This is a guest contribution by Lionel Iruk, Esq. If you would like to submit a contribution please contact Bill Beatty for submission details.

Over a year ago, in the dark recesses of the internet an undisclosed source contacted the German newspaper Süddeutsche Zeitung (SZ) and submitted over 11 million encrypted internal documents from Mossack Fonseca . Being one of the largest Panamanian law firms that sells and establishes offshore companies and wealth management structures, Mossack Fonseca generally operates in tax friendly regions such as Switzerland, the British Virgin Islands, and Gaming industry hubs such as Guernsey, Jersey and the Isle of Man.



What are the Panama Papers?

The files also known as the ‘Panama Papers’ stem from a security breach, which has provided journalist sensitive data on some 214,000 companies , covering a period spanning from the 1970s to the spring of 2016. In the wake of the data breach, investigators have searched the homes and offices of about 100 people and commercial enterprises related to the leak. This includes Germany’s Commerzbank, HSH Nordbank, and Hypovereinsbank who have all agreed to pay fines of around 20 million euros, respectively. Since then the United States, UK, and Iceland amongst others have also acquired this leaked data.

The documents show a dozen or more former heads of state, and several people linked to world leaders have utilized the Panamanian law firm for offshore services. They included the Icelandic Prime Minister, Sigmundur Gunnlaugson, who had an undeclared financial interest tied to his wife’s wealthy estate. Minister Gunnlaugson, is now fighting off calls for his resignation. Moreover, Azerbaijan’s president, Ilham Aliyev, has been alleged to have used companies and funds in Panama to hold onto gold mine stocks and real estate. In total, the probe identified relationships with 58 relatives and friends of prime ministers, presidents or kings.

The Problem with Mossack Fonseca & The Irony of Over Reliance



Notwithstanding the larger issues associated with the privacy breach; the data leak provides rare insight behind the French manicured pay wall that is Global Asset Management & Legal Services. Similar to the banking industry where centralization and over-reliance on “no-holds” barred rule making allowed a few companies to so dominate the market, the Offshore Services industry has over relied on the same few firms, same few banks, and same few “experts” time and time again, creating the perfect storm in Panama.

The story not being told is that the vast majority of law firms in this space are extraordinarily compliance driven. Moreover, the vast majority of the offshore structures and transactions within the Panama papers leak, while politically “improper” are legally compliant in most cases. However, as can be expected the media is in a full-on rabies induced frenzy, proclaiming with its usual verve that high powered law firms, have conspired to protect the estates of the world’s rich and famous, and are the sole cause for billion dollar money laundering schemes, the 2008 Financial crisis, ISIS, and everything in between. That may be a stretch, but..

We get the message:

“Law Firms are evil and are bent on wrecking society down to its core.

Kill Them With Fire.”

– Sincerely Yours,

The Media.

Yet, the media fails to mention, that these same firms only use the same set of laws and rules made available to every man, woman and child in their jurisdiction. This does not excuse or condone criminal behavior, in any way, shape or form, but it does bring some varied context to the larger story.

The offshore services legal industry, just like another has its growing pains, based on a tradition of over reliance on larger providers like Mossack Fonseca to do the “heavy lifting”, without putting the proper protocols in place to protect their clients’ interests.

A blatant example of this is that in most cases Mossack Fonseca did not know its clients , basically forgoing the most basic Due Diligence and KYC standards required in representation. An internal examination conducted in 2015 indicated the firm was privy to the owner identities (UBO Information – “Ultimate Beneficial Owner”) of 204 out of 14,086 companies it has registered in the Seychelles.

This is particularly troubling, since failure to disclose UBO information, is the primary way to have a client’s assets seized, and potentially blacklisted from that institution. Especially if the bank or trust institution becomes aware of such a revelation in an extremely damaging way, (say via the Guardian, CalvinAyre.com, or the IRS). It has been alleged that Mossack Fonseca provided sham directors and, if desired, concealed the company’s true shareholders. The result was an offshore company whose true ownership structure was indecipherable from the outside, in some cases even to Mossack Fonseca itself. When asked about this,

Mossack Fonseca candidly replied that:

“An internal examination carried out by a legal company concluded that our formula for risk assessment is significantly defective.”

Too Big For Common Sense?

Ironically, major asset offshore protection firms like Mossack Fonseca are not alone; they have relied on being well-connected and very well paid to do the tasks they were retained. That primary task was to preserve and secure their client’s assets, which they did successfully. However, the unwritten purpose of asset protection is to preserve your client’s structural privacy and keep their principal’s assets from becoming a public spectacle. They failed at this.

Mossack Fonseca should have applied common sense data protections to keep their client’s information safe, not only from nefarious actors on the outside, but safeguards should have been placed on the insides of Mossack Fonseca’s data integrity department to minimize the chances of things like this taking place in such spectacular fashion.

When you’re representing the “Who’s Who” of global leadership, one would assume that affords you military grade decentralization, encryption, and data management services. There is no Panama Papers leak, with proper data management controls in place. Additionally, the firm should have placed a greater emphasis on risk management, and compliance. It should have employed the most basic internal and external KYC policies, in order to preserve its standing and keep its clients out of prison.

As lawyers, we all understand riding the edges of the law – that is why we are hired. We also understand, riding your client’s over that edge, will get you fired and possibly disbarred. Mossack Fonseca’s willingness throw caution to wind and “hope for the best” seems to have caught every reasonable minded asset protection strategist off guard.

How it May Affect The Gaming Industry’s Insiders: Looking for a Bogeyman.

It’s no secret that the gambling industry strongly relies on a diverse array of asset protection solutions to make sure operations run smoothly. We place assets in a wide variety of legal onshore and offshore solutions to defend them from a wide range of actors, whether state sponsored, criminal, or otherwise.

We tend to have risk adverse policies when it comes to ensuring that we keep our doors open for the long run. Most importantly, using offshore structures are entirely legal in every context; and essential to protecting client’s funds from being caught up in the excessively ambiguous relationship forged between Casinos, payment processors, and banking institutions.

With that said, the strategies employed by various law firms and accountants throughout the Asset Protection industry may be called into question as a result of the Panama Papers leak, especially as more names closely related to the Gaming industry begin to pop up in every 10 cent tabloid on the internet. Undoubtedly, if and when this happens the Media may unsurprisingly shift its focus from the untouchable politicians to the very touchable members of the Gaming industry, who may have been unwittingly ensnared in this data breach, no matter their innocence or guilt, or knowledge of the structures used for their benefit.

What We Can Learn from the Panama Papers Debacle?



1. Diversify Your Legal Representation

“Bigger isn’t Always Better.” Similar to your stock portfolio, law firm diversification can help manage risk and reduce the volatility of an unscrupulous or mismanaged firm. While Big Firms, almost always get a pass that they are doing everything correct; you should always hedge your bet in case they are not. We advise clients to not solely rely on the biggest or most well known firm in a particular jurisdiction, but instead choose the best fit, which may be a small or mid-size operation in which you can have more intimate access. Remember, that no matter how diversified your asset or legal portfolio is, risk can never be eliminated completely. However, you can reduce risk associated with individual offshore structural setups, by diversifying the strategists in your legal portfolio. The key is to find a medium between reliability, security, competence and price. This ensures that you achieve your goals while still maintaining piece of mind.

2. Optimize your Risk Management Strategies-

Sounds obvious. Want to stay out of the news, due the insanity of a rouge actor? Do more legal work in-house; and free up your legal spend for highly specialized legal matters. Routine structures and non-complex setups may not require an outsourced firm, no matter how convenient it may be to get on the phone with an offshore structural operation. However, if you must outsource the work, you would be best served by employing a Specialized Attorney Manager (SAM) to manage your legal process outsourcing duties to firms like Mossack Fonseca.

3. Hire Specialized Attorney Management Services- (SAMs):

Specialized Attorney Management (SAM) Services, are a unique niche within legal process outsourcing, in which in-house legal departments, individual clients, or organizations outsource legal work from areas in a cost effective manner to firms which can perform tasks at significantly decreased cost. There are several law firms, including our own who offer SAM Services, by which an outside firm, or a particular lawyer acts as your intermediary in a particular specialty (offshore banking, licensing, etc.) A legal Sherpa of sorts.

Their function is to hire other attorneys, translate “legal lingo” into your preferred method of communication and comprehension, and protect your interest above all else. SAMs are more than just introductory firms, they usually have input or develop your asset strategy, find and secure the best attorneys for that particular job, negotiate price points and positions, and keep things within a proposed budget.

Additionally, they Provide compliance, data security, encryption guidelines, and risk management services, and continuous assess legal operations and propose and implement solutions in a wide variety of disciplines.

4. Understand the Law

Many countries require specific security measures for personal information, and attorneys are not exempt from securing your data. Make sure that your firm has implemented basic level requirement such as: Encryption of all transmitted records and files containing personal information that will travel across public networks, and encryption of all data containing personal information to be transmitted wirelessly and encryption of all personal information stored on laptops or other portable electronic devices.

Additionally, most firms must retain client records for a period of 2 to 5 years, however after this period has expired, you (or your SAM) should send a written request for return of document and/or a destruction of all electronic records. If possible request an itemized printout of all documents returned and destroyed.

Additionally, request your firm encrypt all conversations and chat logs, since clients are fully in control on how they exercise their portion of “attorney client- privileged information”. We have had many clients request to speak on private services logs such as Telegram, Silent Circle, Signal, or request PGP encrypted emails in lieu of a standard Yahoo, Gmail, or Non-encrypted method of communication.

Mossack Fonseca’s ‘Panama Papers’ Are A Call To Action



As a matter of best practice there is little reason for a ‘Mossack Fonseca’ to exist into today’s highly advanced technological environment. With the vast amount of available options on the internet, service providers, small/midsize law firms willing to employ amazing structural strategies, clients should refrain from over reliance on major firms who may be riding on the coats of their reputations, but have not shown a willingness to evolve beyond their comfort zone (such as implementing effective encryption, following KYC guidelines, informing clients of political and legal risk if their strategies fail).

The Panama Papers reads like a novel written in the 1970s, where salacious details about the intricate works of the elite are being called into question. However in 2016, given the relatively low cost of solutions, and the sheer quality of service professionals in the offshore asset management field, there are no longer any acceptable excuses for not deploying such solutions. We should heed this as a call to action…well unless you want to make the news.



Lionel Iruk, Esq.- is currently a Managing Partner at Empire Legal, PLLC whose practice focuses on Gaming, Citizenship by Investment & Residency Planning, Asset Protection, and Specialized Attorney Management (SAM) Services for Empire Legal. He also counsels founders and key managers inside and outside of the Gaming Industry, and implement tactical strategies related to forming their companies, risk and data management, acquiring licensing, setting up equity and banking structures, negotiating with investors, and dealing with a wide variety of complex and simple asset and cash management solutions, for high net worth individuals and their families. Lionel is the host of the 1000 Ways to Do Business Offshore Podcast, Conference Speaker, and contributing writer on CalvinAyre.com. He can be reached at [email protected], or Via the web at www.empire.legal