Skip to content

Menu

Ballard Spahr LLP logo
HomeAboutPublicationsServicesContact

Money Laundering Watch

Insights and news on the world of financial corruption

Home » “Panama Papers” Law Firm Announces Its Closure Due to Fallout from Massive Data Breach

“Panama Papers” Law Firm Announces Its Closure Due to Fallout from Massive Data Breach

By Edward J. McAndrew, Peter D. Hardy & Alicia M. Went on March 15, 2018
Posted in Attorney Client Privilege, Attorney Liability, Cybersecurity, International Tax Evasion, Offshore Account, Panama Papers

The beleaguered law firm at the center of the international Panama Papers scandal – Mossack Fonseca – has announced that it is closing its doors. It offered no apologies.

Founded in 1977 by Jurgen Mossack and Ramon Fonseca, Mossack Fonseca had been perched at the top of offshore legal services providers until April 2016, when it became ground zero for a global controversy because approximately 11.5 million of the firm’s internal legal and financial documents were leaked to the media. These leaked documents – publicized primarily by the International Consortium of Investigative Journalists (“ICIJ”) – allegedly reveal a global system of undisclosed offshore accounts, money laundering and tax evasion, and how the rich and powerful around the world use shell companies to conceal assets and possible illegal activity.

The incident is the largest publicly disclosed data breach involving a law firm. Following the April 2016 publication of data, founding partner Ramon Fonseca and other public sources claimed that the firm’s network had been compromised by hackers sometime in 2015.  Security researchers and other public sources identified numerous unpatched vulnerabilities in Mossack’s website and email server, which could have been very easily compromised by hackers. Approximately 2.6 terabytes of data – including 4.8 million emails, 3 million database files, and 2.1 million.pdf files – were leaked, including client documents dating back to the 1970s.

The Panama Papers scandal not only sharpened the national and global focus on the general risks of money laundering, tax evasion, and terrorist financing, but it also helped fuel the international critique of the United States as a potential haven for money laundering and tax evasion due to opportunities in the U.S. to form legal entities without having to disclose the entities’ true beneficial owners. The scandal also reminded the world how lawyers potentially can facilitate their clients’ money laundering.

The incident and resulting scandal also illustrates the growing frequency, ease, and potentially devastating consequences of data breaches. Cyber incidents – whether malicious or non-malicious in nature – can threaten even the richest and most powerful people, and the breach of client confidential information held by a law firm can have serious potential legal consequences for both the firm and its affected clients.

No Apologies

When the Panama Papers scandal broke, the Office of the U.S. Attorney for the Southern District of New York announced an investigation into these matters, as did enforcement agencies in many other countries.  Panamanian authorities raided the law firm in both 2016 and 2017, and the firm’s founders were arrested last year in Panama after their indictment on money laundering charges allegedly tied to the Petrobas corruption scandal in Brazil.

In announcing its closure to its clients, the firm cited “reputational deterioration” that has caused “irreversible damage.” Other highlights from the firm’s statement regarding its closure include the following claims (roughly translated from Spanish to English) by Mossack Fonseca, which has cast itself as the law-abiding victim of a massive data breach and smear campaign directed at both the firm and Panama itself.

  • The firm’s members fulfilled their duties to their clients “to provide dynamic, innovative and law-abiding service;”
  • The firm was a “victim of a cyber attack of global scale,” as well as an ensuing media campaign;
  • The ICIJ presented to the world, based on stolen information, an inaccurate portrayal of the services provided by Mossack Fonseca, distorting the nature of the firm’s business and its role in the global financial markets;
  • The so-called Panama Papers scandal represented not only an attack on a prestigious firm, but also an effort to attack the entire Panamanian financial system; and
  • The firm has asked the authorities to get to the bottom of the theft of their client information, and to resist pressure from some international groups wanting to make Panama less competitive.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.

You also can follow the latest legal developments in privacy and cybersecurity by subscribing to our blog, CyberAdviser.

Print:
EmailTweetLikeLinkedIn
Related Posts
  • ABA Issues Formal Opinion on Lawyers as “Gatekeepers” for Client Criminality
  • Corporate Transparency Act of 2019 Broadens Beneficial Ownership Reporting
  • Use of Tainted Assets to Pay Attorney Fees: A Primer on the Pitfalls
  • International Report Critiques U.S. Beneficial Ownership Transparency
  • Ballard to Co-Present on Potential Money Laundering and Ethical Risks Faced by U.S. Tax Professionals Serving Foreign Clients Bringing Funds Into the U.S.
The Ballard AML Team
Stimulus Enforcement Tracker_blog

Stay Connected

RSS LinkedIn Twitter YouTube

Topics

Archives

Publications
Events

Links to Other Resources

  • Ballard Spahr Anti-Money Laundering Services
  • Digital Currency & Ledger Defense Coalition
  • Federal Financial Institutions Examination Council – Bank Secrecy Act/Anti-Money Laundering Examination Manual
  • Federal Tax Crimes
  • FINRA Rule 3310 Anti-Money Laundering Compliance Program
  • IRS BSA Examination Techniques for Bank Secrecy Act Industries
  • IRS Money Services Business (MSB) Information Center
  • Money Laundering Bulletin
  • New York Department of Financial Services BSA/AML and OFAC Regulations
  • SEC Anti-Money Laundering Source Tool for Broker-Dealers
  • The Financial Action Task Force
  • U.S. Department of Justice – Asset Forfeiture and Money Laundering
  • U.S. Department of Justice U.S. Attorneys Manual – Title 9: Criminal Money Laundering
  • U.S. Department of the Treasury – Financial Crimes Enforcement Network
  • U.S. Department of Treasury Office of Foreign Assets Control

Recent Posts

  • FinCEN Warns Financial Institutions About Economic Stimulus Aid Scams
  • New PPP Procedural Requirements Reflect Lenders’ Emerging AML Duties
  • OSHA to Investigate Retaliation Complaints Under Money Laundering and Criminal Antitrust Laws
  • DOJ Unseals Indictment Charging Three North Korean Military Intelligence Operatives With Attempting to Steal Over $1 Billion in Cash and Cryptocurrency
  • FinCEN Issues PPP Lender Guidance

Money Laundering Watch

by the White Collar Defense/Internal Investigations Group at Ballard Spahr LLP

Contact

Peter D. Hardy
hardyp@ballardspahr.com
215.864.8838
RSS LinkedIn Twitter YouTube
DisclaimerPrivacy Policy

About

Ballard Spahr’s White Collar Defense/Internal Investigations Group conducts internal investigations and represents clients across a range of industries, including financial institutions, facing actual or threatened government enforcement. We also represent clients in civil fraud litigation and administrative proceedings.

Copyright © 2021, Ballard Spahr LLP All Rights Reserved.
www.ballardspahr.com
Powered By LexBlog