Panama Papers leak highlights global elite’s use of tax havens

A huge leak of documents from a Panamanian law firm has provided an unprecedented insight into the use of offshore financial centres by the rich and powerful, allegedly implicating members of Vladimir Putin’s inner circle.

According to the International Consortium of Investigative Journalists, the documents demonstrate that as much as $2bn has been shuffled through banks and offshore companies said to be linked to associates and friends of the Russian president.

More than 11m documents were leaked from Mossack Fonseca, a law firm that specialises in setting up offshore companies in tax havens. They include emails, bank records and client information dating back several decades.

The documents were passed to Süddeutsche Zeitung, the German newspaper, and shared with the ICIJ. The year-long investigation involved more than 100 news organisations.

“I think the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents,” said Gerard Ryle, director of the ICIJ.

Edward Snowden, the former US National Security Agency contractor turned whistleblower, called the co-ordinated reports the “biggest leak in the history of data journalism”.

The revelations have already embroiled current and former leaders across the globe. Sigmundur David Gunnlaugsson, Iceland’s prime minister, is facing allegations that he used an offshore vehicle to hide millions of dollars of investments in the country’s banks.

The documents also appear to show that Juan Pedro Damiani, a Uruguayan lawyer and member of the ethics committee at Fifa, provided assistance to offshore companies reportedly linked to a former Fifa executive arrested in the corruption investigation at the football governing body.

The leaks illustrated purported relationships between close friends of Mr Putin in managing a trail of more than $2bn that the ICIJ says could not have been accrued without Mr Putin’s approval. The allegations centre around Sergei Roldugin, a classical cellist and one of Mr Putin’s closest friends from his youth in Leningrad (now Saint Petersburg). Mr Roldugin set the president up with his former wife, Lyudmila, and is godfather to his elder daughter, Maria.

Mr Roldugin, according to the leaked bank records, holds shares in Bank Rossiya, a bank that the US Treasury has identified as one of Mr Putin’s “cashiers”. It was said to have played an important role in building the offshore network linked to Mr Roldugin. The bank faces sanctions from both the US and the EU.

Yuri Kovalchuk, Bank Rossiya’s chairman and another close friend of Mr Putin, financed the construction of the Igora ski resort near their home town of Leningrad, according to the files. The exclusive resort was the site where Mr Putin’s younger daughter Ekaterina married Kirill Shamalov, the son of another close friend of Mr Putin’s, amid great secrecy in 2013, according to Reuters. 

Mr Roldugin also holds a minority stake in Kamaz, a Russian car manufacturer, according to the files, as well as Video International, an advertising company founded by Mikhail Lesin, a longstanding associate of Mr Putin who died in mysterious circumstances in Washington last year.

None of the Mossack Fonseca files mentions Mr Putin by name, or implicates him or his associates in any financial wrongdoing.

Relatives of at least eight current and former members of China’s Politburo Standing Committee, the country’s most powerful political body, have offshore companies arranged though Mossack Fonseca, according to the ICIJ. They include the brother-in-law of President Xi Jinping, who set up two companies in the British Virgin Islands in 2009.

Iceland has been convulsed for the past week by escalating claims that have put immense pressure on its centre-right prime minister.

After denigrating the creditors of Iceland’s failed banks as vultures, Mr Gunnlaugsson has been on the defensive over reports that his own wife was among the creditors. The pressure mounted as Mr Gunnlaugsson was forced to admit in recent days that he used to own 50 per cent of Wintris, the offshore company that owns the holdings.

Other ministers — including Bjarni Benediktsson, the finance minister who leads the junior party in the coalition government — have admitted to ownership of offshore companies. This is potentially damaging on the Nordic island which is still dealing with the aftermath of its banks imploding during the financial crisis.

Icelandic opposition parties are likely to push for early elections over the revelations, not least because the anti-establishment Pirate party leads the polls with more support than both government parties combined.

Ramón Fonseca Mora, one of the partners of Mossack Fonseca, is a senior adviser to Juan Carlos Varela, Panama’s president. On March 11, he took leave of absence “to defend my honour and my firm”. He denied any wrongdoing in an interview with La Estrella de Panamá, a local daily.

Panama has long been perceived by many as a safe haven for questionable financial deals. Ramón Ricardo Arias, a respected lawyer who runs the Panamanian chapter of Transparency International, said: “Panama has made an effort to adopt legislation to avoid illicit use of its financial sector. Now is the time to enforce those laws. While there still is no strict compliance, there will be abuses. It is the moment for Panama to grow up.”

In a statement on Sunday, the president’s office said: “Panama’s government leads a policy of zero tolerance before any aspect of its legal or financial system that is not handled with high levels of transparency”.

In a statement to ICIJ, Mossack Fonseca said: “We have not once in nearly 40 years of operation been charged with criminal wrongdoing. We’re proud of the work we do, notwithstanding recent and wilful attempts by some to mischaracterise it.”

Additional reporting by Andres Schipani in Lima