The unassuming offices of Wan Chai
The Panama Papers in 2016 blew the lid off the murky world of international offshore finance — and showed Hong Kong was the most active place on the planet for the creation of shell companies, alongside traditional tax havens such as Switzerland, Cyprus and the US state of Delaware.
The 11 million-plus document dump, leaked to the International Consortium of Investigative Journalists (ICIJ), revealed how wealthy and powerful people allegedly employed Mossack Fonseca, a Panamanian law firm and corporate service provider, to set up shell or front companies on their behalf.
Mossack Fonseca denied any wrongdoing after the story broke, but the leaks helped explain how the world's 1% can use front or shell companies to move money internationally. Such firms could conceal the true identity of a company's owner, mask a business' assets or monopolistic practices, or even avoid sanctions.
Tycoons also use them to obfuscate their business practices. A 2001 study found that eight major conglomerates controlled a quarter of all corporations in East Asia's nine most advanced economies at the time, including Hong Kong.
The papers caused reputational damage to the city, exposing how open its financial system and corporate services sector are to abuse.
As of the end of June 2020, Hong Kong boasted more than 7,000 licensed trust and corporate service providers. Many bear little resemblance to global firms like Mossack Fonseca. They often operate out of poorly lit offices in unassuming mid-rise buildings. Some have strange names like Cheerful Best Company Services, the business at the office tied to the North Korean bank, or Sky Charm Secretarial Services Limited, one of the three corporate service providers at the address that was supposed to house a front company accused of violating US sanctions on Iran.
