‘Panama Papers' Offshore Accounts: Investigations Begin

The International Tax Monitor delivers daily news and analysis from the world's financial and business centers, with a focus on tax and accounting developments affecting transnational enterprises.

By Anjana Solanki

April 4 — Governments across the world were quick to announce investigations of wealthy individuals, celebrities and politicians named in a series of reports published by the International Consortium of Investigative Journalists that revealed millions of assets hidden in tax havens.

The Australian Taxation Office said it identified more than 800 individual taxpayers from the ICIJ data April 3 and has linked more than 120 to an associate offshore service provider located in Hong Kong. Meanwhile, the U.K.’s tax authority has confirmed it has asked the ICIJ to share the leaked data with it, while India will establish a panel to examine each case involving an Indian citizen. Tax authorities in Chile, France, Mexico, the Netherlands and Poland also announced investigations, with each nation detailing steps they have taken to reduce the use of tax havens.

Panama's government vowed to cooperate with the investigations, saying it will “vigorously cooperate with any request of assistance necessary in the event of any legal action occurring.”

The investigations arose after the ICIJ posted articles reporting on a massive document leak from Mossack Fonseca & Co., a global law firm based in Panama. The data, dubbed the “Panama Papers,” included “11.5 million records, dating back nearly 40 years—making it the largest leak in offshore history,” the nonprofit organization based in Washington said in an April 3 statement.

The information included the offshore holdings of 140 politicians and public officials from 59 countries, including 12 current and former world leaders, such as the prime ministers of Iceland and Pakistan; the presidents of Ukraine, Argentina and the United Arab Emirates; and the king of Saudi Arabia. It also named celebrities and sports personalities, including Barcelona FC soccer player Lionel Messi and officials linked to the FIFA international soccer governing body scandal.

Not Necessarily Illegal 

Mossack Fonseca, which has branches in Hong Kong, Miami, Zurich and more than 35 other locations worldwide, denied that many of the parties mentioned in the ICIJ reports were clients of the company in a written letter to the consortium. It also stated that none of its practices are illegal.

The ICIJ's findings revealed that law firm worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers. It worked with over 2,212 intermediaries in Hong Kong, 1,924 in the U.K. and 1,223 in Switzerland. This included large financial institutions such as UBS Group AG and HSBC Holdings Plc.

The figures also revealed that the British Virgin Islands was the most popular tax haven for shell companies, while Panama was the second-favorite jurisdiction. Bahamas, Seychelles, Niue, Samoa, British Anguilla, Nevada, Hong Kong, and the U.K. followed, to round up the top 10. More than 113,000 were incorporated in the British Virgin Islands, the group said.


The Australian tax authority (ATO) was the first to announce action on the leaked data, with many more governments also in hot pursuit of suspected tax evaders.

In a statement, the ATO said the information published by the ICIJ included “a significant number of Australian residents.”

“Currently we have identified over 800 individual taxpayers and we have now linked over 120 of them to an associate offshore service provider located in Hong Kong,” it said.

The ATO's deputy commissioner, Michael Cranston, said the authority has been analyzing the latest data it has received against information previously reported by taxpayers under its “Project DO IT” offshore disclosure initiative. “Through data analysis we have been able to identify patterns such as clusters of individual taxpayer and advisers for further investigation,” Cranston said. “The information we have includes some taxpayers who we have previously investigated, as well as a small number who disclosed their arrangements with us under the Project DO IT initiative. It also includes a large number of taxpayers who haven't previously come forward, including high-wealth individuals, and we are already taking action on those cases,” Cranston said.

U.K. to Follow 

The U.K. was named as the second top location where the Panamanian law firm worked with intermediaries to set up shell companies for wealthy individuals and public figures including current and former parliamentary members.

U.K. Prime Minister David Cameron, whose father was also on the list of those with hidden offshore assets, has vowed to end “tax secrecy” in the U.K. and will host a major summit to discuss offshore issues in London in May, the Guardian reported.

Meanwhile, the U.K. tax authority's director general of enforcement and compliance, Jennie Granger, confirmed that Her Majesty's Revenue and Customs has “already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation,” but has also asked the ICIJ to share the leaked data with the government.

“We will closely examine this data and will act on it swiftly and appropriately,” she said in an April 4 statement.


India's finance ministry said April 4 that the government “is committed to detecting and preventing generation of black money” and the “expose of Panama Papers will further help the Government in meeting this objective.”

Prime Minister Narendra Modi has told the ministry to establish a “special multi-agency group,” which was constituted on April 4 to “monitor the flow of information” in each one of the cases mentioned in the data leak that included former politicians and world famous celebrities, the ministry said. The special group will consist of officers from the investigative unit of the Central Board of Direct Taxes (CBDT), Financial Intelligence Unit, Foreign Tax and Tax Research Divisions of the CBDT and representatives of Reserve Bank of India. “The Government will take all necessary actions as required to get maximum information from all sources including from foreign governments to help in the investigation process,” the ministry said.


French President Francois Hollande said April 4 that his government will look into the data and open investigations on suspected tax evaders if necessary, warning that some cases could end up in court. He also used the opportunity to point out how vital whistle-blowers are. “It is through a whistleblower that we now have this information. These whistleblowers do useful work for the international community. They take risks, they should be protected,” he said.


The Netherlands said it will also examine the leaked data in an April 4 statement. In addition, the finance ministry said the Dutch central bank, De Nederlandsche Bank (DNB), will take the Panama Papers into account while continuing its probe into trust companies and the potential for money laundering in professional soccer. Results are expected by the end of the second quarter of 2016.

Belgium, Sweden 

Separately, Belgium Finance Minister Johan Van Overtveldt said on Twitter April 4 that the tax authority will investigate the published data, while local media in Sweden said the Swedish Tax Agency will request information about named Swedes.

NGOs Weigh In 

Tax justice organizations have also voiced their opinions on the revelations. The Tax Justice Network (TJN) welcomed the reports, but said they are no surprise. “Law firms like Mossack Fonseca know exactly what they are doing when they set up secret offshore companies,” TJN said.

TJN Director John Christensen said the Panamanian law firm “has been one of the giants of the offshore world for decades. They had a reputation for extreme secrecy and discretion on their clients' behalf, which needless to say was attractive to many clients engaged in tax evasion, fraud, hiding conflicts of interest, and other white collar crimes.”

Nicholas Shaxson, author of Treasure Islands, a book about tax havens, said that although the focus is currently on Panama, it is part of a bigger global system. “The United States is a big player in the game, hosting vast sums in foreign-owned assets in conditions of strong secrecy. The United Kingdom runs a global network of Overseas Territories and Crown Dependencies that includes some of the world's biggest tax havens—including Cayman, the British Virgin Islands, Bermuda and Jersey,” he said. “If the U.K. government is serious about taking on corruption and money laundering, then it needs to take action on the British territories, many of which are used by companies such as Mossack Fonseca to hide their clients' wealth,” he said.

Transparency International called on the European Union to do more, saying the leak shows the “urgent” need for public lists on corporate ownership. “Transparency International EU is calling for public registers of all companies' beneficial owners to make it harder for the corrupt to hide stolen assets in secret companies and trusts,” it said, adding that all EU member states should “seize this opportunity to reassure the public about abuses of the system and legislate for public access to information on corporate ownership.”

Transparency International EU Director Carl Dolan added that “[j]ournalists, civil society and citizens should not have to rely on leaks to be able to scrutinise this kind of information.”

With assistance from Yoonah Lee

To contact the reporter on this story: Anjana Solanki in London at asolanki@bna.com

To contact the editor responsible for this story: Rita McWilliams at rmcwilliams@bna.com

For More Information

The ICIJ's documents can be found at https://panamapapers.icij.org/.