Have you ever wanted to be a pirate? If being free on the high seas has an allure you may want to think again. Today’s pirates don’t have ships or parrots, nor do they take over other ships at sea. They’ve gone bigtime, making a lot more money off of the very lucrative practice of making money disappear even more surely than burying it in the ground.
That’s what has been shown in the “Panama Papers”, a huge stash of 11 million documents taking up about 2.5 terabytes of data. The leak of papers from Panamanian firm Mossack Fonseca is about ten times the size of Edward Snowden’s leak – and none of the secrets revealed are about security.
This is about money. Lots of it.
It’s not as though this activity comes as any surprise to anyone. The way you hide money is a relatively simple process involved in setting up “shell” companies that exist solely for the purpose of cataloging fictitious import and export bills through various small nations. The most popular place for money to disappear from the developed world is the British Virgin Islands (BVI), a British Commonwealth nation with a long history as a haven for pirates.
The difference is that today’s pirates are less likely to wear an eyepatch than a green eyeshade.
Through a series of bills for goods not delivered and loans never repaid money flows easily from the BVI to … well, just about anywhere you want. The Seychelles are a nice place, as is Mauritius. From there, it may even flow back to the developed world to a comfy place like London.
The documents were first delivered to the staid and reliable Munich based paper Suddeutcher Zeitung. They quickly delivered them to the International Consortium of Investigative Journalists (ICIJ), a trade group that includes the Guardian and the BBC. They’ve spent the last year secret combing through the documents to develop a good understanding of the trail that they map out for money – where it came from and where it went.
It should come as no surprise to anyone that one of the leading launderers is the mafia state of Russia. Their lucrative trade in sex slaves from Moldova, Ukraine, and other nations is just the tip of the business that the Bratva needs to launder before enjoying it in the West.
Lest you think that this money laundering causes no harm, the ICIJ has this video introduction:
The full implications of these secrets is still rolling out, the fruits of the time and energy put into them by the ICIJ. The first casualty was the Prime Minister of Iceland, Sigmundur David Gunnlaugsson, who resigned yesterday. That squeaky-clean Iceland had a problem with its leader hiding money is only the first shock. Lionel Messi and Jackie Chan are said to be implicated, likely just for the tax dodges. Bashar al-Assad of Syria has apparently been looting his nation while it burns, as have many other foreign leaders.
Missing from the list will be any large number of Americans. That’s because we have our own methods for laundering money through shell corporations which are easy to set up here at home. Cleaning up money is a big business in Miami, for example, a place just 30 miles from Bimini (just over an hour by fast boat) and home to many remarkably friendly banks such as Banco Industrial de Venezuela, which has convenient offices in Miami, Caracas, Havana, and the BVI.
Piracy has clearly outgrown the need for a leaky ship, too.
There is plenty to read about the operations in the Panama Papers, and more will come out through the mainstream legacy press in the next few weeks. The revelations are simply too shocking to ignore. What’s been missing so far are good figures as to how much this all adds up to, however. We know it’s a massive business but we don’t know exactly how massive. There isn’t even a good estimate.
What we do have is a lot of scandal all around the world. This thing we call “globalism” has brought many parts to the world closer together than they reasonably should be. The last time this happened was when fast ships came to the Caribbean loaded with misfits from Europe eager to hide and wait for ships laden with looted gold to slowly sulk by.
The world came together in the 1600s in ways it never had before. The result was a combination of misery for some and riches for the few unencumbered by morals. Sound at all familiar?
Back then, the swampy coast of Darien was as good of a place to hide as any. Today, Darien is Panama and the result is the same.
So if you want to talk like a pirate don’t put on a ruffled shirt and say, “Arrrr”. Put on a suit and say, “BVI”. There won’t be wind in your hair but the main allure is the same: money, lots of it. There’s plenty to You’ll have plenty of company with the most powerful people in the world in that.
It should be interesting to see the names that make the list, but I fear that the real big names won’t be released. Call me skeptical, but I always look for agenda and motivation. The war on cash and privacy is real. FACTA was to fight terrorists, and to bring home all the lost tax revenue (yeah, that’s the ticket). Currently there is anger with the super wealthy; so lets put them up as the reason that we need more invasions of privacy (they’ll call it “transparency”).
I am all for hanging the bums in the streets. However, I suspect that the big dogs will laugh it off and walk away unscathed, while the little people will have more hassles, more fees, and less options.
When the bankers start getting thrown in jail, and the lawyers are in orange jump suits, I’ll become less jaded – well maybe.
The new regulations that they will put in place to “protect us” from these things will just cause hardship (TSA anyone?).
This is an international problem, with the US actors not really involved. We won’t have the fodder we need for a good discussion on it. But Europe is lighting up over this, especially with a lot of details on Russia.
Thanks for this blog post regarding the Panama Papers; I really enjoyed it and am definitely recommending this blog to my friends and family. I’m a 15 year old with a blog on finance and economics at shreysfinanceblog.com, and would really appreciate it if you could read and comment on some of my articles, and perhaps follow, reblog and share some of my posts on social media. Thanks again for this fantastic post.
There is no way anyone can do anything about this without some kind of world dictatorship. We just have to live with it.
A world government that has the ability to tighten this up doesn’t have to be a dictatorship. But yes, this will continue without a global effort. And it will be ugly.
There are many legitimate businesses, not everyone is corrupt. Those who are make life much harder for the rest of us.
Of course. This is just the big playahs.
If I were to fly a flag it would be the “Jolly Roger”. (Not that I’m a pirate in the sense that is mentioned here.) These people don’t deserve to live in a civilized society. I wouldn’t make them walk the plank but I sure would abandon them on some of desert island – them and their money.
Yes, well, this is what happens when the whole world becomes very small very quickly. Between culture clashes and new ways to hide assets it’s the new world (lack of) order.
Erik, this has alway been going on. With the smaller world we’re finding out about it sooner. The thing that amuses me is that these people probably don’t see anything wrong with it until it is exposed.
A very good point! Certainly, it’s easier today to hide money in some ways – but it’s also easier to find it. Do we simply know about it more? I think you may be right. Let me look into how I can quantify this, if I can.
It becomes a little more difficult for these guys to hold onto their self respect when their backroom deals and underhanded tax evasion is front page news. – This is a good thing.
This is all incredible, but predictable. Is that possible?
Today? Yes, it’s kinda routine. 🙂
Reblogged this on Ancien Hippie.
Yours is as astute an analysis I have read of the Panama Papers leak. Good job, great explanation! I have seen it hinted more than once that there may be some high-level U.S. names on the list that will be released later on. What is your take … gossip or likely?
Thank you! I doubt there will be any interesting Americans on the list. There are too many easier ways for us to launder money here. We don’t have to resort to international shell companies since we can set them up on our own. Usually it’s only really dirty money that goes this route from here, which is to say drugs / sex trade / etc.
Your title reminded me of a piece I did some years ago: http://www.greendel.org/2003/11/23/pirates-still-active-in-delaware-their-targets-your-health/
What would it take to create some international system of transparency? Or is it as impossible as campaign finance reform…..?
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