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How the Panama Papers Happened

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Do you have an offshore account? We don’t either. Seems pretty easy, though. There are tutorials on YouTube. It’s also frightfully common: according to the latest leak, the Panama Papers everybody who’s anybody has one.

But do you actually need one? Another quick consultation with the internet will tell you that yes, you absolutely do. For perfectly legit reasons: to protect your money from government(s), predators of different kinds, political instability, or your spouse. Actually, here’s a cute video that explains it using piggy banks.

Where can you open one? Well, you’d be a fool if you didn’t open it in a tax haven. You don’t even have to go offshore – really, some of the best places that give tax breaks and ask few questions are landlocked  or have some shore. While perfectly legal, it’s potentially not terribly ethical, as this little animation from the ICIJ, the good people who brought us the Panama Papers will explain, but ethics is not a currency these days, so there’s that.

There’s a number of reasons why you might want to go offshore and cover your business with a shell (a shell company, that is). Some are nice, some are less nice.

Saul Goodman knows it all. – via Breaking Bad

You may have a perfectly valid reason. Perhaps you actually live in a tax haven. People do, you know. Or you may live somewhere where you can’t register a trader account for, say, an app store. Or you may simply be greedy. (We don’t judge.)

What do you do? You register it in another country. Obviously, you pick one where taxes are lower. You register with relevant tax authorities in your country of residence and off you go. Perfectly legal and, unless you’ve incorporated yourself and can now follow these steps, even ethically impeccable. (Perhaps now it’s the time to revisit that old notion that corporations are people. Just sayin’.)

And yet.

The Panama Papers, the mother of all leaks. They are interesting for sorts of other reasons too. Not that tax evasion is not a huge story – hundreds of billions a year is not small change, after all. The people that got caught? The usual suspects. (Cue: the usual conspiracy theories.)

Sanders ardently opposed the trade deal that led to Panama Papers abuses. – via Salon.Com

But what is also interesting is the things the papers are not yet saying. WSJ  claims there are hundreds of US entities potentially implicated. Without too much speculation, chances are some will be implicated for dealing with unsavoury characters. Watch the ICIJ animation again, you’ll notice that they talk about something else: traceability. There’s an enormous amount of money that is, well, poorly documented. And not exactly clean. You know, the kind that sinks, then magically reappears, fresh and fragrant, somewhere else. Tax havens notoriously provide cover (or shell, as they call it, even though it’s usually a letterbox. You know what we’re talking about, right, a “fake” company with ownership structure so winded that people just give up) for money that is of dubious source. An extreme practice of “don’t ask, don’t tell”. Where does the poorly traceable money come from? Often, drugs and arms.

An extremely common way of laundering the money? Apparently, real estate.  Does your head hurt yet?


And even when there’s no trace of wrongdoing, it’s pretty annoying to know you’re paying through your nose to live in a shoe box, while your offshore landlord is sipping margaritas somewhere in the Caribbean.  Here’s a breakdown for London, read it and weep. You may not be a Londoner, but chances are your city is somewhere there.

With all the news coming in as we write, who knows how big this thing really is or where it will lead. We know very little. But we’ll be following the money for you.

Unless we decide to give offshore a try and go to Panama City, and from there, wherever the untraceable trail of banknotes takes us. Although probably it’s a little late for that route now – we’ll have to go somewhere else. Where? Unfortunately, we can’t really disclose this information.

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