NOTE: This guest post was written by Angelo Piro, one of the School of Diplomacy’s UN Youth Representatives. Angelo is a student majoring in Diplomacy and International Relations and Economics at Seton Hall University. Angelo’s focus has been on the role of international organizations in development and good governance. He is fluent in English and Spanish, and has a working knowledge of Russian. Angelo has studied at Dubrovnik International University in Dubrovnik, Croatia, and has interned with the Permanent Mission of Honduras to the United Nations and the Office of US Senator Kirsten Gillibrand (D-NY). He writes for the Diplomatic Envoy, and is a member of the Seton Hall United Nations Association.
One month ago, most people around the world would not have heard about the law firm Mossack Fonesca. Yet, now with over eleven million documents released by the International Consortium of Investigative Journalists, this firm may be one of the most infamous names in finance since Bernie Madoff or Fannie Mae. On April 3, the ICIJ released a massive amount of documents from Mossack Fonesca’s office that show that they were complicit in creating thousands of shell companies and dummy accounts that allowed individuals, companies, and groups to evade taxes, skirt sanctions and hide their money. While this practice is nothing new, the scale of these activities and the people to which they are tied are surprising. Heads of state, like Petro Poroshenko of Ukraine and Vladimir Putin of Russia, have been implicated, as well as companies from over 21 other jurisdictions. Even people like Jackie Chan and Lionel Messi have been listed as clients.
While the scandal that surrounds this document dump grows, governments and advocates need to note that the information contained in these documents poses a serious threat to the implementation of the Sustainable Development Goals. The issues brought to light by the ICIJ need to be addressed in order to make the SDGs work around the globe in both developed and developing countries alike.
One of the main underpinnings of the Sustainable Development Goals has been the outcome document of the Third Conference for Financing for Development, more commonly referred to as FFD. One of the main points of FFD is to build self-sustaining financing and tax structures that allow all countries, developed and developing, to allow for the implementation of sustainable development. This included the creation of the Committee of Experts on International Cooperation in Tax Matters, among other structures. This framework has had to grapple with the idea of tax havens and evasion as a massive problem. Now, they have a clear view of how just one firm has completely undercut their attempts to make a responsible tax structure.
The papers also reveal challenges to the implementation of the Goals themselves. Goal 16 addresses Peace and Justice, and stresses the targeting of those committing violence and crime, as well as making institutions accountable and transparent. Yet, with the information revealed in the ICIJ’s documents, the world clearly has a ways to go to tackle this. For one, the information reveals the failings of the current sanctions regimes in place against many individuals and governments around the world. Sanctions have been meant to punish aggression and force people to abandon violence, as well as arms trade and smuggling. But, among the clients of Mossack Fonesca are multiple middlemen of the Syrian regime and North Korea, as well as John Brendenkamp, an African businessman who is thought to provide violent groups in countries like Zimbabwe and the Democratic Republic of the Congo with supplies and equipment.
The leak also reveals the failings of creating effectively accountable institutions under Goal 16. Revealed in the documents are the names of many high profile politicians. This includes many British lawmakers and high profile officials from China’s Communist Party. One of the most well-known examples, mentioned above, is Petro Poroshenko, who, after his election, told the public he would sell his interests in his various business, but seemed to merely transfer control to a number of shell companies created by Mossack Ponesca. The most shocking example of the lack of accountable institutions revealed in the documents seems to be the case of Iceland’s Prime Minister, Sigmundur David Gunnlaugsson. Gunnlaugsson was elected after the wave of public anger that followed the collapse of many banks in Iceland. What was not revealed was that the Prime Minister held large scale investments in bonds of Icelandic banks. This piece of information would have likely colored the public trust given to Gunnlaugsson, as can be seen with ongoing protests against his government. He resigned in the wake of massive protests following the Panama Papers revelations.
As these documents are slowly digested and examined, the problems presented by the Panama Papers need to be addressed. As the world attempts to build on the Sustainable Development Goals and achieve them, the challenge of tax evasion needs to be addressed, or an estimated eight percent of the world economy will be left out of the potential sources for their achievement. The Panama Papers will likely galvanize public outrage and action, but this needs to be turned into effective structures and not merely righteous retribution