Panama Papers Heat up Iceland
Thursday, April 7th, 2016April 7, 2016
Yesterday, April 6, Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson resigned from office. Gunnlaugsson had enjoyed fair popularity since taking office in 2013, but his downfall came quickly and loudly. On April 3, Gunnlaugsson and his wife were among the international figures named in the controversial Panama Papers. The papers consist of millions of confidential documents detailing secret offshore bank accounts used by wealthy world leaders, celebrities, and others for various purposes, including money laundering and to avoid paying taxes in their home countries. The papers—leaked from the Panama-based international law firm Mossack Fonseca—raised widespread questions of corruption or at least of unseemly legal deception.
The Panama Papers revealed transactions between the Gunnlaugssons, offshore companies, and the Icelandic banks that were at the heart of that nation’s financial collapse in 2008. While the nation plunged into economic chaos, the Gunnlaugssons profited handsomely—and secretively. Gunnlaugsson denied any legal wrongdoing, but the people of Iceland, who paid a hefty price for their nation’s financial recovery, were not interested in the legality of his actions. Large protests and demonstrations erupted immediately, calling loudly for Gunnlaugsson’s resignation. After failing to rally support, Gunnlaugsson reluctantly stepped down.
Gunnlaugsson was the first casualty of the Panama Papers, but he won’t be the last. Other world notables attached to the documents include top leaders (or their friends and relatives) from Argentina, Brazil, China, Chile, India, Malaysia, Mexico, Pakistan, Peru, Qatar, Romania, Russia, Saudi Arabia, South Africa, Spain, Syria, Ukraine, the United Arab Emirates, and the United Kingdom. Others named in the papers include world soccer’s already-troubled governing body, FIFA, as well as many of the sport’s star players. Many others have been named too, and the investigation is just gaining traction. Stay tuned.
Offshore companies often provide financial and legal advantages for investors. Among the benefits are privacy, little or no taxation, and no deposit regulation—meaning no alarms are raised if you suddenly deposit, say $1 million. If you deposited $1 million in your corner bank, the Internal Revenue Service would soon be in contact with a list of questions beginning with where did you get it?