What Do the Panama Papers Have to Do with Forex Trading?

The so-called Panama Papers are a leak of 11.5 million documents from the Panama law firm of Mossack Fonseca. This folks have spent the last forty years setting up offshore accounts for the world’s rich and famous and occasionally such as Hezbollah, Iran and the mafia. Now that everyone’s secrets about where their money is stashed are out in the open some are running for cover and others are in full denial. What do the Panama Papers have to do with Forex trading? When the wealthy elite in China or those surrounding Russian president Putin stash funds offshore they convert their wealth to dollars, euros or yen first. Bloomberg Business writes about the uncomfortable spotlight on wealth of the global elite.

No sooner did a group of media outlets report Sunday that some of the world’s wealthiest people, including politicians and business figures, had channeled billions through offshore accounts than the inevitable blowback began.

Public officials responded with outrage, bluster, denials, semi-denials or all of the above. Banks like HSBC Plc and UBS Group AG stressed that they follow the rules and carefully vet customers. And regulators said what regulators often do: We’ll look into it.

One of the sources quoted says the following.

“This leak is proof that despite explicit banking laws against tax evasion, criminal uses and money laundering, the global offshore shell game business remains open for the wealthy and well connected.”

Large banks are in the spotlight in this case as they are the ones who typically transfer the funds that end up in the British Virgin Islands, Panama, the Bahamas, Seychelles and other offshore locations. Whether Mossack Fonseca did wrong or not the appearance is such that the moneyed 1% is taking advantage of a system that the rest of us do not have access to. This commonly results in laws that make such businesses more difficult. How the Panama Papers will effect Forex trading is probably in more regulation, especially in the movement of large sums of money from bank to bank and currency to currency.

How Bad Was It?

Clients of Mossack Fonseca over the years include close associates of Vladimir Putin, and the thieves who made off with three tons of gold in the British Brinks-Mat robbery in 1983. NBC News explores the tangled web of Panama Papers.

In November 1983, a team of masked robbers committed one of the most brazen and lucrative heists in modern history, stealing three tons of gold – worth about over $100 million today – two boxes of diamonds and stacks of cash from a Brink’s-Mat warehouse near London’s Heathrow Airport. The bandits were caught, but most of the loot was never recovered. The proceeds were allegedly laundered to cover conspirators’ tracks.

That’s where the Panama Papers come in. The leaked documents show that the law firm Mossack Fonseca and one of its founders, Jurgen Mossack, helped protect a shell company belonging to one of the men who handled the Brink’s-Mat haul, ICIJ member BBC reported.

Mossack even wrote a memo noting that the money probably came from the robbery but the firm did not sever ties with the robbers until they were sent to prison. This example alone will probably fuel the fires of financial “reform” to make transferring money offshore harder and harder to do.