Let’s say a group of criminal defense lawyers kept a database of their confidential conversations with their clients. That would include clients charged with murder, robbery, DUI, drug abuse, and so on. In turn, a hacker would break into that database and post the information from those conversations on Wikileaks. Of course a lot of those conversations would appear to be incriminating because — let’s face it — most of the people who require defense attorneys on criminal charges are in fact guilty. When asked why the hack was committed, the hacker would say “Most of those people are guilty. I want to make sure they do not escape punishment.”
How many of us would approve of that behavior? Keep in mind the hacker is spreading the information not only to prosecutors but to the entire world, and outside of any process sanctioned by the rule of law. The hacker is not backed by the serving of any criminal charges or judge-served warrants.
Yet somehow many of us approve when the victims are wealthy and higher status, as is the case with the Panama Papers. Furthermore most of those individuals probably did nothing illegal, but rather they were trying to minimize their tax burden through (mostly) legal shell corporations. Admittedly, very often the underlying tax laws should be changed, just as we should repeal the deduction for mortgage interest too. But in the meantime we are not justified in stealing information about those people, even if some of them are evil and powerful, as is indeed the case for homeowners too.
Once again, politics isn’t about policy, it is about which groups should rise and fall in relative status. And many people believe the wealthy should fall in status, and so they will entertain the morality of all crimes and threats against them. These revelations will of course lead to some subsequent cases of blackmail, against Chinese officials for one group.
I had tweeted “Are your views on privacy and #PanamaPapers consistent? Just asking…” and my goodness what a response, positive and negative. Most interesting of all, many people had never pondered the question before. Somehow “good things” such as “privacy” and “transparency” cannot stand in such conflict because all good things, like all bad things, must come together.
Here is a good Kaddim Shubber discussion on FT Alphaville.
Here is Veronique de Rugy on the Panama Papers.
Here is Ray Lopez on the same:
1. There’s a tension between US and foreign law firms and FATCA (United States Foreign Account Tax Compliance Act (FATCA) has the objective of reducing tax evasion by American taxpayers with foreign accounts). This is because law firms are exempt from reporting on clients past crimes, not future crimes, however, money laundering is considered a future crime. When a known criminal is setting up an offshore account with the help of a law firm, is the law firm an accessory to money laundering or not? The better view is they are not: it’s up to the client to report any offshore account to the government, and not the law firm’s responsibility. That’s the better view, but see point #2, which rebuts this.
2. There’s a tension between client confidentiality and tax treaties. Check this out: https://www.lawsociety.org.nz/practice-resources/practice-briefings/FATCA-and-New-Zealand-Law-Firms.pdf In New Zealand, which is probably representative of others, a passive non-financial foreign entity–which almost always will be a law firm trust account holding money from a client–has a duty under FATCA to report on the client to the US government (“know your customer” is the buzz phrase banks use, which as you know already are required to ‘spy’ on their customers).
Both points 1, 2 are relevant for the conduct of the law firm of Mossack Fonseca. Except for the alleged destruction of evidence by them, I don’t see them doing anything that bad (by law firm standards; remember, any law firm of decent size has former crooks as clients, and for a firm in Panama I would say that’s not the exception but the rule!)
From the comments
, here is Kai:
I practice law in cross-border banking and finance in China. I am puzzled by how non-professionals in this field view offshore jurisdictions as categorically related to criminal activity, embezzlement and corruption, etc.
Almost all cross-border transactions involve offshore jurisdictions at some level. For instance most companies listed on the HK stock exchange are incorporated in the Cayman Islands. Anything to do with Bermuda, Cayman, BVI, etc. in cross border transactions is very, very mundane.
According to the papers, Xi Jinping has relatives who are owners of offshore companies. How is that any sort of evidence of wrongdoing by them (much less of Xi Jinping)? I doubt anyone can provide an intelligent answer.
Maybe yes, maybe no, but I don’t see that the people rendering judgment know more about it than he does.