The news item that’s caused the most buzz in the anticorruption community in the past month is likely the bombshell release of the so-called “Panama Papers” (though the initiation of impeachment proceedings against Brazilian President Dilma Rousseff runs a close second). Most readers of this blog probably don’t need much explanation of the Panama Papers or their significance. These documents, leaked from Panamanian law firm Mossack Fonseca to the International Consortium of Investigative Journalists, reveal how a very large number of very wealthy individuals, including many senior government officials and their close associates, have made use of middlemen, shell companies, obscure corporate secrecy rules, and other legal techniques to conceal their wealth from tax authorities, law enforcement, and the general public. (Rick’s post from a few weeks ago usefully highlights some of the most important legal loopholes that Mossack Fonseca helped its clients exploit.) Though in some cases the assets in question may have been acquired legitimately, in many cases they probably weren’t. And while it’s not entirely clear whether Mossack Fonseca broke any laws in assisting its clients, the whole affair is a window into the shadowy and often sordid practices that the very wealthy—including corrupt public officials and their cronies—use to hide their assets.

I haven’t yet weighed in on the Panama Papers brouhaha on this blog, mainly because I’m not sure what there is to say. On the one hand, the Panama Papers leaks are hugely consequential for at least two reasons: First, the identification of specific individuals—in addition to feeding our collective appetite for celebrity gossip—is likely to be important for holding those individuals legally or politically accountable. (And indeed, the release of the Panama Papers has already forced the resignation of Iceland’s former Prime Minister Davio Gunnlaugsson.) Second, the Panama Papers revelations have gotten a great deal of mainstream media attention, including front-page coverage on major newspapers and prominent discussions elsewhere. This may well help build momentum for efforts that anticorruption activists and others have been pushing for some time (such as crackdowns on corporate secrecy, closing gaps in the international money laundering regime, and other matters). Yet at the same time, individual names aside, it’s not clear that the Panama Papers revelations have told the anticorruption community anything that wasn’t already widely known (or at least strongly suspected): That corrupt leaders, and plenty of others with an interest in hiding their assets, take advantage of lax or uneven regulatory oversight, combined with networks of shell companies. So, while the added publicity is a boon, and the identification of individuals is necessary (though of course not sufficient) to holding them accountable, I’m not entirely sure whether the Panama Papers revelations have told us all that much that’s new. Of course, we still have a lot to learn from these documents—many of which haven’t yet been published—and I would be lying if I said I’d studied what has been released carefully enough to have any strong opinions. But I’ve been struggling to come up with something interesting to say about the Panama Papers, and mostly coming up empty.

There is, however, one thing about these revelations did strike me as potentially interesting, which I haven’t seen discussed in the coverage of the Panama Papers that I’ve read so far, so I thought I’d throw it out here to see what other people think:

Here’s the preliminary observation: Mossack Fonseca seems to have had a lot of clients for its asset-hiding services. These clients come from all over the world—Europe, North America, Russia, China, Central Asia, South and Southeast Asia, Central and South America, the Middle East, Africa, Australia, you name it. Now, maybe that’s not in and of itself that surprising, since Mossack Fonseca, though based in Panama, is an international firm with offices in many countries. But it still struck me as somewhat unexpected. My prior beliefs—if you’d asked me the day before the Panama Papers stories came out—were that there were probably hundreds of firms providing the kinds of services that Mossack Fonseca was allegedly providing to its clients. In other words, I had assumed that this was a market with a great deal of competition, such that each firm involved would only have a relatively small market share. But my very unscientific impression, based on the news stories so far, is that Mossack Fonseca’s share of this market was fairly sizeable.

Now, that’s just a guess. I don’t really know the total size of this market, and Mossack Fonseca’s client list is not yet fully public. But I do think there’s at least the possibility that, rather than a market with a very large number of players—essentially interchangeable, with stiff competition—the market for providing asset-concealment services may be dominated by a relatively small number of sophisticated players (Mossack Fonseca among them). Maybe, instead of hundreds of firms willing and able to do what Mossack Fonseca did for its clients, there are only a few dozen. At the moment, I have no idea which is closer to the truth, but it seems like it might be a question worth asking.

Does the answer to that question matter, beyond the satisfaction of intellectual curiosity? It might, insofar as the most appropriate and effective legal-regulatory response might depend on whether we’re dealing with a very large number of service providers (such that focusing attention on individual firms might prove the regulatory equivalent of whack-a-mole) or a relatively small number of “gatekeeper” firms, which we might be able to identify and scrutinize. Indeed, it might be that the perception that we’re facing the former situation creates a counterproductive sense of despair, when in fact we can make a fair amount of progress by targeting a few “bad apples.” An analogy: New York City in the 1970s and 1980s was plagued by so-called “squeegee men”—people who would approach stopped cars at intersections, give them a perfunctory and unrequested windshield-wipe with a dirty squeegee, and then demand payment (and threaten retaliation if none was forthcoming). It seemed to New Yorkers that there were hundreds and hundreds of these squeegee men throughout the city. As it turned out—when the city began cracking down in the early 1990s—there were only about 75 of them total. This made them fairly easy to eliminate, once the city decided that it would no longer tolerate their activities.

Yes, I realize it’s a flawed analogy in many respects. Taking action against law firms providing asset-hiding services is not like arresting squeegee men on street corners, especially in light of the fact that, sleazy as the Panama Papers revelations may be, firms like Mossack Fonseca might also often provide services that are (appropriately) legal. But I do think law enforcement strategies might look different if we’re dealing with a market with a relatively small number of providers, at least at certain crucial bottlenecks. In fact, it wouldn’t surprise me if, in super-elite circles that include many heads of state who have professed their desire to crack down on tax evasion and money laundering, it’s already pretty widely known which are the go-to firms for setting up confidential offshore accounts, anonymous shell companies, and the like. Perhaps one step the anticorruption activist community might take in is to try to generate a list of the international firms that are known to provide the same sorts of services that Mossack Fonseca was apparently providing? I’d be curious how many firms would be on that list…