Responding to the Panama Papers

Next Steps

The leak – regarded as the largest of its type in history – of 11.5m documents reportedly covers almost a 40-year period and includes emails, financial spreadsheets, passports and corporate records. With regulatory, government and public scrutiny increasing following the immediate investigatory actions, institutions need to consider how best to establish a sustainable response as new information emerges. Understanding the issues Possible implications for financial institutions

The ICIJ has recognised that there are legitimate uses for offshore structures of the type offered by Mossack Fonseca and many other firms.

Private Investment Companies (PICs) and other small entity structures are a core aspect of the wealth structuring arrangements of many wealthy individuals. Therefore, catering to their banking and investment needs is a cornerstone of the private banking and wealth management industry.

Many of these structures are not intrinsically good or bad per se – consideration needs to be given to the intentions and actions of the underlying beneficial owner(s).

Much work in this area has been done by financial institutions over recent years – e.g., in the field of identification of beneficial ownership, exiting or risk mitigation of bearer share structures, and triage for FATCA purposes.

However, the media and political climate in relation to offshore arrangements is highly charged. Financial Institutions therefore need to consider urgent questions of reputational risk and internal and external communication strategy, alongside immediate questions of client and regulatory risk.

Beyond the Panama Papers, financial institutions now need to build on the extensive work already done, and consider their long-term approach to offshore arrangements, within the framework of a global anti-evasion programme and, especially, under the developing provisions of Anti-Money Laundering (AML) regulations.

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