World leaders have fallen in the days since the massive “Panama Papers” leak, but, as Brooke Harrington explains in a piece for the Atlantic, most of the activity detailed in those documents is perfectly legal. And Brooke Harrington would know. A sociologist at the Copenhagen Business School, Harrington spent two years training to join the ranks of the world’s elite wealth managers, all purpose financial fixers who do the work behind Mossack Fonseca’s spilled secrets. She tells their stories and details the ways of offshore banks, shell corporations, and trusts in Capital without Borders: Wealth Managers and the One Percent, coming this fall.
As she writes in the Atlantic, the world’s richest people pay wealth managers to help them hide money and defeat the purpose of laws and policies without strictly breaking them:
What Mossack Fonseca and its counterparts all over the world really provide is the expertise that allows their clients to stay just on the right side of the law—or far enough into the legal grey zones that the clients have a real chance to prevail if they end up in court. That’s why many of the people who have seemingly been exposed by this leak will likely never face charges of any kind… When the firm writes that “we have a strong compliance record” and “we are responsible members of the global financial and business community,” they are not lying through their teeth, as some might suspect. Keeping clients out of legal trouble is a core element of their business model: that is how they earn their money. If they, or firms like them, were to lose their reputations for keeping clients on the right side of the law, the clients would take their business elsewhere.
And there’s always an elsewhere to take it—the wealth management industry’s main professional society has roughly 20,000 members. Indeed, despite the sheer volume of the Mossack Fonseca leak, what’s there is the work of just one company in just one place. In the course of her study, Harrington conducted interviews with sixty-five practitioners in eighteen countries. While many wealth managers may project a buttoned-down, old school sensibility—the better with which to woo old money—a quaint scene this is not.
Wealth managers take full advantage of the decades of work done removing restrictions on the international flow of capital, but one of their most valuable services is ensuring the free movement of their clients themselves, through the world and even, in a sense, through time. Here’s Harrington in a piece from last year:
Tax avoidance—the perfectly legal practice of minimizing one’s tax obligations—is really the least of the wonders that wealth managers achieve for their clients. They can also help clients swap nationalities when holding the passport of a particular country means submitting to undesirable requirements. Remember when the Facebook founder Eduardo Saverin renounced his American citizenship for a Singaporean passport? Classic wealth-management strategy. And thanks to the expanding number of practitioners, U.S. citizenship renunciations are at an all-time high, and growing. Finally, wealth managers can give their clients a kind of financial immortality, in the form of inheritances tied to the performance of certain duties by the heirs, such as going into the family business or producing grandchildren.
The underlying point to Harrington’s work is that the massive accumulation of wealth, rising inequality, the reign of global plutocrats—these things don’t just happen on their own. They require work, and they require workers. Those workers and their clients are now catching some sunshine through the haze of the Panama Papers. Harrington’s work may leave some burnt.