Panama is listed by the EU as a country that is not cooperative on tax issues. Panama is listed by the EU as a country that is not cooperative on tax issues.

A European Union official has threatened to sanction Panama and other nations if they don’t cooperate fully to fight money laundering and tax evasion, after a leak of data showed the small country remains a key destination for people who want to hide money.

The 11.5 million documents from the Panama-based law firm Mossack Fonseca showed it helped thousands of individuals and companies from around the world set up shell companies and offshore accounts in low-tax havens. Because such accounts often hide the ultimate owner of assets, they are a favoured tool to evade taxes, launder money or pay bribes.

So far, the scandal has brought down the leader of Iceland and raised questions about the dealings of the presidents of Argentina and Ukraine, senior Chinese politicians, famous actors, athletes and the circle of friends of Russian Vladimir Putin, who some allege has profited indirectly from such accounts.

Thursday, British Prime Minister David Cameron acknowledged he profited from his father’s investments in an offshore tax haven before being elected.

“People are fed up with these outrages,” said Pierre Moscovici, who heads financial affairs for the 28-nation EU. He took to task countries like Panama that facilitate such secretive, low-tax accounts.

“The amounts of money, the jurisdictions and the names associated with this affair are frankly shocking,” he said.

Panama is listed by the EU as a country that is not cooperative on tax issues, and Moscovici urged the country to “rethink its position in this regard.” The EU has to “be ready to hit them with appropriate sanctions if they refuse to change,” he said.

The Central American country’s government is offering to cooperate more. On Wednesday, President Juan Carlos Varela announced the creation of an international committee of experts to recommend ways to boost transparency in Panama’s offshore financial industry.

But Varela defended his country against what he called a “media attack” by wealthy nations that he says are ignoring their own deficiencies and unfairly stigmatising Panama.

Ramon Fonseca, a co-founder of the law firm at the centre of the scandal and until recently a top adviser to Varela, Thursday said the only law that has been broken so far is the right to his clients’ privacy. He said the biggest source of secretive shell companies is Europe and the US.

“If a company in England has problems nobody says anything against England, but when it happens to a firm in Panama it’s a big problem and the entire world beats up on poor Panama,” Fonseca said.

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