The Panama Papers: what’s next?

The Panama Papers: what’s next?

The need for corporate transparency on an international scale has never been so apparent, both from a business point of view and that of the public, since the so-called ‘Panama Papers’ leak involving Panamanian law firm Mossack Fonseca.  

The corporate lawyers at top Bahamas law firm ParrisWhittaker advise companies on issues relation to corporate transparency and other regulatory requirements.

Moves to increase corporate transparency across multiple jurisdictions have been ongoing for some years with Brussels, for instance, considering a mandatory public country-by-country reporting regime for all multinationals (there is already a similar system in place for banking and the extractive industries). 

In the US, the Treasury Department recently announced a customer due diligence final rule for financial institutions.   This rule contains explicit customer due diligence requirements and includes a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.  The Treasury has now asked Congress to pass a new law requiring companies formed within the US to file beneficial ownership information with the Treasury Department, saying: “The misuse of companies to hide beneficial ownership is a significant weakness in the U.S. anti-money laundering/counter financing of terrorism regime that can only be resolved by Congressional action.”

Many believe the Panama Papers is just the tip of the iceberg of corporations hiding assets and being less than transparent in their dealings.  Greater international cooperation between governments to drive forward corporate transparency and depress opaqueness is now likely to gain momentum.

What does this mean for us?

Firm with links to tax havens but which have not (and are not) behaving illegally have arguably borne the brunt of the fall out after the data leak.  According to research by INSEAD Knowledge (the expert opinion and management insights portal of INSEAD, The Business School for the World), links to tax havens cited in the Panama Papers lost more than US$220 billion in market capitalisation in the days after the leak – firms who were not necessarily acting illegally. INSEAD says more than 1,100 firms in its sample (it sampled 26,655 publicly traded firms from 73 countries), had at least one subsidiary in Panama, the British Virgin Islands, the Bahamas or the Seychelles

Investors and consumers have lost confidence in firms and individuals who have offshore shell companies, or who invest in offshore companies who have wrongly been considered corrupt. 

What’s clear is that corporate transparency is key to regaining confidence in firms.  With greater corporate transparency, the purpose behind a firm’s use of tax havens will be clearer – and those using them illegally will be less able to hide funds from shareholders.

Firms’ compliance officers, particularly in the financial industry and related professions, must sit up and take note of the implications of failing to work towards greater corporate transparency.

How can we help?

For expert, incisive legal advice on all matters relating to corporate and commercial law, including corporate transparency, contact the experienced corporate lawyers at ParrisWhittaker. Whatever your circumstances and however complex your issues, we are ready to act on your behalf.