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  • Let’s say you save your quarters in a piggy bank that you keep on the shelf in your bedroom.

  • But your mom keeps checking up on how much youre putting in and taking out. You don't

  • like that, so what you need is a second piggy bank that you keep somewhere else. Your friend

  • Johnny’s mom is busy and she doesn’t have time checking on piggy banks. You bring your

  • spare bank over there and money can come and go without anyone being the wiser. But maybe

  • Johnny’s mom isn’t reallytoo busy.” Maybe she’s just lazy. Maybe she’s deliberately

  • telling the neighborhood that for a small fee, shell safeguard their piggy banks

  • and not pay attention to what happens. That what countries like Panama and the Cayman

  • Islands and other tax havens do. They have very weak regulations in terms of watching

  • when money is coming into or out of bank accounts. And they have rules that make it easy to form

  • a corporation without disclosing who owns it. So basically everyone gets to write a

  • fake name on their piggy bank. There's a Panamanian law firm called Mossack Fonseca. They've got

  • over 40 offices in dozens of countries around the world. They specialize in setting up these

  • kind of special piggy banks. Theyre calledshell companies” — hollow vessels that

  • don’t conduct any business, they just own financial assets on behalf of their real owners.

  • There's been this massive leak of over 2 terabytes worth of Mossack Fonseca documents to the

  • International Consortium of Investigative Journalists. And it sheds an unprecedented

  • light on the world of shell companies. People can use shell companies for legitimate reasons

  • sometimes you just need privacy. But theyre also useful for covering up scandalous or

  • embarrassing information. The Panama Papers show that close associates of Vladimir Putin

  • have taken over $2 billion in assets owned by offshore shell companies. And that the

  • prime minister of Iceland actually held financial interests in bankrupt Icelandic banks even

  • as he was simultaneously involved in political negotiations over what should be done with

  • the banks. And the main use of offshore shell companies is avoiding taxesbecause the

  • government can’t tax money it can’t find. One of the memos says “95 percent of our

  • work coincidentally consists in selling vehicles to avoid taxes." These tax havens are generally

  • small countries that could be persuaded to clean up their act, but so far political leaders

  • in the big countries haven’t wanted to do it.

Let’s say you save your quarters in a piggy bank that you keep on the shelf in your bedroom.

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