Massive trove of Panama Papers just ‘a small slice’ of offshore banking world

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• GWEN IFILL:

  The project is called the Panama Papers. It represents the work of hundreds of journalists in dozens of countries, coordinated by the International Consortium for Investigative Journalism, or ICIJ.

  The project exposes the dealings of a Panamanian law firm called Mossack Fonseca, and its work in allegedly creating shell companies for the global rich and powerful to hide and launder money and to evade taxes. More than 11 million law firm documents were initially provided to a German newspaper by an anonymous source.

  Among the world leaders allegedly involved in these schemes, the presidents of Argentina and Ukraine, the king of Saudi Arabia, and the prime minister of Iceland.

  The papers also detail the elaborate financial dealings of the friends and relatives of both Russian President Vladimir Putin and Syrian President Bashar al-Assad.

  The real-world effect of these deals is shown, in part, in this video released by ICIJ and the Pulitzer Center on Crisis Reporting, a frequent "NewsHour" partner.

• NARRATOR:

  Over the past three years, Syria's air forces rained death on more than 21,000 civilians, their bodies ripped apart by exploding barrel bombs, missiles dropped on homes, businesses, bus stops, even hospitals.

  These war crimes have been well-documented. Not so the part played by the shadowy world of offshore finance. Behind the scenes, companies using offshore tax havens were accused of supplying fuel to the Syrian air force. In 2014, multiple governments, including the U.K. and U.S., issued bans on doing business with these companies.

  But now a new global investigation has revealed that a Panamanian firm helped these companies operate as attacks in Syria continued. That firm, Mossack Fonseca, is a key player in a sprawling, secretive industry that the world's rich and powerful used to hide assets and skirt rules but setting up front companies in far-flung jurisdictions.

  More than 300 journalists trolled through millions of leaked records from Mossack Fonseca to expose an alarming list of clients involved in bribery, arms deals, tax evasion, financial fraud and drug trafficking.

  Behind the invoices, e-mails and paper trails are real victims. In Uganda, a company that wanted to sell a prospective oil field paid Mossack Fonseca to help it avoid $400 million in taxes. It was sent the paperwork. The company's address was changed from one tax haven to another. In a country where one in three people live on less than $1.25 a day, $400 million represents more than the government's annual health budget.

  Uganda spent years in court trying to force the company to pay its taxes. Meanwhile, hospitals in the shadow of the oil field lacked funds for even the most basic equipment. Patients slept on floors and were asked to bring their own medical supplies like sterile gloves and cotton balls.

• WOMAN (through interpreter):

  It was a surprise to me, because I expected all of this equipment to be at the health center. No, these things are not there. Nurses say, we cannot work on you. At times, we are forced to leave and return home unattended to.

  Some women have lost their legs and babies.

• NARRATOR:

  Uganda ranks among the worst 10 countries in the world for high maternal, newborn and child mortality rates due to a lack of access to good health care.

• GWEN IFILL:

  In a statement to the International Consortium of Investigative Journalists, Mossack Fonseca said it never knowingly allowed the use of its companies by individuals with a relationship to Syria. The law firm said it was quick to report suspicious activity, always cooperated with authorities, and that it doesn't — quote — "offer solutions whose purpose is to hide unlawful acts such as tax evasion."

  For more on all of this, we turn to Gerard Ryle, the director of the ICIJ, and Shruti Shah. She's vice president of Transparency International-USA, a watchdog group that seeks to expose corruption globally.

  So, Gerard Ryle, tell us, explain to us what these folks are doing in these dealings, and what is illegal about it?

  GERARD RYLE, The International Consortium of Investigative Journalists: Well, a lot of what happens in the offshore world is actually legal, but where you have secrecy, which is exactly what the offshore world abides, then you have the potential for wrongdoing.

  And certainly, in the documents that we have seen, there was wrongdoing. I mean, it's almost ridiculous to think that Mossack Fonseca, this company, didn't actually know who their clients were. And some of these clients appear on sanctions lists, for instance, or they are drug dealers or mafia bosses.

• GWEN IFILL:

  So, when they put out a statement that says this wasn't our intent to facilitate anything illegal?

• GERARD RYLE:

  I think it is the whole system here that is wrong.

  I think what you're seeing here is, they are claiming their major — their clients were actually the banks and the accountancy firms that were basically going to them for their end client. It's almost unbelievable to think that they actually didn't know who these people really were.

• GWEN IFILL:

  Shruti Shah, they often say it is what is legal that is the crime.

• SHRUTI SHAH, Transparency International-USA:

  You're absolutely right there as well.

  And what Gerard just said was that it is absolutely legal in many parts of the world to form a company without disclosing who the true beneficial owner is, including right here in the United States.

  In every state in the U.S., you can form a company without having to disclose who the person is that really controls the company or derives economic benefit from it. And also here, you know, people, gatekeepers such as real estate agents and others, don't have to do any due diligence on buyers' identities or the sources of their funds.

  So, what he has pointed out is really the crux of the problem. The structure needs reform.

• GWEN IFILL:

  Even though, in this case, in these sets of documents, we haven't seen — or at least I haven't read about a lot of U.S. names and U.S. connections.

• GERARD RYLE:

  Well, it is the first time, though, we are actually seeing U.S. jurisdictions coming out in a big leak.

  We are seeing a lot of documents from Nevada, for instance, and also from Wyoming, which we have never seen before. But, I mean, people think of the offshore world as being some Caribbean island somewhere. It's not. It is actually spread around the world. It is in First World places, as well as Third World places.

• GWEN IFILL:

  Where are the most popular places to hide money?

• GERARD RYLE:

  Well, the most popular place to hide money is here in the U.S., in fact, and in Britain.

  A lot of the money flow that we see from Russia, from China, from Africa is actually coming in to the banks here in the U.S. and to Britain. And that's why we're seeing so many banks in the data. They are actually the users of this world.

• GWEN IFILL:

  Are you saying that it is perfectly fine for people to do that, as long as the laws do not account for anything shady?

• SHRUTI SHAH:

  What I am saying is that it shouldn't be so easy for money launderers, drug traffickers and other criminals from around the world including corrupt public officials, to be able to access the global financial system with such ease using anonymous companies and hide their true identities.

  This veil has to be lifted. We really need to know who the true owners are behind these companies. And we need to end the secrecy, particularly, as Gerard pointed out, Delaware is home to thousands of shell companies. Nevada, which he pointed out.

  Now, Mossack Fonseca has a presence in Nevada, and it's not by accident. Again, it's one of those states that is known for its business-friendly corporation laws.

• GWEN IFILL:

  Has there been fallout from the publication of this information so far?

• GERARD RYLE:

  Well, before we even published, Vladimir Putin's spokesman came out last Monday and attacked us because we had sent a list of questions asking why associates very close to him, what we were seeing in the documents is almost $2 billion had flowed through offshore companies involving people very close to Vladimir Putin, including the godfather of his child.

  And one of the offshore companies we saw was the owner of a ski resort in Russia where Vladimir Putin's daughter got married.

• GWEN IFILL:

  I saw that Nawaz Sharif, the prime minister of Pakistan, his children all have these kinds of companies.

• GERARD RYLE:

  Yes.

  Well, we saw the biggest ever protest in Iceland today. In fact, the entire parliament house there was surrounded by people protesting about the fact that we revealed that the prime minister of Iceland had a secret offshore account that had millions of dollars in bank bonds.

  And if you recall, in Iceland, there was a crisis a few years ago where all the banks melted down. And he was actually elected to sort that problem out, without telling the people that he had a secret company that had bonds in the same banks.

• GWEN IFILL:

  If you are an ordinary person who has a savings account, a checking account, maybe still a passbook, how does this affect you?

• SHRUTI SHAH:

  Let me explain how it affects you, both in the international stage and right here in the U.S.

  In the international scene, when you see corrupt people stealing money from their own people, it leads to loss of trust in government. It creates instability, leads to conflict, and really poses a national security problem for the U.S.

  In terms of right here domestic — in the domestic context, you see the real estate boom in places like Manhattan and also Miami being fueled by these anonymous real estate purchases, which means that ordinary citizens like doctors, nurses, schoolteachers can't buy houses in these places because they are so unaffordable.

  That is how, I think, it really affects us in the U.S.

• GWEN IFILL:

  Gerard Ryle, we're talking about more than 11 million documents from one single law firm.

• GERARD RYLE:

  Yes.

• GWEN IFILL:

  Is this the tip of an iceberg?

• GERARD RYLE:

  It has to be, because we know that even though Mossack Fonseca is one of the biggest incorporators of offshore companies around the world, there are about 800 others ones around there.

  So we are only really seeing a small slice of this world. And what is stunning is that there are so many politicians that we — what we saw. There are 12 current and former world leaders. There are about 140 politicians in all, and then hundreds more of their associates.

• GWEN IFILL:

  So, Shruti Shah, how do you get to the bottom of this?

• SHRUTI SHAH:

  Well, you need to call for reform.

  And this is where they have done us a whole lot of good in calling attention to this issue of anonymous companies. There have been several past investigations which have talked about the role that anonymous companies play in aiding criminals.

  I really do hope that this actually leads to actual structural reform, i.e., in the U.S., we start collecting information on beneficial ownership of shell companies. We do ask our gatekeepers, such as people in the real estate industry, to do due diligence.

  And, also, responsibility lies with the banks. Banks should be required to determine and verify who the beneficial owner is of their covered clients. I think that all of these three things, if we can manage to do them in the U.S., it would make the U.S. financial system less vulnerable to dirty money.

• GWEN IFILL:

  This seems so much easier said than done. What you just laid out sounds like a very high mountain to change.

• SHRUTI SHAH:

  I would disagree. Two of these things can be done without legislation.

  With regard to my last point about, you know, requiring financial institutions to determine and verify the beneficial owner of the (INAUDIBLE) actually proposed a rule in 2014. It still needs to be finalized — 18 months after the rule was introduced, it has not yet been finalized. Maybe this will give them the push to do it.

• GWEN IFILL:

  Maybe so.

  Shruti Shah, vice president of Transparency International, and Gerard Ryle, the director of the ICIJ, thank you both very much.

• SHRUTI SHAH:

  Thank you.

• GERARD RYLE:

  Thank you.

• SHRUTI SHAH:

  Thank you so much.