies.

Shah said anonymous companies are often used to hide the true bidders in public procurements.

“The shell companies allow “government officials to conceal their interests and those of their family and friends in the legal entities that may bid on procurements under their jurisdiction,” she said.

Using anonymous offshore companies isn’t always illegal. But the companies are often used to conceal beneficial ownership of assets in other countries or evade taxes.

Liz Confalone of Global Financial Integrity said Sunday, “Banks and law firms routinely conspire to hide their clients’ money and fail to follow through on required customer due diligence checks.”

The United States has been criticized for allowing anonymous companies.

“The U.S. is no exception as it is possible to form companies in every state in the U.S. without disclosing the true beneficial owner,” Shah said Monday.

TI-USA has been pushing for better disclosure.

Shah said the U.S Congress should pass legislation on incorporation transparency. Senator Sheldon Whitehouse and  Rep. Carolyn Maloney introduced a bill earlier this year that would address the loophole.

The Panama Papers published Sunday dated from 1977 to 2015.

Mossack Fonseca has offices in nearly forty locations, including Hong Kong, Miami, and Zurich. It has about 500 staff, according to its website.

It offers incorporation and other services for Belize, The Netherlands, Costa Rica, United Kingdom, Malta, Hong Kong, Cyprus, British Virgin Islands, Bahamas, Panama, British Anguilla, Seychelles, Samoa, and in the United States for Nevada and Wyoming.

The firm told the ICIJ that it “does not foster or promote illegal acts.”

It said allegations that it provides shareholders with structures “supposedly designed to hide the identity of the real owners are completely unsupported and false.”


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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