Panama City's skylineArnulfo Franco / AP

News reports based on an unprecedented leak of classified documents have, in very little time, dramatically exposed a secret world of the global elite, where large sums of money are quietly, anonymously, and apparently legally hidden and shuffled around with barely any governmental oversight.

The 11.5 million documents, dubbed the Panama Papers, come from Mossack Fonseca, a Panama-based law firm that handles offshore shell companies. The news organizations with access to the documents, which are not public, have reported only a small portion of their contents, and promise more in the coming days. The actions described in the reports are not necessarily illegal, but they do raise questions about the kinds of legal tax-avoidance services available to the world’s wealthy—and draw attention to Panama and other countries that allow such practices to flourish.

Panama is known as a tax haven, the name given to countries where foreign individuals and companies are taxed at very low, or even nonexistent, rates. In tax havens, international businesses operate outside of their owners’ jurisdictions—offshore—and so enjoy the financial benefits of the country where they are operated. In Panama, that means less regulation and more privacy. Panama doesn’t ask offshore companies to pay income tax on international transactions, sales tax, and other fees—only an annual franchise tax of $300 to the government, according to InSight Crime, which studies organized crime in Latin America and the Caribbean.

Offshore companies can operate anonymously. Their owners’ names and personal information are not filed with any public government registry, and remain secret. Many companies are managed by law firms, like Mossack Fonseca. They’re not required to keep records of any transactions. If the records exist, companies are not required to disclose them to foreign governments and tax agencies.

“When it comes to money laundering, we offer full service: rinse, wash, and dry,” Miguel Antonio Bernal, a Panamanian lawyer and political analyst, told Ken Silverstein, in Silverstein’s 2014 investigative story on Mossack Fonseca for Vice. “You can go to any law firm in the city, from the smallest to the biggest, and open up a shell company with no questions asked.”

Panama also promises privacy to holders of offshore bank accounts: It’s a crime for Panamanian banks to disclose any information about those clients unless they’re ordered to do so by a court, usually in cases that involve serious offenses, like terrorism or drug trafficking. In any other case, if banks talk, they can be fined up to $100,000.

Panama is one of the oldest tax havens in the Americas. In 1919, Panama, then just a 16-year-old nation, began registering foreign ships under its flag to help Standard Oil dodge American taxes and regulations, according to a report by Armando José Garcia Pires, a researcher at Norway’s Institute for Research in Economics and Business Administration. U.S. ships sailing under Panama’s flag could serve alcohol to their passengers during Prohibition. (These days, foreign ship operators can register online and pay no income taxes.) In 1927, Wall Street bankers helped Panama introduce lax incorporation laws, which allowed foreign individuals to open tax-free companies with few questions asked, explains Pires. The boom in offshore business came in the 1970s, when the country passed strict confidentiality laws. Insight Crime’s Arron Daugherty writes Panama quickly became known as a haven for criminal activity under its military dictator Manuel Noriega, who worked with Colombia’s Medellín cartel in the 1980s.

Today, Panama has more than 350,000 international business companies registered, the third-largest number in the world after Hong Kong and the British Virgin Islands, according to the Financial Secrecy Index, which ranks jurisdictions based on their offshore financial activities. In recent years, Panama has made legal and regulatory changes to address money-laundering concerns. In February, the intergovernmental Financial Action Task Force removed Panama from its so-called “grey list,” a roster of jurisdictions the intergovernmental agency considers to have inadequate anti-money laundering provisions. The agency said Panama had made “significant progress” in combating laundering, but law experts say the practice remains widespread. After the Panama Papers reports, and the promise of more revelations, the public may learn just how widespread.

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