The Panama Papers have been all over the news, but what’s this story all about?
Over a year ago an anonymous source, using encryption, gave a German newspaper 11.5 million
files from the Panama-based law firm Mossack Fonseca. Fonseca serves wealthy and powerful
clients around the world by incorporating companies for them in offshore jurisdictions
like the British Virgin Islands.
At 1.7 gigs the Panama Papers is the biggest leak in history, so there was no way one single
newspaper could go through it all by themselves, so the Germans reached out to the International
Consortium of Investigative Journalists - or ICIJ - for help. Together with their news
organizations, hundreds of journalists spent the last year researching the documents and
connecting the dots. They waited to go public until they understood the overall picture
and until they had written several rounds of reports. Then, by cooperating to stagger
the release of bombshell report after bombshell report, the ICIJ masterfully maximized the
leak’s impact by extending the time it stayed on the front pages of the world’s newspapers.
What is offshore banking and why is it bad? An offshore bank account is, simply, an account
to hold your money that is not located in your home country, and therefore not accessible
to your country’s government. It is not against the law to put your money in offshore
accounts, and there are arguments for why people would want to keep at least some of
their money in an offshore account. If your country has an unstable political system you
could keep your money offshore in a more stable bank in a more stable currency in a more stable
country, or so corrupt officials in your home country can’t steal from you, or so your
bankrupt government can’t impose restrictions on your money, like what happened in Iceland
and Greece during their financial crisis.
But what the Panama Papers expose is the darker side of offshore banking, when it’s combined
with the creation of shell companies to create secrecy to avoid paying taxes, to get around
international sanctions, or to launder money acquired through criminal activity. Think
the mafia or drug cartels.
Even though they play dumb, this is a foundational part of the business models of firms like
Mossack Fonseca.
The Panama Papers are especially damning to political leaders because the disclosure that
a head of state uses secretive offshore banks undermines the authority of the system they
have been entrusted to oversee in a very fundamental way. The public justifiably wants to know:
what’s wrong with our own banks? What do you have to hide? Are you trying not to pay
taxes to your own government?
Who do the Panama Papers expose? Some of the world’s most powerful people
- or their close relatives and associates - are linked to Mossack Fonseca, like Russian
President Vladimir Putin, Chinese Premier Xi Jinping, British Prime Minister David Cameron,
Syrian President Bashar Al-Assad, Pakistan Prime Minister Nawaz Sharif, Ukrainian President
Petro Poroshenko, Argentinian President Mauricio Macri, the President of the United Arab Emirates,
the King of Saudi Arabia, and the President of FIFA...and, obviously some of the world’s
top bankers. And Iceland’s Prime Minister already resigned after being named.
For people who we pretty much knew were horribly corrupt, like some bankers, Putin, Assad and
the entire first family of Azerbaijan, the leaks don’t come as a big surprise. But
the revelations could endanger Cameron and Xi’s ability to govern, as their governments
have billed themselves as anti-corruption watchdogs. That’s why China is using their
great Internet firewall (which I broke down in a video last year) to censor any mention
of the Panama Papers.
But that censorship regime is gonna be kept busy, because stories on the leaks are just
getting started. But we already know that celebrities like footballing superstar Lionel
Messi and Jackie Chann use offshore services. Spanish soccer team Real Sociedad went offshore
so they - and their players - could avoid paying taxes on their salaries; taxes that
would benefit their fans and fellow citizens.
While numerous countries have already launched investigations to uncover wrongdoing, many
are wondering why there aren’t many Americans named in the Panama Papers. Are we Americans
suddenly perfect? No, in fact far from it. It’s because wealthy Americans have many
methods available to them to hide their money offshore, so they don’t need to rely on
a Panamanian firm to do it.
Now, let’s gain a sense of how rampant this problem is: Mossack Fonseca is only the world’s
fourth-ranking provider of offshore services,
so this leak is just a small glimpse behind the
curtain of secret banking.
For Americans, this story confirms the argument being made most forcefully by Bernie Sanders
- and others around the world like him - who say that the wealthiest have far too much
power, and that it’s well past time that we united to take them on.
Sen. Sanders: "Panama is a world leader when it comes to allowing wealthy Americans and large
corporations to evade US taxes by stashing their cash in offshore tax havens..."
I’ll leave you with a segment from a video by the ICIJ itself that highlights the damage that offshore
banking does to local populations.
In Uganda, a company that wanted to sell a prospective oil field paid Mossack Fonseca to help
it avoid $400 million dollars in taxes.
It was simple paperwork. The company's address was changed from one tax haven to another.
In a country where one in three people live on less than $1.25 a day, $400 million dollars
represents more than the government's annual health budget.
Uganda spent years in court trying to force the company to pay its taxes.
Meanwhile hospitals in the shadow of the oil field lacked funds for even the most basic equipment.
Patients slept on floors.
They were asked to bring their own medical supplies like sterile gloves and cotton balls.
Patient: "It was a surprise to me because I expected all this equipment to be at the health center."
When all these things are not there nurses say 'we cannot work on you.'
At times we are forced to leave and return home unattended to.
Some women have lost their lives and babies..."
This episode of TDC was sponsored by the online learning platform Lynda.com. As a viewer of
TDC, I got you a free 10-day membership there. So check it out and sign up through the link
below to gain access to all of their high-quality video tutorials on a whole range of topics
so you can learn how to edit videos like this one, or learn how to become a software developer.
Lately I’ve been using Lynda to learn how to run a business the right way. I mean,
I don’t want to end up like the guys named in the Panama Papers, who clearly got some
bad business advice along the way.
Thanks for watching, I'm Bryce Plank.
I hope you found this informative, I’ll talk to you in the next video.