The international structures and tax planning have been targeted by tax and transparency fanatics in recent years. While the Panama Papers might be the most information leak, several lesser-known leaks have occurred. Millions of private documents have been released through several different leaks.
Below you’ll find a brief history of the leaks that have occurred since 2013 and the best possible way to protect yourself.
was published in April 2013 after an investigation by the International Consortium of Investigative Journalists (ICIJ) involving over 100 journalists. The leaked documents were obtained from two separate financial service companies: Portcullis TrustNet from Singapore and Commonwealth Trust Limited from the British Virgin Islands.
More than 2.5 million files were leaked exposing the private details of more than 120,000 offshore companies, trusts, and foundations. It is unknown how they were obtained.
was released in two waves – LuxLeaks 1 in November 2014 and LuxLeaks 2 just one month later. Again, the Luxleaks were the product of an ICIJ investigation.
The documents were obtained from unspecified Swiss banks and Appleby – a reputable, Bermuda based international law firm. ICIJ says that current and former employees of Luxembourgish subsidiaries of the Big Four accounting firms provided the documents.
28,000 pages of confidential documents were released.
was released in February 2015 by the ICIJ after analyzing the data. The documents were removed by a software engineer at HSBC Private Bank. For two years he collected data and then tried to sell it. Only after he was arrested did the analyst begin sharing the information.
60,000 confidential files were leaked providing details on over 100,000 HSBC clients and their bank accounts.
was published in 2016.
An unknown source leaked internal documents from a company register in the Bahamas. The documents were again analyzed and published by the ICIJ.
Over 1.3 million internal files linked to more than 175,000 companies, trusts, and foundations that were registered there between 1990 and 2016.
was also published in 2016 by an anonymous source that hacked the email system of the Panamanian law firm Mossack Fonseca.
More than 11.5 million files were released including emails, contracts, and even audio recordings.
Again, the ICIJ published the documents and a statement from the anonymous leaker who cited income inequality as the motivation behind his actions. You can read his meandering diatribe if you’d like. It’s riddled with logical contradictions, moralizing, and baseless accusations. Predictably, the leaker makes no distinction between legal tax avoidance and illegal tax evasion.
Examining the fallout from these leaks, the Panama Papers in particular, proves the exact opposite of what was intended by the ICIJ. It’s claimed that over USD $2 trillion flowed through entities established by Mossack Fonseca. Three years later, governments around the world have collected a paltry $1.2 billion in fines, penalties, and backed taxes.
Stated differently, governments have connected 0.06% of all the money that the firm supposedly helped protect and transfer with activities that were found to be illegal.
was published in the summer of 2019.
Over 200,000 private documents from the law firm Conyers Dill and Pearlman were leaked by an anonymous “whistleblower” to the ICIJ. Many of the documents dated back to the early 1990s.
was published in early 2020.
Over 710,000 documents were originally obtained by the Platform to Protect Whistleblowers in Africa (PPLAAF) who then shared them with the ICIJ. The documents include confidential emails, contracts, incorporation papers, organizational charts, invoices, and board of directors meeting minutes and video.
All documents pertained to the financial activities of Isabel dos Santos, daughter and eldest child of Angola’s former president Jose Eduardo dos Santos, and her husband Sindika Dokolo.
Innocent Or Guilty?
For the most part, the people exposed (or, “doxed” more accurately) earned their money through perfectly legal and voluntary transactions. But anonymous leakers and their enablers like the ICIJ not only feel entitled to what others have earned but morally superior in taking it from them.
Truth is, such people will always exist, although they don’t deserve to. These types of leaks will continue. The next one could come from a hacker, a government insider, a professional at an accounting or law firm… hell, a janitor with a little know-how and access to sensitive materials could be a source – anyone with a “tax the rich” mentality comfortable with using the excuse of “the ends justifying the means.”
The Fall Out
What has changed because of these leaks?
For starters, legislation has changed considerably. Countries around the world have passed a slew of laws and regulations requiring transparency and enhanced scrutiny for international transactions. Many countries around the world automatically share tax and financial records of their residents and locally domiciled entities.
One of my clients got caught up in the Paradise Papers. He’s a legitimate businessman strictly engaged in legal activities. His business and wealth structures are entirely legitimate.
Because of the leak, he now faces enhanced scrutiny for his legitimate transactions, as well as enhanced due diligence from banks and professional service firms.
But it’s not just him. Everyone that incorporated in certain jurisdictions wound up in some of these leaks.
Because the ICJI and other “tax justice” groups copy and pasted publicly available government company registries.
For example, somebody could have opened up an ice cream shop and wound up in the leaks which could easily impact their ability to bank get insurance, and open financial accounts.
How to Protect Yourself
The Panama Papers wasn’t the first leak and it won’t be the last.
Given that the leaks are likely to continue and, of course, the harsh consequences for violating the law, your best option is to be prepared to defend every last action in court.
After all, the law is all that matters – not what a bunch of crybabies with journalism degrees say.
Your wealth alone means that you’ll never win in the court of public opinion. To millions, the mere fact that you have it means, a priori, that you’re guilty of something.
Stay focused on your prime objective of keeping and growing your wealth while remaining in legal compliance.
Anticipate that every move you make will one-day become public knowledge. With that approach and the right structure, you and your family will keep what’s yours.
If you’d like to discuss your current structure or help with setting one up, contact us here.