By Lisa Main and Elise Worthington
An obscure law firm in Central America is at the centre of the world’s largest data leak.
The massive security breach shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars.
The exposé of Panama-based Mossack Fonseca has been made possible by an unprecedented leak of more than 11 million documents to German investigative newspaper Süddeutsche Zeitung.
The leak came from an anonymous source and was then shared with the International Consortium of Investigative Journalists (ICIJ) which organised an investigation by news organisations around the world.
The cache of documents includes emails, banking details and client records dating back 40 years and reveals the inner workings of a law firm famed for its secrecy.
At the helm of Mossack Fonseca sits German-born lawyer Jurgen Mossack and Panamanian lawyer Ramon Fonseca, who until a month ago worked as an advisor to Panamanian President Juan Carlos Varela.
The leak reveals the offshore holdings of 12 current and former world leaders including Iceland’s Prime Minister Sigmundur David Gunnlaugsson, as well as relatives of Syria’s President Bashar al-Assad, friends of Russian President Vladimir Putin and members of China’s Communist Party elite.
More than 1,000 Australian links to companies have been found in the data leak including the passports of hundreds of Australian citizens connected to companies as directors, shareholders and beneficial owners.
Twenty-nine Forbes-listed billionaires are also named in the leak.
Using complex shell company structures and trust accounts Mossack Fonseca services allow its clients to operate behind an often impenetrable wall of secrecy.
Mossack Fonseca’s success relies on a global network of accountants and prestigious banks that hire the law firm to manage the finances of their wealthy clients. Banks are the big drivers behind the creation of hard-to-trace companies in tax havens. Commerzbank, HSBC and Societe Generale are all clients.
Much of the firm’s work is perfectly legal and benign. But for the first time the leak takes us inside its inner workings, providing rare insight into an operation which offers shady operators plenty of room to manoeuvre.
How does Mossack Fonseca operate?
Mossack Fonseca registers companies in tax havens on an industrial scale. Many companies exist on paper only with no office and no employees.
One of the big selling points is anonymity.
Clients can pay Mossack Fonseca extra to provide front people known as nominees so they can act as shareholders, directors or even the owners of companies.
“This is always a really good opportunity to launder money. This is, they are doing really huge transactions from one country to another and they are hiding it and masking it in a way, so you really can’t follow the money,” German investigative journalist Bastian Obermayer said.