Leaked files from a Panama law firm that creates shell companies show that politicians, criminals and celebrities worldwide have used banks and shadow companies to hide their finances, according to a series of reports by the International Consortium of Investigative Journalists.
Within hours of publication, the divulgences drew ridicule from a close confidant of Russian President Vladimir Putin, a curt denial from Argentina and prompted a parliamentary vote of confidence in Iceland’s prime minister.
The consortium, in articles published Sunday, said it had obtained a cache of 11.5 million records outlining the creation of more than 200,000 offshore shell companies. The trove includes offshore companies linked to 12 current and former world leaders, as well as hidden financial dealings by 128 more politicians and public officials, according to the ICIJ.
At least $2 billion in transactions involved people and companies it alleged had ties to Putin, according to the report. It outlined, for example, the creation, within 24 hours, of a chain of four shell companies in three countries, involving two banks, a process that made the money behind it “all but untraceable.”
The original company in the chain, according to the consortium’s report, was a St. Petersburg-based bank “whose majority owner and chairman has been called one of Putin’s ‘cashiers.”’ Some of this money was used to gain “indirect influence” over shareholders in Russian companies.
“Mr. Putin was never involved. It’s bulls**t,” Andrey Kostin, chief executive officer of VTB Group, Russia’s second-largest lender, said in an interview with Bloomberg Television on Monday. He also rejected allegations that the lender made unsecured loans through a Cyprus-based subsidiary to a close friend of the president.
While offshore holdings can be legal, they can also be used to hide wealth. The ICIJ cited documents that it alleged showed that some banks and law firms failed to follow requirements to check that their clients weren’t involved in crimes.
Icelandic Prime Minister Sigmundur D. Gunnlaugsson faces a no confidence vote in parliament Monday after he and his wife appeared in documents as having an investment account in the British Virgin Islands to handle an inheritance.
The ICIJ’s report said account holders also include current and former leaders from Argentina, Georgia, Iraq, Jordan, Qatar, Saudi Arabia, Sudan, United Arab Emirates, and Ukraine.
The office of Argentinian President Mauricio Macri said in a statement that he had been “occasionally designated as a director” of an offshore company mentioned in the report, but never held shares.
The documents span from 1977 to 2015 and came from Panama-based law firm Mossack Fonseca, a top creator of shell companies that has branches in Hong Kong, Miami, Zurich and more than 35 other places around the globe, the ICIJ said.
In written comments to the consortium, Mossack Fonseca said it “does not foster or promote illegal acts” and that the group’s allegations that it provides shareholders with structures “supposedly designed to hide the identity of the real owners are completely unsupported and false.”
The ICIJ, founded in 1997, is a global network of investigative journalists who collaborate on in-depth investigations on issues including cross-border crime, corruption and the accountability of power, according to its website.
— Check out The Dark Side of the Global Super-Rich on ThinkAdvisor.