Panama Papers reveal billions hidden in anonymous paper shares

The Panama Papers revealed various complex, labyrinthine ways in which the world's wealthy have tried to distance themselves from their money, but one of the most common is surprisingly simple: paper stock certificates, long the preferred choice of money launderers and tax evaders and only recently banned in many jurisdictions.

Until recently, bearer shares were the favoured method of remaining anonymous when hiding wealth, assets

Firms like Mossack Fonseca help the wealthy set up shell companies to shelter their assets. A common way to disassociate the companies from their true owners was to have the corporation issue bearer shares rather than registered shares. The paper share certificates carry all the benefits of registered shares, such as voting rights and dividends, but are not tied to a named owner. They belong to whoever has them in hand. (Joe Raedle/Getty Images)

The Panama Papers chronicle various complex, labyrinthine ways in which the world's wealthy tried to distance themselves from their money, but one of the most common is surprisingly simple: paper stock certificates.

That's right, like the ones your grandmother has under the bed along with the gold bullion in preparation for that proverbial rainy day. Except in the Panama Papers, their intended use was less rainy day, more cloud cover.

Unlike the registered shares most people are familiar with, which are logged in an electronic company register along with the name of the person who owns them, bearer shares are paper certificates that belong to whoever is holding them at the time — literally. That makes it easy to conceal who exactly owns a corporation and to transfer ownership.

It also makes the shares easy to lose.

German billionaire Joachim zu Baldernach was reportedly frantic when he couldn't locate one of his bearer shares, according to the Sueddeutsche Zeitung, the German newspaper that received the trove of 11.5 million leaked files, from Panamanian corporate services firm Mossack Fonseca, that makes up the Panama Papers.

Ian Cameron's investment fund, Blairmore Holdings, was incorporated in Panama, one of the last offshore jurisdictions to ban bearer shares. Leaked documents from Mossack Fonseca reveal that Cameron, right, was worried that his company's paper share certificates would be lost or stolen. The company had hundreds of investors, according to the Guardian, including Cameron's son David, who sold his shares before becoming prime minister of Britain. (Toby Melville/Reuters)

"Wherever he looked, whichever drawer, file or cabinet he opened, it was nowhere to be found," the paper reported.

Ian Cameron, the late father of British Prime Minister David Cameronreportedly had to count stacks of paper certificates belonging to hundreds of investors in his Bahamas-based, Panama-incorporated offshore investment fund Blairmore Holdings to make sure all were accounted for. The fund kept more than two million bearer shares in a bank safe in Nassau, with no official record of who owned them. 

'Vulnerable to misuse'

While there are legitimate uses for bearer shares, such as passing on inheritance without the hassle of the probate process, avoiding administrative costs and maintaining privacy for valid reasons such as risk to personal security, the high degree of anonymity and the ease of transferability they allow "makes them vulnerable to misuse," an OECD report concluded as far back as 2001.

Pesme, World Bank Group

"Public authorities need to be able to have access to who owns and controls companies at any time so that if they want to make checks on whether the use of the company is legitimate, where the assets are and who controls them and whether the company itself or the controllers of the company pay their tax," says Jean Pesme, practice manager for financial systems and markets at the World Bank Group in Washington, D.C.

"That's where the tension with the bearer share comes in immediately because … at every moment, you can transfer ownership just by giving the paper to your neighbour."

For the average person, paper share certificates are novelty items, but for the wealthy individuals named in the Panama Papers, they were a handy way of maintaining anonymity while controlling vast amounts of wealth in offshore companies. (Reuters)

Bearer shares have existed in common and civil law jurisdictions for centuries, but it's only in the last 15 years or so that they've been identified as a favourite tool of money launderers and tax evaders and targeted by those trying to stamp out those practices, such as the global Financial Action Task Force.

"There were so many instances where they came up in money laundering schemes that the risk balance changed, and that was the basis for policy action," Pesme said.

Common practice

It's a safe bet that anyone who set up a so-called international business company, or IBC, in one of the world's tax havens prior to the early 2000s had the option of issuing bearer shares.

In 2002, for example, virtually all of the 380,000 active IBCs operating in the British Virgin Islands had the power to issue bearer shares, according to the territory's Financial Services Commission.

Sharman, Centre for Governance and Public Policy, Griffith University

In its unravelling of the 214,000 shell companies Mossack Fonseca helped set up between 1977 and 2015, the Guardian newspaper linked at least 700 U.K. properties, worth billions of dollars, to offshore companies owned through bearer shares.

"Until 10 or 15 years ago, almost all jurisdictions offered them — both tax havens and 'normal' countries," said Jason Sharman, deputy director for the Centre for Governance and Public Policy at Griffith University in Brisbane, Australia.

Australian researcher Jason Sharman found several corporate service providers in OECD countries (and a few in offshore jurisdictions) that were willing to set up shell companies for him without ever asking him for proof of identification, but banks were less willing to deal with him anonymously. (Jason Sharman/Griffith University)

"From about 2003, 2005, tax havens came under a lot of pressure to get rid of bearer shares, and most of them either got rid of them or did a thing called immobilizing them, which kind of amounted to the same thing, but OECD countries did not come under similar pressure, so got rid of them a lot later."

Immobilizing bearer shares means storing them with a custodian — usually a lawyer, a bank or corporate services firm — who keeps a record of who owns them and any transfers of ownership. Some jurisdictions simply required all bearer shares to be converted to registered form.

As part of its investigation into the Panama Papers, the International Consortium of Investigative Journalists found that, as offshore jurisdictions such as the British Virgin Islands and the Bahamas phased out bearer shares, Mossack Fonseca clients shifted their companies to Panama, where bearer shares were allowed up until the end of last year.

Bearer shares out of fashion

Today, most jurisdictions have outlawed bearer shares, but many OECD countries only did so recently. The U.K. and Switzerland banned them last year; Luxembourg and Ireland in 2014. Up until 2007, Wyoming and Nevada had no laws expressly barring bearer shares, which made the states a favoured destination for incorporating shell companies.

Canada's Business Corporations Act states that "shares of a corporation shall be in registered form," and in 2015, the federal government contemplated adding an "explicit ban on bearer instruments" but never did, which means bearer bonds, for example, are allowed. Some provincially incorporated companies, such as those in Nova Scotia, can issue bearer shares.

A bearer share in the amount of $1 US from the Seychelles-based corporation Sharman set up as an experiment. He bought the corporation, complete with a Cyprus-based bank account, from a firm in Singapore that purchased it from a wholesale provider of so-called shelf companies in Hong Kong. The whole thing cost him about $2,600. (Jason Sharman)

Panama gave corporations until Dec. 31, 2015, to convert all bearer shares to registered shares or appoint a custodian.

"You can still issue bearer shares, but the point of doing so has disappeared because you can't actually keep them yourself," said Sharman. 

In an interview with CBC News, the owner of a small law firm that sets up offshore companies in Panama said about 80 per cent of the firm's 700 active clients had bearer shares, and most have opted to convert them to registered shares.

Tracking down all those paper certificates can be a challenge, however, and most jurisdictions give companies about a year or two to make the change.

"I have a couple of clients … they've never gotten back to me, and at some stage, they're going to completely freak out," said the Panamanian lawyer, who did not want to be identified.

Panama, above, was the last holdout among offshore jurisdictions when it came to outlawing bearer shares, but generally, so-called tax havens were quicker to eliminate the paper shares than many OECD countries. (Joe Raedle/Getty Images)

She said most of her clients used bearer shares to hold real estate they want to be able to easily pass down to their children or sell for profit.

"In Panama, it's illegal for a foreigner to own beachfront property. The easiest way to get around that is the corporation owns the beachfront property, therefore it's a Panamanian owner, and a foreigner owns the shares of the corporation," she said.

Many legal ways to stay anonymous

These days, most big banks won't deal with bearer share companies or will insist on identifying the owner and taking custody of the shares.

In his own field research, Sharman managed to set up several anonymous shell companies with bearer shares without ever having to prove his identity, but getting a corporate bank account without proper identification proved more difficult.

"Bearer share companies have gotten less and less useful simply because you can't link them to a bank account anymore," he said.

There are still plenty of other ways to remain anonymous when hiding wealth, however, including:

  • Nominee shareholders and directors — hired front men of sorts who run your company on paper while you, the beneficial owner, retain control at a distance.
  • Trusts, which are not as heavily regulated as corporations and afford greater anonymity by transferring legal ownership to a trustee.
  • Shelf companies. Dormant companies with inactive shareholders and directors bought "off the shelf" from a corporate service provider for as little as a few thousand dollars. They provide a ready-made corporate structure, complete with a tax and credit history and in some cases a bank account. Often, the transfer of ownership is never officially registered, rendering it nearly impossible to track down the real owner.
  • Tiered corporate structures. Setting up multiple, interconnected companies across several jurisdictions has proven effective at disguising ownership since unravelling the layers takes significant time, money and expertise.

These perfectly legal entities offer almost as much anonymity as bearer shares. 

"At least," says Sharman, "until your offshore provider loses all its files."


Kazi Stastna

Senior Producer

Kazi Stastna is a senior producer with She has worked as a features writer and copy editor with CBC's digital news team for over a decade. Prior to that, she was at the Montreal Gazette and worked as a reporter and editor in Germany and the Czech Republic.