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Last night, authorities in Panama raided the offices of Mossack Fonseca, the law firm that was the target of a huge document leak last week. The documents suggest that the firm helped high-ranking political figures, sport stars and celebrities all over the world hide their money. The case sheds new light on the process of tax evasion - the shell corporations and secret accounts. As NPR's James Zarroli reports, it is a huge business that's growing.
JIM ZARROLI, BYLINE: It is shockingly easy to set up a shell corporation. Economist Gabriel Zucman says you just go online, pay a little money, fill out some documents and it's done.
GABRIEL ZUCMAN: Now you're the owner of a company that can open, for instance, bank accounts all around the world. It makes it easier for you to hide your identity and to be an anonymous owner of wealth everywhere in the world.
ZARROLI: And if you really want to hide your money, you can set up multiple interlinked shell corporations, says Tom Cardamone, managing director of Global Financial Integrity.
TOM CARDAMONE: You can create an anonymous shell in one jurisdiction. It controls an anonymous trust in a completely different country that also controls a bank account in a third country, all of which can be completely opaque to law enforcement or tax authorities.
ZARROLI: And Cardamone says none of this violates any laws.
CARDAMONE: There's nothing illegal about setting up such a corporation. It's what happens after that that can cause a problem. Whether it's tax evasion or money laundering, you actually don't know what these entities are doing, and that's the crux of the problem.
ZARROLI: There are hundreds, perhaps thousands of companies that will help you set up a shell corporation, including a great many in the United States. The Internet is filled with ads for them.
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ZARROLI: Most of these firms don't actually set up shell corporations themselves. They turn to much larger firms that specialize in the practice. Among these, Mossack Fonseca is considered one of the largest, although it can be hard to gauge how big it really is. Gabriel Zucman, author of the book "The Hidden Wealth Of Nations," says the whole business is so shrouded in secrecy, any estimates of its size are at best educated guesses. Zucman says what is clear is that the business is getting bigger.
ZUCMAN: A growing fraction of the world's wealth, in particular the wealth in tax havens, is owned via shell companies. So it's obviously a business that is booming and is doing extremely well.
ZARROLI: For example, Zucman says, 60 percent of the wealth held in Swiss bank accounts is now owned by shell corporations whose owners are nearly impossible to trace. And as the business has gotten bigger, it's attracted a lot of investment dollars. Over the years, private equity firms such as The Carlyle Group have made big investments in some of the largest firms. Jason Sharman is a professor of political science at Griffith University in Australia.
JASON SHARMAN: I think they saw this as a growth industry, obviously something that particularly was experiencing strong growth from the developing world, particularly China. And it was kind of a new industry that hadn't attracted much attention from outsiders before.
ZARROLI: In recent years, the United States and other developed countries have made new efforts to crack down on tax shelters. They have begun to require major banks to provide much more information about accounts held by shell corporations. And regulators say this is making a dent in the problem. But Gabriel Zucman is skeptical these banks are really ready to cooperate.
ZUCMAN: You know, after all for decades they've been exactly the opposite. You know, they've been helping their clients evade taxes, hiding them behind shell companies. And so, you know, we can ask ourselves, you know, is it just enough to now ask these very same individuals and these very same institutions to now play the tax man's job?
ZARROLI: What's more - the new laws don't apply to shell corporations owned by investors in countries such as Russia, China and Brazil or the countries of Africa and the Middle East. And as the Mossack Fonseca suggested, that's where a lot of the newest money is coming from. Jim Zarroli, NPR News, New York.
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