In April, while many people were celebrating the arrival of spring, the International Consortium of Investigative Journalists disclosed the existence of 11.5 million private documents it had obtained from Panamanian law firm Mossack Fonseca. In disclosing the Panama Papers, the consortium exposed to the public the secret world of financial dealings that the wealthy, the powerful, and the criminal underworld use to hide money from, and evade taxes owed to, governments worldwide.
The public was justifiably outraged. The leak caused ordinary people around the world to protest a system that enabled and supported such financial secrecy. Those protests brought down at least one government, led to the resignation of other officials, and created a massive backlash against the secret financial dealings of politicians, business people, crime syndicates, and power brokers. The law firm at the center of the controversy, Mossack Fonseca, took a big hit, losing business and opening itself up to criminal and other investigations in a number of countries.
Most governments reacted swiftly and decisively to address growing public anger at the disclosures. Some placed Panama on a blacklist of financially opaque countries, subjecting it to additional scrutiny and removing some benefits. Others proposed to establish registries of beneficial owners for LLCs and partnerships, hoping to shed light on the secret dealings.
Seeing its role as one of the Western Hemisphere’s financial hubs jeopardized, Panama took several steps designed to assure a skeptical public that it could identify any potential abuses and address them accordingly. First, it agreed to adopt the OECD’s common reporting standard, a commitment it had made last year and then reneged on. Then it signed the multilateral convention on exchange of tax information, ensuring that tax administrations in other countries would have access to Panamanian tax records to administer their tax laws.
In perhaps the country’s most trumpeted confidence-building measure, Panamanian President Juan Carlos Varela announced the creation of a seven-member independent commission to review the country’s financial and legal practices and issue a report of its findings. Claiming that Panama was committed to “transparency and international co-operation,” Varela appointed Nobel-Prize-winning economist Joseph Stiglitz and Swiss secrecy expert Mark Pieth to the commission.
At the commission’s first meeting in early June, Stiglitz, Pieth, and their five colleagues asked the Panamanian government to make just one commitment: make the independent commission’s final report public. Panama recently said no. Decrying Panama’s failure to commit to transparency, Stieglitz and Pieth resigned in response. Who can blame them?
Spring has since turned to summer. And as they usually do, many in the Northern Hemisphere have gone on holiday. Unfortunately, Panama’s claim to support greater financial transparency seems to have taken a holiday as well. It is long past time for Panama to acknowledge that transparency is always in season, and clean up its act.