A behind-the-curtain look at offshore accounts

The secretive world of offshore accounts is coming under scrutiny with the release of the "Panama Papers," an examination of more than 11.5 million documents that link politicians, actors and billionaires to offshore holdings.

It may come as a surprise to some Americans that so many offshore accounts continue to exist, given news over the past few years about new standards and crackdowns on their use. While it has gotten tougher for Americans to hide their money abroad -- and some Swiss banks won't do business with Americans because of the regulations -- not every country has agreed to the standards.

Some politicians who have disavowed corruption were revealed to be linked to offshore accounts, according to the International Consortium of Investigative Journalists (ICIJ), which released the documents. The revelations have already led to the ouster of one politician, Iceland Prime Minister Sigmundur Gunnlaugsson. He resigned after it came out that he owns an offshore company called Wintris, which prompted a massive demonstration outside the country's parliament.

"With scandals in Russia, China, UK, Iceland, Ukraine, and more, perhaps a new rule: if you're in charge of a country, keep your money in it," whistleblower Edward Snowden wrote in a tweet on Tuesday.

Despite the stigma of offshore accounts, businesses and the wealthy are likely to keep using them, given that many countries still turn a blind eye to the practice. Plus, offshore accounts in themselves aren't illegal. By one account, as much as $32 trillion may be hidden through more than 80 offshore jurisdictions.

Here are five things you should know about offshore accounts:

"Offshore" isn't a physical location.The term may conjure up the image of a balmy island where tax laws are lax, but it doesn't indicate an actual geographic location. Instead, the word refers to a system that taps networks of entities and structures that can cross borders and help hide money from tax authorities, according to the nonpartisan advocacy group the Tax Justice Network. For instance, a bank account might be located in Switzerland, but the legal structure that owns the account could be centered in another jurisdiction, while a trust located elsewhere could in turn own that structure.

For some, the ultimate goal is to tap into the range of protections these complex structures provide, from anonymity to hiding assets.

Offshore accounts aren't illegal or hard to open.Despite their links to secrecy and tax evasion, offshore accounts aren't actually illegal. Rich people in countries with political unrest or criminal threats such as kidnapping may tap them as a way to protect their assets legally, for instance.

As Planet Money detailed in 2012, it's not difficult to set up an offshore bank account, although doing it on the up-and-up comes with the expense of managing attorneys and accountants to make sure the holder is compliance with tax laws in dozens of countries. Setting it up requires only paperwork, identification such as a passport and processing fees, the financial podcast noted.

The Panama connection.While "offshore" isn't a single geographic location, certain countries make it easier to open accounts for offshore activity. These include the British Virgin Islands, Bermuda, Jersey, the Cayman Islands and Panama. The "Panama Papers" gained that moniker because the documents came from a Panamanian law firm called Mossack Fonseca & Co., which told the ICIJ that it has "never been accused or charged in connection with criminal wrongdoing."

Panama is "one of the world's sleaziest tax havens," Nicholas Shaxson, the author of the tax-haven book "Treasure Islands," told the Tax Justice Network. The group has rated Panama as one of the most secretive tax havens in the world.

What's hidden in offshore accounts.As much as $32 trillion in assets, according to an estimate from the Tax Justice Network. Top banks such as UBS (UBS) and HSBC (HSBC) requested offshore companies for their clients, according to the Panama Papers. The records provide tantalizing clues about political leaders' financial transactions, such as the millions of Icelandic bank bonds held during the country's banking crisis by Iceland's Gunnlaugsson. The ICIJ also said the documents reveal links to the 1983 Brink's-Mat heist at Heathrow Airport and show how as much as $2 billion was shifted between associates of Russian President Vladimir Putin.

How it affects inequality.The distribution of wealth between the rich and poor has been growing more lopsided for decades, and offshore accounts only exacerbate the problem, according to the Tax Justice Network. This secretive world has allowed the wealthy to expand their assets by shielding them from tax laws, which both erodes a country's tax base and creates an elite class with "a strong vested interest in pushing for weaker income and wealth taxation," the group noted.