The Laundromat: Greed, for want of a better word, is everywhere
Modern limited liability companies were created by New York State in 1811, and the concept took the US and then the world by storm. Before limited liability, shareholders were on the hook personally – even to the extent of going to debtors’ prison – if a company they invested in failed. This incentivized shareholders to only invest in companies where they trusted the management and normally knew them personally.
Steven Soderbergh’s new film, now out on Netflix, makes the case that this thread of trust which once bound investors and their investments together has become so stretched through a kind of international cat’s cradle of ever-more-sophisticated corporate structures that it might as well have snapped.
The film, loosely based on some of the many vivid stories which accompanied the 2015 leak of the so-called Panama Papers, a trove of sensitive internal documentation from Panama law firm Mossack Fonseca, weaves together three stories. In one, Meryl Streep is bilked by a shell company insurance firm after her husband dies in a boat accident. In another, a daughter of an African plutocrat gets a shell company as compensation for having her family idyll destroyed. The final chapter dramatizes the final hours of Neil Heywood (“Maywood” in the film), a British adventurer in China who was poisoned in 2011 by his partners in crime.
The sketch-like mixing of stories is overlaid with some gleeful fourth-wall breaking commentary from the ostensible facilitators of this world, Gary Oldman as Jurgen Mossack and Antonio Banderas’ Ramón Fonseca. At one point they even tell us that “the director of this movie” has five shell companies.
Oldman and Banderas are having so much fun it seems unhip to feel sorry for their customer and victims. Few of the characters in the film come off smelling of roses. In fact, greed (or at least our unquestioned thirst for money) pervades every story and plotline: from David Schwimmer’s attempts at thrift leading him to insure his company via a fraudulent shell company, to the (very American) translation of tragedy into the universal language of a lawsuit and payout in an attempt to gain redress, to the way that reality dawns on a furious daughter that her father is trying – and succeeding – at paying her off for his bad behavior. Only Streep’s everywoman widow situates her experience outside of the frame of reference of dollars and cents, raging that “the world is just men hiding behind piles of paper!”.
What can the compliance industry learn from the film? First, this is not a forensic analysis. Oldman and Banderas give a potted history of the history of money but it’s hard to remember exactly how exactly the barter system worked when you are faced with a selection of eveningwear and accents as exotic as the duo put on display. If you want detail, go and watch the 2018 documentary The Panama Papers.
Second, the film is vague about the reasons the offshore world thrives and bludgeons its message home as a “haves vs have-nots” narrative, in particular focusing on tax evasion. This misses some of the other reasons that AML practitioners should be concerned about offshore vehicles: their convenience as a store of illegitimate gains or bribes, their use as stashes of cash hidden from spouses and family, and for concealment of conflicts of interest.
But possibly the most provocative point that the film makes is that risk doesn’t just live on a palm-shaded beach. Instead it’s the limited companies – 200,000 new ones born every year – that are registered in the small state of Delaware. Not only is the genie out of the bottle, but he has moved in next door.
David is a former investigator who has advised banks, law firms and leading multinationals on corruption, fraud, money-laundering and other risks. He is a regular speaker on the use of technology for collection, analysis and reporting in a KYC/AML context. He graduated from Oxford University.