PANAMA PAPERS 101
The massive documents dump provides confidential details on the offshore holdings of 12 current and former world leaders and allegedly includes a $2-billion (U.S.) money trail linked to associates of Russian President Vladimir Putin, according to the International Consortium of Investigative Journalists (ICIJ).
There is also data connected to Chinese President Xi Jinping; the late father of British Prime Minister David Cameron; Ukrainian President Petro Poroshenko; and Icelandic Prime Minister Sigmundur David Gunnlaugsson. Also mentioned is Argentine soccer superstar Lionel Messi, who along with his father faces tax-evasion charges in Spain.
British officials said on Monday they have asked the ICIJ to share the leaked data with them in order to carefully assess the information and promptly act upon it if warranted.
A spokesman for British Prime Minister David Cameron said his late father's reported links to an offshore company were a "private matter." Ian Cameron is mentioned in the files, alongside some members of his Conservative Party in the upper house of Parliament, former Conservative lawmakers and party donors, British media said.
French President François Hollande said the so-called Panama Papers will help his government hold accountable any French citizens who have engaged in wrongdoing.
"I can assure you that as the information emerges, investigations will be carried out, cases will be opened and trials will be held," Mr. Hollande said on the sidelines of a visit to a company in the Paris suburbs. "These revelations are good news because they will increase tax revenues from those who commit fraud."
MICHEL EULER/ASSOCIATED PRESS
The Australian Tax Office (ATO) said it was investigating more than 800 wealthy clients of Mossack Fonseca, the Panamanian law firm which has offices in 35 countries and specializes in the creation of shell companies in tax havens around the world for the rich and powerful.
ATO Deputy Commissioner Michael Cranston said his office was working with the Australian police and the anti-money laundering regulator AUSTRAC to cross-check the data, and some cases may be referred to the Serious Financial Crime Taskforce.
Iceland's opposition called on Prime Minister Sigmundur Gunnlaugsson and his government to resign and planned a no-confidence vote after the data leak stoked anger over his wife owning a tax-haven-based company with large claims on the country's collapsed banks – allegations that had already surfaced in Iceland last month.
Mr. Gunnlaugsson told privately held Channel 2 he did not plan to resign.
The Prime Minister said in a blog post last month that his wife's overseas assets were taxed in Iceland, and added in a radio interview that he had put the interest of the public before his own in dealing with the financial claims. However, opponents and local media have alleged a conflict of interest, and said that Mr. Gunnlaugsson should have been open about the overseas assets and the company.
In Sweden, the Financial Supervisory Authority (FSA) said it has contacted authorities in Luxembourg to request information related to allegations that banking group Nordea helped some clients set up accounts in offshore tax havens.
A Kremlin spokesman has called the ICIJ documents alleging links to Mr. Putin a misleading "information attack" on the Russian President.
Panama, the Cayman Islands and Bermuda are among more than a dozen small, low-tax locations that specialize in handling business services and investments of non-resident companies.
The Financial Secrecy Index, which ranks offshore financial activity around the world, puts Panama at No. 13 worldwide. Switzerland is No. 1.
The Panamanian firm Mossack Fonseca's services include setting up shell companies for investors in tax-friendly jurisdictions. However, not all of the companies listed in the leaked documents are based in Panama; most, in fact, are in the U.S. Virgin Islands.
Mossack Fonseca has denied any wrongdoing. Establishing offshore entities is not in itself illegal; many high-net-worth individuals do it for a variety of reasons, including the use of legal tax loopholes. However, tax havens have also been used to illegally dodge taxes or to launder or hide money.
Offshore banking is a multibillion-dollar global business. Companies or individuals often use shell companies, initially incorporated without significant assets or operations, to disguise ownership or other information about the funds involved. Here's how usual traffic to offshore accounts stacks up against Canada's GDP in 2014:
HOW OFFSHORE BANKING WORKS
Can they be used legitimately? Yes. Companies or trusts can be set up in offshore locations for things such as business finance, mergers and acquisitions and estate or tax planning, according to the global money-laundering watchdog, the Financial Action Task Force.
How can they be used illegitimately? Shell companies and other entities can be misused by terrorists and others involved in international and financial crimes to conceal sources of funds and ownership. The ICIJ says the files from Mossack Fonseca include information on 214,488 offshore entities linked to 14,153 clients in 200 countries and territories.
How are regulators trying to stop them? The Financial Action Task Force and other regulatory agencies publish assessments identifying weaknesses in enforcement of anti-money-laundering and counterterrorism financing efforts of specific countries and territories. Financial and legal professionals get training on how to spot potential violations, since in some cases lawyers and bankers are unaware they are handling illicit transactions. The European Union has stepped up efforts to crack down on tax avoidance by multinational corporations.
Graphics by Murat Yükselir and Matt Lundy
With reports from Jeff Gray, Evan Annett, Affan Chowdhry, Associated Press and Reuters