Email chains, invoices and documents leaked from Panama-based law firm Mossack Fonseca have revealed that Hong Kong is a top centre for secretive offshore financial services.

The International Consortium of Investigative Journalism (ICIJ) said that the firm had worked with over 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts to help its clients hide their wealth. Home to 2,212 such entities, Hong Kong tops the list of territories where such intermediaries operate.

HSBC Building
HSBC HQ. File photo: Reuters/Bobby Yip.

More than 11 million leaked files, known as the Panama Papers, were obtained securely from an anonymous source over a year ago by German newspaper Süddeutsche Zeitung. The data was shared with the ICIJ and several other media outlets. Over 370 journalists from over 100 news organisations in 76 countries collaborated on the project over several months, with the first stories from the data dump emerging on Monday.

Banking giant HSBC was mentioned in the leaks. The bank and its affiliates created more than 2,300 offshore companies for its clients, according to the papers.

The leaks also revealed that Hong Kong celebrity Jackie Chan had at least six companies managed by Mossack Fonseca, though the ICIJ said that there was no evidence the actor had used his companies improperly.

jackie chan
Jackie Chan. Photo: Wikicommons.

See also: Law firm at centre of leaked docs debated dropping VIP client Sun Hung Kai Properties during corruption scandal

In a statement after the leak, the law firm said that it has never been sued and that it followed “both the letter and spirit of the law”.

“We’re proud of the work we do, notwithstanding recent and willful attempts by some to mischaracterize it,” the statement read.

The ICIJ has said that it will release a full list of companies and people linked to them in early May.

Top choice for tax avoidance

According to the Tax Justice Network, Hong Kong is second only to Switzerland in its 2015 Financial Secrecy Index. The ranking compares national jurisdictions based on their secrecy laws and the scale of offshore financial activities in the country. The United States, Singapore and the Cayman Islands were also amongst the “worst offenders” in the top five.

hong kong tax haven
Photo: Tax Justice Network.

The report noted that Hong Kong’s “classic see-no-evil approach to financial regulation” and “reluctance to sign up to global transparency standards” makes it one of the fastest growing choices for ultra-rich individuals and businesses looking to shield their assets behind a cloak of secrecy.

In June 2015, Hong Kong was listed as a non-cooperative tax jurisdiction by the European Commission. Four months later, it was dropped from the blacklist after the number of EU member states listing Hong Kong as a non-cooperative was reduced from ten to eight.

See also: Panama Papers: Family of China’s President Xi implicated

What are shell companies?

Shell companies have few significant operations, products or assets, but are used to carry out business transactions. They exist only on paper, are usually based in offshore jurisdictions and have no offices or employees. Some may lie dormant simply because the company failed, but they may also be used to avoid or evade tax, as corporate entities “invest” profits into the “fake” corporations.

Tom is the editor-in-chief and founder of Hong Kong Free Press. He has a BA in Communications and New Media from Leeds University and an MA in Journalism from the University of Hong Kong. He has contributed to the BBC, Euronews, Al-Jazeera and others.