Often, companies or individuals use shell companies to disguise ownership or other information about the funds involved.
An investigation published by an international coalition of more than 100 media outlets, based on 11.5 million records of offshore holdings, details how politicians, celebrities and other famous people use banks, law firms and offshore shell companies to hide their assets.
The International Consortium of Investigative Journalism, a non-profit organisation based in Washington, said a cache of 11.5 million records detailed the offshore holdings of a dozen current and former world leaders, as well as businessmen, criminals, celebrities and sports stars.
A cache of documents has exposed the secret offshore dealings of aides to Russian president Vladimir Putin, world leaders and celebrities including Barcelona forward Lionel Messi. An investigation into the documents by more than 100 media groups, described as one of the largest such probes in history, revealed the hidden offshore dealings in the assets of around 140 political figures, including 12 current or former heads of states.
The ICIJ has said an anonymous source provided the internal documents from a Panama-based law firm, Mossack Fonseca, one of the world’s biggest creators of shell companies.
However, Ramon Fonseca, a co-founder of Mossack Fonseca, said the documents were obtained illegally by hacking but confirmed that many of them were real. He denied his firm has engaged in any wrongdoing.
Here is a look at offshore accounts and how they are used:
What are offshore accounts?
Offshore bank accounts and other financial dealings in another country can be used to evade regulatory oversight or tax obligations. Often, companies or individuals use shell companies, initially incorporated without significant assets or operations, to disguise ownership or other information about the funds involved.
Where are the most offshore accounts?
Panama, the Cayman Islands and Bermuda are among more than a dozen small, low-tax locations that specialise in handling business services and investments of non-resident companies.
What are the legitimate uses of offshore accounts?
Companies or trusts can be set up in offshore locations for legitimate uses such as business finance, mergers and acquisitions and estate or tax planning, according to the global money laundering watchdog, the Financial Action Task Force.
The illicit uses of such accounts
Shell companies and other entities can be misused by terrorists and others involved in international and financial crimes to conceal sources of funds and ownership. The ICIJ says the files from Mossack Fonseca include information on 214,488 offshore entities linked to 14,153 clients in 200 countries and territories.
Crack down on financial havens
The Financial Action Task Force and other regulatory agencies publish assessments identifying weaknesses in enforcement of anti-money laundering and counter-terrorism financing efforts of specific countries and territories. Financial and legal professionals get training on how to spot potential violations, since in some cases lawyers and bankers are unaware they are handling illicit transactions. The EU has stepped up efforts to crack down on tax avoidance by multinational corporations.
Past scandals over offshore accounts
Banking secrecy laws tend to obscure offshore financial dealings. But the disclosure of other leaked documents by the ICIJ and other organisations in late 2014 drew attention to sweet tax deals offered by the tiny European country of Luxembourg to multinational companies and ultra-wealthy individuals. In the 1980s, the Bank of Credit and Commerce International, an international bank founded by a Pakistani financier, was found to have been involved in wide-scale money laundering and other illegal financial dealings.
Keywords: Offshore bank accounts, Mossack Fonseca, International Consortium of Investigative Journalism, Ramon Fonseca, Bank of Credit and Commerce International