The new files mainly cover a period between January 2016 and December 2017 and show that subpoenas were sent to regulators in the British Virgin Islands, Seychelles and other offshore tax havens just weeks after publication of the original set.
A new leak of data from the embattled law firm Mossack Fonseca shows it scrambling to contain the crisis triggered by the April 2016 leak of the Panama Papers and attempting to field demands for information from authorities in numerous countries — with the glaring exception of the United States.
The publication more than two years ago of more than 11.5 million documents from the law firm trained a spotlight on the practice of hiding fortunes away in secretive offshore companies.
Both the original Panama Papers and the newly leaked documents reveal shell companies created by Mossack Fonseca that were used not only for legitimate purposes but also to conceal illicit proceeds from drug trafficking, help pariah nations skirt US sanctions and hide corruption and bribery by politicians around the world — although no names of prominent American politicians have surfaced in the documents.
But the new material suggests surprising inaction on the part of the US government, given the breadth of the operation used to hide illegal and questionable transfers of funds — the kind of activity that American law enforcement has for years sought to combat.
The new files mainly cover a period between January 2016 and December 2017 and show that subpoenas were sent to regulators in the British Virgin Islands, Seychelles and other offshore tax havens just weeks after publication of the original set.
The governments of France, Germany, Brazil and even Bolivia demanded information from these tiny countries, which are home to tens of thousands of secretive offshore shell companies, used to camouflage legal and illicit transactions alike.
Similar subpoenas from state and federal authorities in the United States about the true owners of shell companies at home or abroad are largely missing, though. If they exist, they are not in Mossack Fonseca’s records. And while Europe has moved to collect more information about owners of shell companies, not so in the United States.
“Even before the release of the Panama Papers, the US was one of the easiest places in the world for criminals, terrorists, and kleptocrats to anonymously hide illicit money with impunity,” said Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency (FACT) Coalition, which advocates for transparency. “Now, as the UK, Europe, and many other countries. . .take steps to end the abuse of anonymous shell companies, the US is becoming an ever more attractive place to launder the proceeds of crime.”
Soon after publication in 2016, Preet Bharara, then the US attorney for the Southern District of Manhattan, announced that he’d opened an investigation into the Panama Papers. He was fired by President Donald Trump less than a year later in March 2017, and there have been no subsequent public signs of any federal inquiry.
“I’m sorry, but I’ll have to decline to comment,” Dawn Dearden, a spokeswoman for the US attorney’s office, said when asked for the status of the probe.
That doesn’t surprise Jack Blum, a veteran white-collar attorney and former Senate investigator, who has for more than a decade complained that the use of offshore companies to hide illicit gains is rarely prosecuted.
“What do you need, two or three years to sort through this stuff to figure out if a crime has been committed?” he asked sarcastically.
German federal police revealed in July 2017 that they purchased the Panama Papers database from an undisclosed source, and this month told to Süddeutsche Zeitung they’ve shared data for criminal investigations in 19 countries, including the United States.
There has been some action at the state level to tighten regulations. Wyoming now requires the communications contact for a shell company to be a real human being; McClatchy had found that in some instances such contacts were other anonymous shell companies.
“In the spring of 2016, we were informed of the Panama Papers release, we immediately audited MF Corporate Services for cause, and we turned that information over to law enforcement that same day,” said Will Dinneen, spokesman for the Wyoming Secretary of State’s Office. There is no evidence in the leaked documents showing the lead was pursued.
Legislators in Delaware, which leads the United States in registration of anonymous companies, proposed legislation this year to give the state more power to regulate administrators of shell companies, said Douglas Denison, spokesman for the Delaware Deartment of State.
Among the changes expected to become law, he said, is a stipulation that “all agents must check prospective entities against federal sanctions lists prior to formation,” and re-check at least quarterly. This prevents registered agents such as Mossack Fonseca for blaming middlemen.
Nevada now allows its secretary of state to spot-check a company’s compliance and perform audits, actions that were not permitted before release of the Panama Papers. Since last October, state officials have been able to examine records as it sees fit.
“We respond when we get complaints and we have not had any of this nature since the new legislation went into effect,” said spokeswoman Jennifer Russell. “We have not received any subpoenas from foreign governments.”
Mossack Fonseca closed its operations in both Nevada and Wyoming in 2016. Yet more than two years after the Panama Papers exposed the dark world of these mysterious companies, including some in the United States, Congress has failed to enact any legislation to remedy the problem.
At a hearing of the Senate Banking Committee’s national security subcommittee Wednesday, a former senior Treasury Department adviser warned there are so many anonymous shell companies in the US and abroad that it’s hard to even offer meaningful statistics about the threat they pose.
“What we are looking at may not even be statistically relevant,” said Chip Poncy, the first director of the Office of Strategic Policy for Terrorist Financing and Financial Crimes, from 2006 to 2013.
Oregon Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, is pushing a bill to require the Treasury Department to create a standard, bare-bones “ownership disclosure” that could be filed with either state or federal authorities when anonymous companies are formed. It would require disclosure of true owners from the outset, instead of nominees and managers who appear on documents but aren’t the owners.
If a state chose not to adopt this new standard, companies would have to register with the Financial Crimes Enforcement Network, or FINCEN, Treasury’s watchdog on illicit finance.
“This isn’t too complicated. We want to know who the true owners are at the get-go,” Wyden said in an interview.
His legislation is cosponsored by Florida Republican Sen. Marco Rubio, who said he was stumped about why no US charges have been filed in the aftermath of the Panama Papers.
“That would be a Department of Justice function and I don’t know where they are in the investigations or where they would be in terms of being able to bring evidence,” Rubio said. “They would have to be able to get a conviction so, that’s an interesting question.”
Wyden puts the blame on the Trump administration for not addressing the problem of shell companies.
“There is a difference between taking the time needed to be responsible, and letting this stall out,” said Wyden. “The pace they are going at is going to make this the longest running battle since the Trojan War.”