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This nonprofit has been campaigning to stop the shell companies exposed in the Panama Papers for 20 years

The biggest data leak in history happened earlier this week with the reveal of the Panama Papers, 11.5 million documents that bring light to more than 200,000 shell companies used by the global elite. 

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Not all shell companies are evil, one economist told us, but they make it extremely hard to know who actually owns the assets or funds controlled by a firm. 

Vladimir Putin
Russia's President Vladimir Putin. REUTERS/Sergei Karpukhin

In two decades of research, the nonprofit Global Witness has found that shell companies are the common thread between human rights abuses, environmental degradation, and political corruption, because they're a method for anonymously storing wealth.

"The majority of these scams and schemes have included opaque corporate structures," Global Witness policy advisor Eryn Schornick tells Tech Insider. 

In the case of the Panama Papers, the sheer number of documents shows how broad the issue is and how high profile the people implicated are, she says, including the heads of state of Russia, the United Kingdom, and Iceland (the prime minister of Iceland resigned on April 5).

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Schornick says that shell companies can buy and sell things just as people can, from yachts to mansions, but thanks to the obfuscating nature of the corporate organizations — where it's impossible to ferret out the actual owners of a shell company — the high net worth individuals behind these companies can move money with anonymity. 

"Because of that anonymity, they're able to carry on with impunity," she says.

One of the highest profile cases of this type of money laundering is Teodoro Obiang, the son of a dictator in Equatorial Guinea. A 2009 Global Witness report strongly suggested that Obiang "purchased a $33 million private jet, a $35 million Malibu mansion, speedboats and a fleet of fast cars using corruptly acquired funds." 

Every year, shell companies and other forms of corporate obfuscation enable $1 trillion to be extracted from the developing world

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The Panama Papers add traction to a corporate transparency movement that Global Witness is campaigning for around the world. In 2014, founder Charmian Gooch was awarded the $1 million TED Prize to further Global Witness's work in corporate transparency.

As Gooch argued in her TED Prize talk, the solution to bringing accountability to shell companies is a "public registry of beneficial ownership," or a database of the people actually deriving benefit from a company, rather than the person who happened to incorporate it. That way law enforcement could actually get the bottom of who owns what.

In 2013, the United Kingdom became the first country to commit to such a registry, and it's in the process of being implemented. By 2017, the European Union will have its Fourth Anti-Money Laundering Directive in place, which requires local governments to create beneficial ownership registries (but allows each country to decide whether its public or not). 

Schornick says that the US has been "a bit of a laggard" in this regard. A bill called the Incorporation Transparency and Law Enforcement Assistance Act has been up for discussion in the house of representatives and the senate for several years, but is yet to become law.

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The US is reportedly one of the easiest places to create an anonymous shell company

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