ICT Views

Paradise lost: new data leak and familiar concerns

by: (Editorial Manager) on

The response to last Sunday’s Paradise Papers leak has been curiously muted and subdued. Gone is the impassioned indignation that greeted last year’s Panama Papers. The Guardian, lamenting the lack of reaction, summarised the public response as ‘tepid’. Why is this the case?

Part of the reason for this is simply burnout: private data is now leaked into the public domain with such frequency that it has become almost common place. When such leaks become routine, they are easier to ignore, and can breed cynicism – a shrug of the shoulders that accompanies another anvil-sized data dump.

With the former British head of FATF named as the beneficiary of a trust based offshore, such attitudes are perhaps understandable. But it is incumbent upon those on the front line of anti money laundering not to adopt this position.

A statistic recently revealed in a report by Transparency International should work as an antidote to any feelings of resignation: over the last 14 years, £80 billion has been involved in over 50 money laundering cases involving British shell companies.

Elliot Bay Marina Aerial View - Seattle Washington -586738656The report also voices concerns over the supervision of Trust and Companies Service Providers (TCSPs). In addition, the report noted that 766 companies allegedly involved in money laundering were registered to just eight UK addresses. 

Looking outside the UK we get a vivid illustration of the damage that illicit money flows through offshore financial centres can facilitate.  

Appleby, the firm from which the Paradise Papers were leaked, operated 17 offshore companies for the Brazilian conglomerate Odebrecht, a company synonymous with Operation Car Wash, the operation to uncover huge, endemic corruption at the top of Brazilian political and business life, which is still rumbling on in the country and across South America.

It is alleged that at least one of the 17 companies established by Appleby was used to hold money used for paying bribes to Brazilian politicians. The fallout from Operation Car Wash has done substantial damage to the Brazilian economy, and is a stark reminder of how money laundering is facilitated by offshore tax havens.

But then this is all familiar territory. The Azerbaijani and Russian Laundromats, the Panama Papers and WikiLeaks all drew back the curtain on the tax arrangements of the superrich – so where do we go from here?      

EU officials have already floated the idea of a tax blacklist, an idea somewhat blunted by the fact that it would be made up of non-EU countries only to appease nations within the EU with lower corporate tax rates.

The challenges of identifying ultimate beneficial owners (UBOs) was an issue that International Compliance Training raised over a year ago when the Panama Papers were leaked. The EU has begun infringement proceedings on countries that are yet to transpose the fourth anti money laundering directive (4AMLD), which includes requirements for companies to hold information on UBOs.

It seems that AML professionals are holding up their end of the agreement when it comes to meeting standards set by regulators – it’s now time for governments to pull their weight, too. 


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