Panama, long famous for its beautiful beaches, is now known for the instantly infamous #PanamaPapers. (Charlie Leu/Flickr)
Ahh... the beach. Who knew it could be so corrupt?
Hundreds of important people across the world are involved with a Panama law firm that may have helped them evade taxes on their wealth. We know this because millions of files were leaked to journalists, who just started sharing what the docs say.
Seriously? Seriously. Let's break it down:
WHAT are the Panama Papers?
The Panama Papers are 11.5 million files leaked from an international law firm, showing international finances of billionaires, celebrities, criminals, drug traffickers, famous athletes, politicians, and more.
Basically, it shows how the rich and powerful are hiding their wealth.
And: It reveals possible corruption.
WHO is involved?
Over 140 politicians and public officials, past and present, are involved in this shady, secret web.
One name you know: Russian President Vladimir Putin. $2 billion in Russian money was placed into bank accounts abroad, by Putin's associates, connecting it to him.
So far it looks like he didn't have his name attached--remember, he used to be in the KGB--but all roads lead to him.
— Edmund Tadros (@edmundtadros) April 3, 2016
Who else? Iceland's Prime Minister Sigmundur Gunnlaugsson. Many Icelanders are calling for him to step down--and he refuses to, saying he stored his money legally.
Icelanders aren't having it, tho.
— Anonymous (@AnonyMobLife) April 4, 2016
Who else? The leaders of Great Britain, China, Argentina, and Pakistan.
The names of numerous other leaders from Africa, Asia, Europe, the Middle East, and the Americas are in the Panama papers.
But none yet from the US.
Emphasis on yet.
Many believe celebrities, sports stars, drug traffickers, and criminals may be implicated when all the data is analyzed.
WHERE is this going down?
The law firm Mossack Fonseca is not a household name, but it's the world's fourth largest offshore firm. This law firm is the major focus. They help clients with wealth management and setting up businesses abroad for lower costs.
Mossack Fonseca is based in the Central American country Panama.
(Hence the name Panama Papers.) Panama is known for its beaches and luxurious vacations but also a tax haven.
WHEN did the shady dealings in the #PanamaPapers happen?
The leaks covers decades, including the years from 1977 to 2015.
HOW do tax havens work?
"Tax havens: Sunny places to hide your money." Yep, that about sums it up. (Jagz Mario/Flickr)
A tax haven is a country where the laws make it so that foreigners--individuals and companies alike--can do business in a way that makes it easy for them to avoid both paying taxes and revealing their financial info to their own countries.
You'll hear the term "offshore," too. That term refers to a place where you do or base your business or hold a bank account that isn't your own country.
Basically, they can operate secretly and without paying the taxes you'd think they owe. Using a tax haven takes some complicated accounting and legal help, so they are only available to the rich and powerful. Panama is a tax haven, and Mossack Foneca specializes in handling the legal issues there for clients.
So what's going on here is technically legal in Panamanian law, but shady because it allows people and businesses to fly under their own countries' radar and hide and protect millions and billions of dollars.
Panama isn't the only tax haven. Switzerland and the British Virgin Islands are two others.
We haven't verified these numbers, but it's definitely true that US companies avoid paying BILLIONS in US taxes by using tax havens. (citizens4taxjustice/Flickr)
This leak tells us about what's going down in Panama, but not in other tax havens. So this is just one strand of a huge international web.
WHY do people and companies use tax havens?
To hide their riches and save their wealth. Taxes can take a huge chunk out of savings.
If you've long suspected that the rich and powerful do shady things to hide their wealth, you are 100% right.
Been following this Panama Papers Leak story. I'm not surprised at this world wide corruption. I'm just curious to see what happens next.
— Mu (@ThatGuyMu) April 4, 2016
There are a lot of reasons to use offshore accounts. Some people put money in offshore accounts to keep their money from being stolen, for future inheritance, and future estate planning.
But many do it for dirty, unethical reasons. Some of these people putting money away abroad are people who run countries internationally, waging war or violence, or are just saving money in a sketchy way--by hiding it.
The Panama papers show that banks and law firms aren't making sure their clients are following the required transparency of their wealth.
They're helping clients hide their money, no matter who they are and where they got their money from.
Some tax haven governments are trying to pass laws that would show who are behind offshore accounts for greater transparency.
And ... why are we learning about this now? Because journalism is bringing that #transparency. The Panama revelations are all thanks to a massive leak, historic in the world of journalism. We don't know who leaked the info, but we do know that journalists are combing through it to shine a bright light on these practices.
Stay tuned. Journalists have had these documents for a year now, and they're still combing through the millions of documents. There's more to come.
This article was written by Patrick deHahn and originally appeared on Kicker. Kicker explains the most important, compelling things going on in the world and empowers you to get in the know, make up your own mind, and take action. For more, check out the Kicker site, like their Facebook page, or subscribe to their email newsletter.