The Panama Papers is the name given to a leaked database of the Panama law firm, Mossack Fonseca. The law firm is the fourth largest offshore firm worldwide and its focus is on incorporating offshore businesses and opening offshore accounts. The Panama Papers which were leaked include extensive details, including the names of accountholders and information on how corporations were created and how money was moved.

The United States government and governments worldwide have been cracking down in recent years on offshore accountholders who are not reporting their offshore investment income or paying taxes on the income.  There have been numerous settlements with Swiss Banks through which the Department of Justice has gleaned extensive information on offshore banking practices. Now, however, the unauthorized release of 11 million documents, which is being called The Panama Papers, has revealed a treasure-trove of information about offshore banking practices.

Bank J. Safra Sarasin AG allegedly helped to facilitate tax evasion by U.S. citizens. The Swiss bank helped U.S. clients title their offshore accounts in the names of Panama corporations and it falsely signed IRS forms certifying these accounts were owned by Panama entities so U.S. taxpayers wouldn't have to report them. The bank also helped set up nominee entities for U.S.-connected accounts which were undeclared. When the bank came under suspicion for these and other efforts at aiding in tax evasion, it helped U.S.-connected accountholders transfer money to other offshore banks in Israel, Liechtenstein and Hong Kong.

If you had money offshore and didn't file annual Reports of Foreign Bank and Financial Accounts (FBARs), you could find yourself facing penalties imposed by the Internal Revenue Service (IRS). Banks are cooperating with the IRS and giving detailed account information about people with offshore funds.  If the IRS determines you failed to follow the rules for reporting offshore accounts and paying taxes on income, there's the potential for criminal consequences.

Switzerland has long been the location where U.S. investors keep funds offshore because of strong banking privacy laws. With the Swiss Bank Program and the Department of Justice crackdown on Swiss institutions, however, this is no longer the case.