International Law

Prosecutors launch probes after massive leak of Panama law firm's documents

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Following news of a massive leak of documents from a Panama-based law firm that has incorporated some 240,000 offshore shell companies, prosecutors around the world on Monday announced related probes.

That included the Department of Justice, which said it is reviewing the documents to see if there is any violation of U.S. law, and the country of Panama, which has launched an investigation of the law firm Mossack Fonseca & Co., reports the Wall Street Journal (sub. req.).

Law firm chief Ramón Fonseca defended the firm’s conduct. He told a Panamanian television station that what the firm has done since it formed in 1977 (some of the 11.5 million documents released reportedly date back that far) was standard and appropriate legal work, the newspaper recounts.

While among such a large volume of transactions there will inevitably be a few companies that get into trouble, most of the firm’s clients are banks, accountants and other law firms, Fonseca said. These intermediaries then subsequently provide the shell companies to third parties.

“We do the legal part,” he told TVN Noticias on Sunday. “All the names that show up [in Mossack records], even soccer players, even Mafiosi, are not our customers, they are customers of the intermediary. We’ve done nothing wrong.”

Indeed, the uproar over the so-called Panama Papers trove leaked by an anonymous source to a German newspaper has centered on the offshore wealth revealed to be held by world leaders, politicians, celebrities and other prominent figures, reports Reuters. In the wake of the revelations, the Icelandic prime minister has resigned, the New York Times (reg. req.) reports.

While it is generally legal to hold assets in offshore accounts, observers are questioning whether seemingly secret assets held in offshore tax havens could point to money laundering, tax evasion or other unlawful conduct, Reuters says.

Mossack Fonseca does not handle funds that go into shell corporations but simply earns professional fees for setting up the companies for legitimate clients, a Monday statement on the law firm’s website (PDF) says.

“We routinely resign from client engagements when ongoing due diligence and updates to sanctions lists reveal that a beneficial owner of a company for which we provide services is compromised,” the firm writes, complaining that a number of media reports have “misrepresented the nature of our work.”

The data leak, reportedly the largest ever to occur, has also put a spotlight on law firm security practices, reports the Am Law Daily (sub. req.).

Firms should expect additional scrutiny from clients concerned about possible cybersecurity breaches, president Philip Lieberman of Lieberman Software told the legal publication.

“There are some law firms with excellent automated and adaptive cyber defense capabilities, but many are stuck in the dark ages of wigs, candles to read by, and quill pens to write with,” he said.

Related coverage: “Massive leak of law firm documents reveals offshore wealth of politicians and celebrities”

Los Angeles Times (sub. req.): “Five key figures implicated in the ‘Panama Papers’ scandal “

Miami Herald (sub. req.): “Brazil’s former top judge hid price he paid for Miami condo”

See also: “Cybercriminals target 50 BigLaw firms for phishing attacks seeking corporate deal info”

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