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The Panama Papers: what they tell us, why they matter and what can be done

Written by Robert Barrington on Tuesday, 5 April 2016

Transparency International UK will on Thursday be publishing a detailed analysis of the UK’s role in relation to corruption as revealed in the Panama Papers.  Here is a glimpse of the findings and the key recommendations.

The Panama Papers could transform the landscape of the way in which the world tackles corruption.  Why are they so significant?  It’s true that in some senses, the Panama Papers do not reveal much that is new.  This is familiar territory for Transparency International:  trusts and companies being created for the purposes of secrecy; the use of those companies by people seeking to hide illicit funds; the links to multiple jurisdictions including the UK’s own Overseas Territories; and the facilitation of these transactions by banks, lawyers and accountants.

What the Panama Papers do tell us

However, four things do stand out:

  1. The scale.  It’s a big leak, and it shows how vast is this industry of secrecy and hiding money.  It has been argued – not least by the tax havens themselves – that there is nothing wrong with providing secrecy, and it allows people privacy.  The scale of this leak has shifted the question away from whether there is a legitimate use of such structures, to whether the vast scale of abuse can still be tolerated.
  2. The names.  Political leaders all over the world, including those in Russia and China, are cited as having accounts and shell companies through which many billions have been laundered.  There is no hiding from the fact that much of the money is corrupt: diverted from public funds, the relentless accumulation of bribes, or one of the other standard schemes that corrupt politicians, public officials and business people have refined over the years.
  3. The professional enablers.  It is striking that the law firm in question has a thick veneer of respectability, and even now is denying any wrongdoing.  Yet it is clear that the professional enablers – law firms, accountants, banks and trust & company service providers  – have their fingerprints all over these illicit transactions.  Those firms, and the authorities that license them, need to think long and hard about whether they have got the balance right between doing whatever a rich client might want, and the historical ethics of their profession.
  4. The UK connection.  It’s an uncomfortable fact that more than fifty percent of the entities implicated are registered in the British Overseas Territories and Crown Dependencies, and that professional enablers from the UK were the second biggest users of Mossack Fonsecca’s services.

A game-changer: revealing the system as fundamentally corrupt

So although the Panama Papers don’t tell us much about the system that we did not already know, they do reveal an important truth: this  is not a fundamentally benign system that has been eroded at the edges by a few criminals, it is has become a system with deeply-ingrained criminality that is now operated in the interests of the world’s corrupt elite.  They are gaming the global financial system to launder and protect their illicit funds.  In this respect, the Panama Papers, and the sense of public outrage, might well be a game-changer.   They should provide a turning point in generating the political will to address the abuse that has gone unchecked for so long.

Why they matter

It is worthwhile remembering what that abuse means – what is the impact of corrupt funds being laundered through Panama and the UK’s Overseas Territories and Crown Dependencies.  Here are three examples*:

  • Funds that should have been spent on life-saving HIV treatments in Africa being diverted through Panama to the British Virgin Islands by a health official who obtained their position due to political patronage and not through any qualifications in public health
  • Bribes paid by a large European company to a senior politician, ensuring that the corrupt politician stays in power and continues to run a key ministry in their own private interests, raking off money and dispensing patronage to corrupt supporters
  • Infrastructure that should be vital for the economic development for an Asian country being half-built, with a substantial proportion of the funds diverted by public officials to their own offshore bank accounts.

What can be done – eight recommendations

Transparency International has been highlighting the vulnerabilities in the global financial system for at least a decade, and that means some of the solutions to these problems are now well known.  The question is whether the UK and other countries have the political will to implement them.  The good news is that the government was already planning an anti-corruption Summit in May, which presents the perfect opportunity to act – if there is political will.

Here are eight things the UK and others could be doing to close down the loopholes highlighted in the Panama Papers, seize corrupt assets, and help to end the impunity enjoyed by the world’s corrupt elite.  It may look like a long list, but we believe the Summit can achieve UK action on all of these, and build a broader international consensus around the underlying principles for application in other countries that attend the Summit.

Recommendation 1: Overhaul the supervisory regime for the UK’s Anti-Money Laundering (AML) rules, notably for professional enablers

The UK Government should consolidate the patchwork of AML supervisors and consider introducing a single ‘super-supervisor’. It should also ensure supervisors meet the good practice standards of transparent enforcement, risk-based regulation, the separation of commercial and regulatory interests, and guaranteeing that the UK is effectively implementing the Financial Action Task Force (FATF) standard regarding professional enablers.

Recommendation 2: Ensure adequate levels of enforcement against money laundering

AML supervisors should have adequate resources and tools to provide a credible deterrent against money laundering, including punitive sanctions and personal liability for professional enablers with regard to AML failings.

Recommendation 3: Prosecute and de-license professional enablers

The UK Government should establish more effective administrative sanctions on professional enablers by encouraging professional bodies to withdraw professional licenses from those implicated in cases of money laundering, in addition to prosecuting those who are personally involved.

Recommendation 4: Extend corporate beneficial ownership transparency

The UK Government should introduce legislation that would require foreign companies wishing to purchase UK property or bid for public contracts to disclose their beneficial owners.

Recommendation 5: Ensure the UK’s Overseas Territories and Crown Dependencies introduce centralised public registers of beneficial ownership

The beneficial ownership standards in the UK’s Crown Dependencies and Overseas Territories should be brought in line with those in the UK: there should be central, public registers of beneficial ownership to allow investigations, public scrutiny and accountability. The UK Government should proactively assist with implementing these registers as a matter of priority.

Recommendation 6: Act on unexplained wealth by increasing the capabilities of the UK’s asset recovery system to seize corrupt funds

To recover more stolen assets, the UK Government should introduce legislation containing powers for issuing Unexplained Wealth Orders. This civil mechanism would allow for easier and quicker freezing of corrupt assets without relying on predicate offences in foreign jurisdictions or assistance from uncooperative origin states. Consideration should also be given to a new law on Illicit Enrichment.

Recommendation 7: Develop accountable asset recovery agreements with cooperative jurisdictions

The UK Government should work with countries to achieve ‘accountable’ and transparent asset recovery against corrupt fugitives in the UK. These should enshrine effective intelligence sharing, civil recovery, and accountable and transparent asset repatriation.

Recommendation 8: Prevent corrupt individuals entering the UK and laundering their funds through the Tier 1 (Investor) visa system

The Home Office should bring full transparency to the Tier 1 (Investor) visa system, with public disclosures of who is investing, how much they are investing, what they are investing in and their financial interests and assets. Upfront declarations should be required for Politically Exposed Persons and public officials who should expect to meet a high level of transparency, even after they have left office.  Retrospective checks should be undertaken on historical Tier 1 (Investor) visas that were granted in the ‘blind faith’ period and consideration given to publishing their details.


These actions will take time.  And they cannot happen in a vacuum.  The UK has a national Anti-Corruption Plan, published in December 2014.  Now is the time for a coherent, long-term, National Anti-Corruption Strategy.

Finally, a recommendation to any individual who feels that their wealth is both legitimate and private: keep it in a bank account in the UK.  If you have nothing to hide, this will give you privacy without the need to set up complex structures in offshore jurisdictions.  If you want to maximise your tax advantages, then of course you can still use an offshore structure.  But the price for doing so is likely to be that it will be more open and less secret.  Purely on the issue of tax avoidance, we may as a result of Panama be moving into an era in which tax avoiders no longer have it both ways: either you pay the same tax as everyone else, and keep that private, or you avoid paying tax and have that known.

*note – these are hypothetical examples based on real-life case studies.

Click here to read and download the report


For more information on global anti-bribery and corruption best practice visit our free-to-use online Global Anti-Bribery Guidance Portal


Read 1624 times Last modified on Thursday, 07 March 2019 14:00

Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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