There are legal ways to take advantage of tax havens across the globe and there are illegal ways as well. The recent leak of 11.5 million secret files from the Panama law firm of Mossak Fonseca provides extensive insight into how offshore tax havens have been used to illegally hide funds. From an investing point of view how will the Panama Papers leaks affect your investment plans? The International Center for Investigative Journalism has leaked a collection of documents called the Panama Papers.
The largest cross-border journalism collaboration ever has uncovered a giant leak of documents from Mossack Fonseca, a global law firm based in Panama.
The secret files:
Include 11.5 million records, dating back nearly 40 years – making it the largest leak in offshore history. Contains details on more than 214,000 offshore entities connected to people in more than 200 countries and territories. Company owners in billionaires, sports stars, drug smugglers and fraudsters.
Reveal the offshore holdings 140 politicians and public officials around the world – including 12 current and former world leaders. Among them: the prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia.
Document some $2 billion in transactions secretly shuffled through banks and shadow companies by associates of Russian President Vladimir Putin.
The list of Mossack Fonseca clients includes Hezbollah, North Korea, Iran and folks actively doing business with Mexican drug lords. What will be the result of this set of leaks and will it change the rules for moving money offshore for investments? Especially how will this play out for large banks that have helped drive the creation of hard-to-trace companies and have dealt with the likes of Mossack Fonseca.
The Washington Post reports that the US is reviewing offshore leaks for possible crimes.
The U.S. Justice Department says it’s reviewing a massive tax evasion leak for evidence of possible criminal wrongdoing that might have a link to the United States or to its financial system.
Spokesman Peter Carr said the department is aware of the Panama Papers data leak containing information on the offshore financial dealings of wealthy, famous and powerful people around the world. He says the department is reviewing the reports but can’t comment on specific documents.
He says “the U.S. Department of Justice takes very seriously all credible allegations of high level, foreign corruption that might have a link to the United States or the U.S. financial system.”
If you have money hidden offshore for the sole purpose of evading taxes you may want to get sound legal advice regarding your next steps before the next set of leaks hit the press. If you simply want to invest offshore, how do the Panama Papers leaks affect your investment plans?
Years ago we wrote about three good offshore investment ideas. Although the countries listed (Brazil, Colombia and Panama) have diverged as investment opportunities the principles of offshore investing are the same. If you can invest and make money, legally pay lower taxes or benefit from changes in the exchange rate from your home currency to the offshore currency where you will invest, it is a good idea to look offshore for opportunities. To the extent that you are trying to hide your money it will probably get harder and harder as new laws and regulations come into effect in response to the Panama Papers.