The Panama Papers: a story resembling a cross between an episode of House of Cards and a John Grisham novel, writes John van der Luit-Drummond
Welcome to Panama: famous for its beautiful beaches, a lush rainforest, the Panama Canal (obviously), and one of the most secretive companies on the planet. Well, formerly secretive, anyway.
The leak of over 11 million confidential files from the databases of Mossack Fonseca, the world's fourth largest offshore law firm, has given us an unprecedented glimpse into the secret world of the rich and powerful and how they use offshore tax havens to hide their true wealth.
Twelve national leaders have been found to have links to offshore dealings. While using offshore companies is not, in and of itself, illegal, the list of those accused of money laundering, sanction dodging, and tax evasion is telling. From Syrian despot Bashar al-Assad, to former Egyptian president Hosni Mubarak, and even Russian president Vladimir Putin - via the circuitous route of world-famous cellist Sergei Roldugin - the Panama Papers are a gold mine of information.
Every day, the largest financial data leak in history brings fresh revelations, fallout, and casualties. Iceland's prime minister Sigmundur Gunnlaugsson was the first big head to roll, but even our own David Cameron has been faced with public backlash after he revealed he had owned shares in an offshore fund set up by his late father.
Having advised a number of clients on placing funds offshore, a host of big name law firms, including Simmons & Simmons, Holman Fenwick Willan, and Child & Child, have found themselves under press scrutiny. The interplay between the political and legal makes this fast-developing story resemble a cross between an episode of House of Cards and a John Grisham novel.
Denying accusations of a sleight of hand by offering fake beneficial ownership services to the wealthy, Mossack Fonseca said it had operated 'beyond reproach' for over 40 years and had never been accused or charged with criminal wrongdoing. Nevertheless, the future looks far from rosy.
Protecting client data is a fundamental part of being a lawyer. With that in mind, can the Panama-based firm recover from a leak of this magnitude? Whether it was an inside job, or the work of a hacker, it is leaks such as this that have been feared by the legal community for some time. But it is not the only a security breach that hit headlines this week.
Reports from the US suggest a Russian cybercriminal recently penetrated the defences of 48 top firms including Hogan Lovells, Allen & Overy, and Freshfields, obtaining insider information on mergers and acquisitions. The implications of such breaches are mind boggling when you consider that any legal business represents a treasure trove of personal and financial data that can be used for illicit means.
Yet despite the obvious dangers posed by cybercriminals and disgruntled staff, it seems some firms are still failing to take data security seriously. Reacting to the Panama Papers earlier this week, Philip Lieberman, the president of US-based security company Lieberman Software, warned: 'It is inevitable that there will be a law firm breach that will result in the bankruptcy of one or more law firms for gross incompetence, negligence, and malpractice as a result of a cyber-attack.'
Amid the political fallout and questions over the ethics of tax havens, Mossack Fonseca and the US breaches are a wakeup call for firms everywhere to get their houses in order.