Book Review: “The Laundromat” by Jake Bernstein

The Laundromat by Jake Bernstein

Originally published in 2017 under the title “Secrecy World”, this is the story of the international collaboration that led to the reporting on the Panama Papers in 2016.  The International Consortium of Investigative Journalists (ICIJ) now curates the Offshore Leaks database, which has even more data.

This is non-fiction but it reads like a spy thriller.

The rich and powerful play by their own rules, and one way they do so is by making their money disappear into “offshore” companies—anonymous, unregulated, mostly fictional companies that have only one purpose, to conceal the owners and sources of money.  These shady practices are the main industry of many small jurisdictions (as well as Switzerland and Delaware).   They are also amazing stories, each one.

The ICIJ “Offshore Leaks” dataset is data purloined from some of these operations.  The ICIJ and others have painstakingly digitized and organized the data and released it for the world to examine.  Dozens of reports and legal cases have been triggered by these revelations.

The fascinating thing is, of course, that these financial technologies are used by the richest, most powerful people in the world.  Even the most cursory look will find politicians, executives, corporations, and celebrities.

The Laundromat  (originally published as Secrecy Land (2017) and now a film) recounts how this consortium was pulled together, and how they executed their initial scoops.  It also recounts the history of the Panamanian law firm, Mossack Fonseca, (MossFon) which was at the center of the big leak tagged “the Panama Papers”.  (This is slightly unfair to Panama, since the mischief is world wide.)

As an old hand at handling big datasets, I sympathize with how much work went in to simply turning the data dump into usable information.  And this was a shoe string operation,  only a handful of people, mostly journalists fer cryin’ out loud.  I’m impressed.

Exposing the secrets of the powerful is dangerous work, and tracking down hidden networks that span the globe requires international cooperation.  The IJCI did a remarkable job navigating the dangers posed by both enemies and friends.

The results have been significant.  Governments have fallen.  Mos F and other operations have closed.  Laws have been changed, though not enough to eliminate the practices.

Of course, lots has not changed.  Many politicians have shaken off the potential scandal, and autocrats have pushed back against journalists. Some jurisdictions have tightened their rules, but others have opened to replace them.

The book seems as timely as ever.  The Trump administration is well represented in these datasets and has successfully passed new laws that help the wealthy profit from offshore transactions.  Malta is roiling in scandal, including the assassination of a journalist. Russian oligarchs and agents are active around the world.  China’s elites are active around the world.  And so on.

Reading the history of MossFon I was struck about the almost ironic notion that this company was a pioneer of mass market services.  What once might have been a bespoke service available to the highest elites, has become simple and affordable, available to anyone with money to hide.  The reported rates are absurdly low, especially considering the amounts of money their clients are dealing.

Indeed, the business is very competitive, with constant pressure for cheap, fast, customized service. MossFon and the rest developed a highly optimized pipeline, customized for the customers.  Furthermore, they franchised the business to local operators, providing a global product line through local representatives.

It is very admirable, except for the basic wickedness of the business.

I am also struck by the fact that the most active off shore jurisdictions (e.g., Malta, Cyprus, Seychelles, Mauritius, Dubai)  are also enthusiastically adopting cryptocurrency technologies.  This is hardly a coincidence, because Nakamotoan cryptocurrencies are basically designed to be “off shore” from everywhere, via the Internet.

Now, cryptocurrencies offer nothing that MosFon and others haven’t provided for a long time. The news is that the technology is extremely fast and efficient, and in the form of “smart contracts”, is almost totally automated.

So, yeah, obviously, secrecy world will love cryptocurrency technology.  And it works anywhere that can connect to the Internet.  (And helpful people are filling the skies with internet connectivity, so it will be everywhere.)  So cryptocurrency offers to further democratize off shore financing, and possibly speed it up.

This cannot end well.

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1. Jake Bernstein, The Laundromat: Inside the Panama Papers, Illicit Money Networks, and the Global Elite, New York, Henry Holt and Company, 2018.

 

Sunday Book Reviews