Panama papers: Reaction to the massive data leak from law firm Mossack Fonseca detailing how global elite protect their riches

Caitlin Morrison
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Companies and people linked to the tax evasion and money laundering allegations in the data leak could face prosecution (Source: Getty)

News that a number of world leaders, as well as other global public figures, have been linked to tax evasion and money laundering has been met with calls for a crackdown on secretive international financial systems.

A leak of 11m documents from Panamian law firm Mossack Fonseca has revealed that the company has helped clients launder money, dodge sanctions, and evade tax.

Anti-corruption group Transparency International (TI) said the data leak reinforces existing evidence that "a cadre of corrupt politicians, public officials and business people are exploiting loopholes in the global financial system to launder and protect their illicit wealth" and called on governments and companies to take action.

“The Panama Papers seem to confirm the evidence from elsewhere that the world's corrupt elite are gaming the international financial system to launder and protect their stolen wealth,” said TI executive director Robert Barrington.

“The only way to stop this grand corruption is through governments, businesses and others coming together and rejecting dirty cash as illegitimate. The time has come to stop turning a blind eye to anonymous purchases of luxury property and goods, refuse to issue un-vetted investment visas and create a legal framework that is fit for purpose in detecting flows of dirty cash.”

Prime Minister David Cameron could use the data leak to his advantage, according to Dan Hough, Professor of politics at the University of Sussex.

"This might be David Cameron’s best opportunity to leave something akin to a lasting legacy," he said.

"That the rich and powerful appear to be able to act largely anonymously while squirrelling their wealth away from prying eyes should be deeply troubling to anyone who believes that transparency is the best disinfectant against corruption, fraud and tax evasion. And here David Cameron in particular has an opportunity."

Given both the size of the UK’s financial services sector and the fact that many of the tax havens that the likes of Mossack Fonseca use fall under UK jurisdiction, the UK government has an opportunity to push others in to a corner and make a difference.

Cameron has called for an international anti-corruption summit in London in May, which Hough said could be the perfect opportunity to push for stricter rules around beneficial owners - and for countries to commit to implementing legislation on corruption.

Hough added: "The UK will inevitably be at the centre of pushing for, or kicking back against, changes in international financial regulations. Cameron has the choice between watching and worrying from the sidelines, or seeing the Mossack Fonseca case for what it really is – a wake up call to try and finally do something about the long outdated rules and regulations that shape international financial transactions."

Meanwhile, legal experts have warned that if the data links UK nationals and companies to criminal activity they could face prosecution under British law - even though the crimes may have occurred offshore.

"If the leaked files evidence criminal activity then UK nationals, and potentially companies, who deal with funds that flowed from those crimes could face prosecution for money laundering in the UK even if all conduct occurred offshore. If corruption has occurred the Bribery Act could again allow UK courts to prosecute people for foreign conduct," said Jeremy Summers, head of business crime at international law firm Osborne Clarke.

And Philip Rogers, head of emerging markets at Brown Rudnick's corporate practice, said there will be "an obligation" to look behind any offshore companies which hold shares in UK companies and disclose beneficial owners of more than 25 per cent, as well as at the people who have ‘significant control’ of such companies.

"Failure to do so will be a criminal offence," Rogers warned.

New obligations around disclosing persons with significant control (PSC) of companies and LLPs come into play from Wednesday this week, and Rogers said the changes "should lead to simpler holding structures which cannot be a bad thing and they will make customer checks easier for banks and other regulated entities".

"At the same time, life is clearly getting tougher for those wanting to hide as soon as they have a UK company in their group,” he added.

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