How to get away with tax evasion
HENLEY DOHERTY | ASST. BUSINESS EDITOR | THE USD VISTA | @hensolo_
Recent data leakage on the international front has brought fraudulent activity of businesses and leaders around the world to the forefront of world news.
This recent data leak has exposed over 2.6 terabytes of 11.5 million digital documents and files, leaked from a law firm in Panama called Mossack Fonseca. These leaked files have thus been coined the Panama Papers.
Data leakage is a problem that students and faculty at the University of San Diego have been warned about in recent months. With the recent risk of phishing scams that were aimed at the USD community, students have become aware about the dangers of releasing personal information.
According to the New York Times, the papers reveal that a large number of businesses and people of considerable influence and wealth are suspected to be holding bank accounts in offshore locations in order to avoid being hit with high taxes.
The suspects include various international politicians, companies, crime leaders, and celebrities such as several associates of Russian President Vladimir Putin; family members of Chinese President Xi Jinping; Mauricio Macri, the President of Argentina; Salman, King of Saudi Arabia; Sigmundur Gunnlaugsson, Prime Minister of Iceland; soccer player Lionel Messi; as well as actor Jackie Chan.
The list of people is growing as the documents are continually being analyzed by various sources, and many more names are expected to be uncovered. These individuals are suspected of storing wealth in offshore companies known as shell companies—inactive businesses without significant assets that are used for a variety of financial reasons.
Using offshore shell companies to hold money is not in itself illegal. However, these offshore companies make it easier for white collar crimes to be committed, such as money laundering and tax evasion. This is why the countless businesses and individuals listed in the Panama Papers are under so much scrutiny.
Senior Maxine Velez shared her thoughts on the data leak.
“My initial reaction to the Panama Papers incident is that I am not surprised how many world leaders are on the list,” Velez said. “Corruption is and will always be around. My view on the data being leaked is that if you don’t want to get in trouble and have people find out what you are doing behind the scenes, then you should not be doing it in the first place. This goes to show how we need to place better and more reliable people in power around the world, and a lot of restructuring of financial, political, and educational systems needs to be and should already be taking place.”
Junior Alexa Layne commented on the lack of international coverage of the Panama Papers incident.
“After researching some information about the Panama Papers, I find it very surprising that the issue isn’t being given more attention,” Layne said. “The over 11 million documents were intentionally leaked by an anonymous source, making it the largest document leak in the history of investigative journalism. Numerous world leaders, prominent politicians, international criminals, and even famous athletes are mentioned in the leaked documents… It makes it even that more suspicious that so many prominent, wealthy people are involved with Mossack Fonseca.”
Layne also shared her thoughts on the involvement of the International Consortium of Investigative Journalists with the issue.
“I think this whole Panama Papers issue just goes to show how easy it is for the wealthy and well-resourced of the world to continue to gain advantages over those who don’t have as much,” Layne said. “I am impressed, however, by the amount of collaboration the ICIJ has done in the investigation of the Panama Papers and the initiative the countries involved and the JITSIC have taken in regards to meeting in Paris on April 13 to discuss the steps moving forward. All in all, I think the resignations as a result of the fallout from the leak of the Panama Papers hints to the nature of the business being done by Mossack Fonseca and its clients.”
According to The Guardian, the majority of offshore shell companies are located in the British Virgin Islands, where an approximated 100,000 offshore companies are expected to exist.
A smaller but still substantial amount of shell companies are also presumed to be in Panama and the Bahamas.
Based off of the information documented in the Panama Papers, the largest amounts of money held in these offshore accounts have been traced to holders in China, Russia, and to a lesser degree, Switzerland and the United Kingdom. Significantly smaller amounts of money are being held by offshore shell companies by people from the United Arab Emirates, Argentina, Brazil, Columbia, and the United States. There have yet to be any major U.S. banks, prominent names, or intermediaries uncovered in the digital Panama Papers documents.
Despite the list of names and businesses that have been leaked through Mossack Fonseca’s files, the true owners of the money stored in these offshore shell companies as well as the source of where the money was obtained is difficult to track in each individual case.
This is because the owners of the funds often use other people to sign off the money on documentation, people who may not even be related in any way to the money owners themselves.
Mossack Fonseca is the fourth largest offshore shell company provider in the world, and it has serviced around 300,000 of these companies. Despite the major data leak and the law firm’s countless dealings with owners of accounts with offshore shell companies, the firm claims that it adheres to all international laws and conducts, as well as with anti-money-laundering laws.
The firm further claims that this massive data leakage was a result of the failures of outside intermediaries such as other law firms and banks, and was not by any means a fault of the firm itself.
Data security is integral for any well-functioning organization, business, or school, including the University of San Diego. However, large-scale data leaks such as the Panama Papers incident can sometimes bring to light important information.