Mossack Fonseca

What Is Mossack Fonseca?

The term Mossack Fonseca refers to a Panama-based law firm that was embroiled in the Panama Papers scandal. Founded in 1977, the firm was headquartered in Panama and operated globally in more than 40 countries.

The firm employed about 600 people, providing its clients with various legal solutions and trust services. Mossack Fonseca was known to be a low-cost creator of shell companies throughout the world. The firm was dissolved in 2018 after documents from the firm were leaked in the Panama Papers scandal of 2016.

Understanding Mossack Fonseca

Mossack Fonseca was founded in 1977 in Panama City by Jürgen Mossack. Ramon Fonseca joined the firm almost ten years later when he merged his practice with Mossack's. The legal firm operated out of Panama City but also had offices in more than 40 countries.

The firm's practice areas included trust services, intellectual property, commercial law, international business structures, and investment advisory services. According to a report by the International Consortium of Investigative Journalists, the firm serviced more than 14,000 banks, law firms, and other intermediaries. It helped its clients set up companies, foundations, trusts, and other vehicles.

At one point, Mossack Fonseca was among the world's largest providers of offshore financial services. The firm became the subject of widespread controversy in April 2016, when a German publication published evidence of an enormous tax haven clientele that included more than 214,000 entities in 200 countries. According to these leaked documents — referred to collectively as the Panama Papers — Mossack Fonseca sold shell companies for a fee of as little as $1,000 in cities across the world.

The Panama Papers contained personal financial information about high-net-worth individuals (HNWIs) and public officials that were previously kept private. An anonymous source referred to only as John Doe leaked the documents — 11.5 million files — through German publication Süddeutsche Zeitung. A dozen current and former world leaders, 128 other public officials and politicians, along with hundreds of celebrities, business people, and other wealthy individuals were among those named in the leak.

Although the company claimed to be working within the applicable legal and regulatory parameters, the Panama Papers highlighted how the company routinely engaged in activities that abetted tax evasion and money laundering. The controversy led Mossack Fonseca to shut down its operations in March 2018, citing the economic impact and reputational damage caused by the exposé.

Special Considerations

Offshore business entities are generally legal. And most of the documents showed no inappropriate or illegal behavior. But some of the shell corporations set up by Mossack Fonseca were revealed by reporters to have been used for illegal purposes including fraud, tax evasion, and to avoid international sanctions.

Mossack Fonseca disputed any wrongdoing, saying it was never formally investigated in connection with any criminal allegations.

Despite dissolving in 2018, Mossack Fonseca's website is still up and running. The firm and its partners maintain that the practice has been misrepresented in the media. According to the firm, "Mossack Fonseca had never once in its history been charged with criminal wrongdoing, or even been formally investigated in connection with allegations of the same."

Mossack Fonseca was also involved in other controversies. For instance, in 2015, the firm was alleged to have assisted Commerzbank, a German bank, to launder money out of Iran and other countries in contradiction of United States sanctions.