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'A Lot Of People Losing A Lot Of Sleep': The Impact Of The Panama Papers

Will Russian President Vladimir Putin's links to people named in the leaks lead to increased sanctions by Western countries?
Will Russian President Vladimir Putin's links to people named in the leaks lead to increased sanctions by Western countries?

A huge leak of over 11 million documents from a Panama-based law firm has revealed how global elites, including associates of Russian President Vladimir Putin, have hidden away vast sums of money.

RFE/RL spoke to John Christensen, executive director of the Tax Justice Network and co-author of The Finance Curse: How Oversized Financial Centers Attack Democracy And Corrupt Economies.

RFE/RL: How do you interpret the "Panama papers" leak? Is this a surprising revelation? A WikiLeaks moment?

John Christensen: I think Panama papers is one of the biggest leaks of modern times. It is the first major leak from a law firm, an offshore law firm, and it is on a scale which most people will find astonishing. Millions and millions of papers have been revealed and continue to be revealed, so the leak is still going on. And it involves very high-profile [people], not just politicians, but business people and elites around the world.

I think this leak is possibly on the same scale as the Edward Snowden leaks, because it reveals the level of corruption amongst the global, political, and wealthy elites. And this corruption has been going on for decades. This is the first time we have a leak on this scale.

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RFE/RL: And when politicians and elites try to establish offshore companies or evade taxes, is this legal?

Christensen: Let's be absolutely clear. Tax evasion is illegal in all circumstances. Even when people say tax avoidance, which we don't know whether it is illegal or legal, even when that's happening, [if] it's been tax avoidance happening through offshore structures, in almost all cases, it is eventually when it is taken to court, shown to be illegal.

So, I think the public understands this very well. They understand that when people are setting up offshore structures, offshore companies, or offshore trusts in jurisdictions like Panama, they think that it's most likely that something illegal or corrupt is happening.

RFE/RL: So offshore companies are illegal?

Christensen: No, the sad thing is that offshore companies are legal. The real problem with offshore companies is the fact that places, countries like Panama, do not require the owners, the real owners of offshore companies to disclose their identities.

What companies like Mossack Fonseca, which is the company, the law firm, at the heart of the Panama papers scandal, what they do is they provide nominee shareholders and nominee directors, that is, people who give their names to act as directors or shareholders to hide the identity of the real people. That's the shocking part about offshore companies, is that they don't disclose the identity of the real people who hide behind these offshore companies.

RFE/RL: What about shell companies, functioning for example in the United Kingdom. Is this legal as well?

Christensen: The U.K., of course, provides shell companies to people from around the world and currently it does not require full disclosure of what's called the beneficial ownership and this undoubtedly creates an environment which supports criminal and corrupt activities. And this is why civil society in Britain is calling for the British government to require full disclosure of the real ownership of these companies, not just in Britain, but in all of the British dependent territories and offshore tax havens like the Cayman [Islands], or the British Virgin Islands, or the Channel Islands. We are demanding full disclosure of who really owns these companies. And that disclosure must be on public record, so that journalists and others with a legitimate reason for investigating these companies will not be blocked from finding out who is hiding behind these companies.

RFE/RL: The leaks are still going on. Do you think there will be a big reaction from people around the world?

Christensen: I am very much hoping that the public in the countries around the world will start to put really serious pressure now on their politicians to take action.

And what kind of action are we looking for? First of all, we want a global treaty or requirement that every single jurisdiction in the world creates a public registry of ownership of offshore shell companies and offshore trusts and offshore foundations. And this will not happen unless politicians are forced by the public to take action, because too many politicians are themselves or their families involved in offshore structures. They will only do this once there is pressure from the public, real global pressure to take action. For decades, politicians have been promising that they would take action against tax havens and they've done nothing. And now is the time. This Panama leak is the wake-up call to the rest of the world to take action.

RFE/RL: Russian President Vladimir Putin's very close friend's name is disclosed in these papers, that he also established offshore companies. Since Russia is already under Western sanctions, do you think it will prompt Western countries to increase their sanctions against the allies and friends of Putin and do you think there will be some reaction in Russia?

Christensen: I am expecting there will be some reaction in Russia, but I think the important thing now is, if the West is serious about taking [further] sanctions against the Russian leader, they must now look at the role of lawyers, law firms like Mossack Fonseca.... So, I think now is the time for the leaders of the rest of the world, if they are serious about imposing sanctions, to put pressure on the law firms to reveal the identity of their clients when they are politically exposed persons and to stop working with them. That would make it very much harder for leading politicians, whether in Russia or any other country, to hide behind offshore structures.

RFE/RL: How do you see the future of such law firms? Until now, we knew that nothing would be revealed, everything would be secret, everywhere in the world, and we couldn't possibly touch these law firms and other offshore companies, because the secrecy was so strict. Do you think the world's financial elite and political elite, or drug dealers, will now be very careful when they are moving money abroad?

Christensen: Well, let's face it, politicians and drug dealers and all the other people who have been using offshore countries have been very careful. They have been operating on the understanding that law firms will protect their identity. This leak shows that law firms are no longer able to protect their identity.

So this is going to be causing a lot of people to lose a lot of sleep in weeks to come. Because they know they can no longer rely upon law firms to protect their identity. And I suspect that criminals and the business elites and the wealthy elites around the world, who've been evading tax and not disclosing political conflicts of interest and engaged in a lot of corrupt white-collar crime, will be losing their sleep in the coming weeks because the level of secrecy which they have been assured for decades can no longer be assured.