Mellody: These accounts get so much attention because they are often used to hide assets and shelter funds from taxes. Unlike most other countries, the U.S. taxes its citizens on all income, regardless of where it is earned or where they live, and many people try to avoid their tax burden by hiding income in shell companies or hidden accounts.
Other uses include money laundering – many of these offshore structures are used to launder money from illicit activities such as arms sales, drug sales, or other money made illegally – or hiding money obtained through corruption.
Tom: What will come of this leak?
Mellody: That really remains to be seen, Tom. We have already seen one democratic leader resign over this, and the pressure is building on many politicians in the UK and in Ukraine. And we have yet to see any Americans named in this leak, which is certain to change. Now, we are beginning to see calls for an international conference to push through policy changes that will close loopholes and bring greater transparency to the international banking system. The scale of the leak suggests that this story will play out over weeks, months and years, so stay tuned tom.
Tom: We certainly will. Thanks for joining us, Mellody.
Mellody: You are welcome, Tom.
Mellody is president of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS news and CBS.com.
Money Mondays: What You Should Know About The Panama Papers was originally published on blackamericaweb.com