#Panama Papers: the Lingering Need to Contain Illicit Cash Flows, By Porter McConnell
The massive investigation, which turns one year old today, brought the discussion of transparency to new heights, but much remains to be done to actually tackle the murky world of offshore finance.
One hundred and fifty investigations in 79 countries, thousands of companies and taxpayers under the microscope, and growing cries for transparency from the public.
These were just some of the byproducts of journalism’s biggest data leak, which came to be known as the Panama Papers. The massive investigation, which turns one year old today, brought the discussion of transparency to new heights, but much remains to be done to actually tackle the murky world of offshore finance.
The Panama Papers reaffirmed a glaring truth—how incredibly easy it is to set up an anonymous company, one where the real owners are hidden from view. This secrecy has shielded wealthy elites, corrupt lawmakers, and criminals for years, giving them an easy method of covering their tracks. In fact, the World Bank found that anonymous shell companies were used in 70 percent of grand corruption cases it studied for its 2011 report, Puppet Masters.
The revelations seemingly touched on every region of the world, from politicians in Nigeria to the prime minister of Iceland. Though reactions to the investigation ranged from outrage to apathy, depending on the country, it’s undeniable that governments took notice. Some even made high profile commitments to increased transparency.
But despite being a full year removed from the revelations, in most places in the world it hasn’t gotten any harder to set up an anonymous company to hide your tracks. For the price of a lawyer and some incorporation fees, you still have a wide range of jurisdictions at your disposal.
It’s past time for politicians in the global north to recognise that corruption and tax abuse aren’t solely a ‘developing country problem.’ Banks in Europe and the U.S. continue to be the premier destination for illicit funds.
One policy solution that gained attention after Panama Papers is ending anonymous shell companies by requiring public registers of beneficial ownership information. These registers would require every company incorporated in a jurisdiction to disclose the real owner that is ultimately profiting from the company.
This data would give government officials, journalists, and civil society the power to track down abuses in the system and would act as a strong deterrent for anyone looking to game the system through a firm like Mossack Fonseca.
And after the Papers broke, we saw some governments make headway on this issue.
In May, South Africa announced that it would create a public register of beneficial ownership information, as part of its membership to the Open Government Partnership. And that same month, Nigeria, Kenya, and Ghana committed to the same at the London Anti-Corruption Summit. These commitments should be applauded, and it’s vital that civil society and journalists work to ensure that governments follow through on these commitments on time and in the spirit intended.
…until bastions of secrecy like the U.S. and the British overseas territories step up, there will still be plenty of places for illicit money to hide.
But there is a glaring omission from the world’s latest transparency epiphany: the most egregious secrecy jurisdictions are still at large.
When Sani Abacha allegedly moved millions out of the Nigeria, he didn’t stash the money in banks in Algeria or Tanzania. Instead, the U.S. Department of Justice traced the funds to accounts in the British Virgin Islands and the tiny island of Jersey. And the U.S. state of Delaware remains one of the easiest places in the world to open an anonymous company, serving as a conduit for criminals of all shapes and sizes, thanks to its lax disclosure laws.
It’s past time for politicians in the global north to recognise that corruption and tax abuse aren’t solely a ‘developing country problem.’ Banks in Europe and the U.S. continue to be the premier destination for illicit funds. When potential clients offer the right number of zeros, few questions are asked.
Commitments in the wake of Panama Papers are laudable, and will help move the barometer on transparency initiatives across the globe. But until bastions of secrecy like the U.S. and the British overseas territories step up, there will still be plenty of places for illicit money to hide.
Porter McConnell is the Director of the Financial Transparency Coalition, a global network working to curtail illicit financial flows through the promotion of a transparent, accountable, and sustainable financial system that works for everyone.