Apr 4, 2016

Up the Canal Without a Paddle - The Panama Papers - The Biggest Data Leak In History

Mossack Fonseca ("Mossack") is a global law firm offering of a range of corporate services including the incorporation of companies in offshore jurisdictions and wealth management. The firm is headquartered in Panama City and operates in over 40 countries worldwide through its offices and a network of intermediaries. The firm is active in low tax jurisdictions such as the Isle of Man and the British Virgin Islands.  It has strong links with the United Kingdom.

Mossack is the subject of a massive data leak branded branded as the Panama Papers which has become global headline news.  It is reportedly the biggest data leak in history and one which has again brought tax evasion and company transparency to the forefront of the UK governments agenda.

The 'Panama Papers'

The Panama Papers can be summarised as 11.5 million documents (2.6 terabytes of information) which have been taken from Mossack's internal database and then leaked onto the internet. The leak is bigger than the WikiLeaks release of US diplomatic cables in 2010 and secret intelligence documents passed to journalists by Edward Snowden in 2013.

The documents reveal the company and its clients' dealings with offshore tax structures, which can be used legitimately, for example, for the purpose of defending funds from criminal raids and to avoid hard currency restrictions.  But they can also be used illegitimately, to avoid paying tax and 'launder' criminal money.

The leak is of global interest as it suggests links between 12 current or former heads of state and tax havens - bad news for want-to-be 'squeaky clean' politicians.

Mossack's statement in response to the leak can be found here. The firm has publicly declared that it is compliant with anti-money laundering laws and carries out due diligence on all its clients.  It has stated that it is not involved in the management of companies it incorporates nor can it be blamed for failings by intermediaries which it instructs to achieve its global offering.

Mossack confirmed "we strongly disagree with any statement implying that the primary function of the services we provide is to facilitate tax avoidance and/or evasion". The BBC claims the leaked documents evidence activity contrary to this statement, focusing in particular on dealing between Mossack and Marianna Olszewski. Mossack said the BBC's claims were false and unsupported.

UK Companies and Tax

Company and individual tax declaration is often in the headlines in the UK and is a political hot potato.  The Government continues to claim that it is taking steps to address concerns over tax avoidance one of which was the introduction of a requirement for UK companies to keep a register of persons with significant control ("PSC"). The requirement comes into force in June 2016, and further information about the PSC register can be found in our earlier article on PSC, which can be found here. However, it is apparent that there may be further issues associated with the anonymity of offshore companies which may not be addressed by the UK PSC register.

For further information on data protection issues please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com

in: Defamation, Digital/Tech, Legal News, News, Regulatory

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