Iceland’s prime minister, Sigmundur Gunnlaugsson, resigned Tuesday amid fallout from the Panama Papers disclosures detailing an offshore company held by his wife. (Birgir Por Hardarson/EPA)

Iceland’s prime minister, faced with street protests and public outrage over offshore holdings, offered to resign Tuesday, becoming the first major political leader to fall amid global reverberations from millions of leaked documents detailing secret financial transactions.

Prime Minister Sigmundur Gunnlaugsson tendered his resignation and asked Iceland’s president to dissolve Parliament after leaked files from a Panama law firm showed that his wife owned an offshore company with links to some of the country’s collapsed banks. The moves appeared likely to lead to new elections in the Nordic island nation, a NATO member.

[The Panama Papers are having a huge impact on tiny Iceland]

It was the most dramatic fallout to date from the disclosures known as the Panama Papers, a trove of documents that allegedly show how members of the world’s elite are able to conceal wealth and potentially avoid accountability and taxes. Among those who have used offshore companies in private business dealings are at least 140 political figures, including a dozen current or former heads of state, according to news outlets that published a major report on the papers following a year-long investigation.

The report does not make specific allegations of illegal activity, but it raises questions about the propriety of hard-to-trace offshore accounts and other tax havens set up by the Panama-based law firm, Mossack Fonseca.

The prime minister previously refused to step down, claiming his wife’s overseas assets were taxed in Iceland and insisted there was no fiscal wrongdoing. (The Washington Post)

In a statement released Tuesday, Mossack Fonseca said: “While we may have been the victim of a data breach, nothing in this illegally obtained cache of documents suggests we’ve done anything wrong or illegal, and that’s very much in keeping with the global reputation we’ve worked hard to build over the past 40 years of doing business the right way.” The firm vowed to make sure that “the guilty parties are brought to justice” for stealing its information. In the meantime, it said, it would “continue to serve our clients” and “stand behind our people.”

[What you need to know about the Panama Papers]

Those named in the documents include associates of Russian President Vladi­mir Putin, the president of Ukraine and relatives of leaders in China, Britain and Pakistan. The disclosures have triggered official inquiries worldwide, including in Britain, France, Italy, Austria, Sweden, the Netherlands, Australia and New Zealand.

In Washington, President Obama weighed in on the revelations as he urged Congress to close “insidious tax loopholes” that allow big corporations to avoid billions of dollars in tax payments by ostensibly relocating offshore.

“We’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem,” Obama told reporters at the White House. “It’s not unique to other countries because, frankly, there are folks here in America who are taking advantage of the same stuff. A lot of it is legal, but that’s exactly the problem. It’s not that they’re breaking the laws, it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by.”

Obama said “legal” and “illicit” tax avoidance combined may amount to “trillions of dollars worldwide.” It is a “huge problem” that has been brought up repeatedly in meetings of world leaders, he said.

[In China, censors busy over Panama Papers disclosures]

The Panama Papers consist of 11.5 million documents from Panama-based law firm Mossack Fonseca. The papers apparently implicate a number of high-profile global figures in potentially illegal financial activities. (Deirdra O'Regan/The Washington Post)

In China, government censors have been working overtime to scrub references to prominent Chinese named in the papers. Some Russians cited in the documents have political or personal connections to Putin, whose spokesman denied that the Russian president is implicated.

The questions about tax havens have spread beyond politics, however, touching such renowned figures as Argentine soccer star Lionel Messi, Spanish film director Pedro Almodóvar and Russian cellist Sergei Rodulgin.

The Panama Papers stem from a year-long collaboration among Germany’s Süddeutsche Zeitung newspaper, the International Consortium of Investigative Journalists and more than 100 media outlets. Their report claims to expose “a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion and drug trafficking.”

In Iceland, the prime minister’s departure could head off a showdown in Parliament. Opposition lawmakers had sought a confidence vote as thousands of protesters gathered in the capital, Reykjavik, demanding Gunnlaugsson’s resignation.

The crowds at times pounded drums and banged pots and pans — harking back to demonstrations during the country’s fiscal meltdown in 2009. Other protesters pelted the Parliament building with yogurt and eggs.

Parliament was not scheduled to meet Tuesday, and Iceland’s president, Olafur Ragnar Grimsson, said he wanted further talks with political leaders and others before making the formal decision to accept the resignation and dissolve Parliament.

But Gunnlaugsson appeared to seal his fate by promising to step aside, retreating from his earlier pledge to stick it out.

“It’s seven years since the crisis, and this shows that we haven’t learned anything. We’ve just rebuilt the same corrupt system,” said Svanur Kristjansson, a political science professor in Iceland. “It’s an in­cred­ibly toxic environment. And we’re expecting more names from the Panama Papers to come out.”

A member of Gunnlaugsson’s government, Agriculture Minister Sigurdur Ingi Johannsson, told Icelandic broadcaster RUV that the prime minister is resigning, the Associated Press reported.

Gunnlaugsson has said that his wife’s overseas assets were taxed in Iceland, and he insisted that there was no fiscal wrongdoing.

But critics said the findings of the Panama Papers report raised questions about conflicts of interest and other possible improprieties nearly eight years after the Icelandic banking system collapsed amid the global financial crisis.

A government spokesman said the company owned by Gunnlaugsson’s wife, Anna Sigurlaug Palsdottir, held bonds totaling more than $4.1 million in some of Iceland’s collapsed banks. The leaked documents have led to accusations of possible conflicts by Gunnlaugsson, who oversaw negotiations with the banks’ creditors.

James McCauley in Paris and Scott Higham in Washington contributed to this report.

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Today's coverage from Post correspondents around the world