The now-infamous “Panama Papers” law firm Mossack Fonseca was raided by Panama itself. According to Reuters, the raid went down on Tuesday, with the national police force stating that it sought documentation that “would establish the possible use of the firm for illicit activities.”
The BBC reports the raid in Panama, involving both police forces and a specialized organized-crime unit, was carried out “without incident or interference.”
A spokesman for the firm told the Financial Times that the raid began around 3:00 PM local time, and was still in progress eight hours later.
“We have a long history of working proactively with relevant authorities in various jurisdictions when questions are raised and additional information is required, and in many cases we’re the ones who actually initiate that contact when suspicious activities are detected,” said Mossack Fonseca in a statement. “In this case, we’re the ones against whom a crime has been committed. Our systems having been unlawfully breached by parties external to the firm.”
Prior raids on Mossack Fonseca offices and executives have been staged by the governments of El Salvador and Peru.
The question of “illicit activities” lies at the heart of the Mossack Fonseca scandal, because as the firm and its clients energetically argue, the only illegal activity involved in the story was the theft of Mossack Fonseca’s data by the still-anonymous source of the Panama Papers. There will soon be considerable courtroom drama over the possibility that the journalistic consortium pushing the story broke any local or international laws by reprinting the pilfered data.
It certainly does not look good to have powerful politicians socking away millions of dollars in the shell companies Mossack Fonseca set up, but there has yet to be a specific allegation that anything illegal occurred. This is why the considerably more subjective term “illicit” is used by so many commentators, and law enforcement agencies.
The Atlantic mentions a few instances of legal trouble in Mossack Fonseca’s history, predating the Panama Papers revelations.
“In January, Brazilian authorities accused five Mossack Fonseca employees of money laundering and corruption and charged two of them,” The Atlantic writes. “The Panama office denied any involvement, saying the Brazil office (which is also not listed on its main website) was an ‘independent entity’ that ‘operates with its own administration, resources, and staff that are independent of our group.'”
Other instances include fines for violating money-laundering protections by the British Virgin Islands in 2012 and 2013, and raids conducted by German authorities in Frankfurt in 2015, although those do not seem to have resulted in any charges against the law firm.
The UK Guardian reports that “tax investigators from 28 countries will meet in Paris on Wednesday to launch an unprecedented international inquiry” into the Panama Papers on Wednesday.
“Senior officials from tax authorities around the world have said they intend to work together to analyse information revealed by the documents,” according to the Guardian.
The U.N.’s independent expert on foreign debt and human rights, Juan Pablo Bohoslavsky, is quoted by the Guardian declaring, “Tax evasion destroys trust in public institutions and the rule of law, and shrinks the fiscal space for investing in public healthcare, education, social security and other goods and services. Public funds that are essential to guarantee economic, social and cultural rights to all are robbed from the people.”
Tax evasion is a crime: the deliberate violation of tax laws. Tax avoidance, on the other hand, is legal action designed to minimize the tax exposure of an individual or corporate entity. The two concepts are likely to be conflated ever more frequently as the Panama Papers story unfolds, especially if government agencies around the world have difficulty finding something illegal to hang investigations and penalties on.
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