A criminal trial of 27 employees working for the law firm at the heart of the Panama Papers on money laundering charges has commenced in a Panamanian court.
Eight years ago, leaked financial records from the law firm Mossack Fonseca sparked international outrage at the use of offshore companies by wealthy individuals to commit tax fraud and hide assets.
In 2016, files from Mossack Fonseca were leaked to reporters at the German newspaper Süddeutsche Zeitung and shared with the US-based International Consortium of Investigative Journalists. Reporters from more than 100 media organisations, including the Guardian, collaborated to investigate the 11.5m files.
The firm’s founders, Jürgen Mossack and Ramón Fonseca Mora, are among those facing charges. They have previously denied any allegations against them, arguing that they had no control over the offshore companies that the firm set up for its clients. If convicted, they reportedly face up to 12 years in prison.
According to the Associated Press, Mossack attended the hearing to declare his innocence, telling reporters outside the courtroom that he was “very optimistic”. A representative for Fonseca told the court that his client was in hospital.
Battered by international criticism, Panama adopted new legislation modernising the country’s legal definition of money laundering in 2019. Aspects of the charges against the Mossack Fonseca employees concern activities predating the change in the law, which could complicate prosecutors’ attempts to convict them, according to the International Consortium of Investigative Journalists.
Panama’s supreme court previously ruled that creating shell companies used for tax fraud could not be considered a crime if the companies in question were created prior to 2019.
Mossack and Fonseca were both acquitted of separate charges two years ago after a judge directed that the firm did not handle or attempt to hide money stolen from Brazil as part of a major corruption scandal involving the state oil company codenamed Lava Jato or the Car Wash.
Offshore companies linked more than 100 politicians from around the world, including 12 national leaders, were discovered by journalists analysing the Panama Papers. They included $2bn in an offshore company belonging to the Russian cellist Sergei Roldugin, the friend of the President Vladimir Putin.
Nawaz Sharif, then prime minister of Pakistan, and Sigmundur Davíð Gunnlaugsson, prime minister of Iceland, were both forced from office amid public fury at hidden offshore wealth connected to their families.
Sharif was disqualified from office and sentenced to 10 years’ imprisonment by the Pakistani supreme court after reporters discovered undeclared real estate secretly owned by his family through offshore companies. Gunnlaugsson was forced to resign after it was revealed that he had never declared his family’s ownership of an offshore company with a $1m claim against one of Iceland’s failed banks.
After publication of the Panama Papers investigation, countries around the world initiated proceedings to recover unpaid taxes that had been hidden using offshore companies. By 2021 more than $1.36bn in fines and penalties for unpaid taxes were said to have been recovered by exchequers around the world, including $253m recovered by HMRC in the UK.
