A formal enquiry into the Panamanian law firm Mossack Fonseca has been launched by the European Parliament’s Committee, which found gaps in beneficial ownership transparency for trusts and fiduciaries and didn’t meet the EU standard.
The PANA Committee was formed exclusively to determine how EU public policy should be influenced by the revelations after the leak of many confidential client documents from the offshore company in April last year. The leak highlighted that there were significant inconsistencies between EU Directives relating to money laundering & administrative cooperation and actual practice in Panama and other offshore jurisdictions.
The draft report was presented to PANA Committee members and concluded that:
- The main motivation behind setting up accounts in offshore financial centres’ is for the anonymity of the Ultimate Beneficial Owner.
- The highest number of offshore accounts revealed from the leak were found to be originating from the UK, Luxembourg and Cyprus respectively, while 90% of the active entities were based in BVI, Panama and the Seychelles.
- Trusts and fiduciary companies are the highest type of legal entity found to be exploiting the tax benefits while Accountants, Lawyers and consultants, were found to be the most common professions linked to the established offshore entities.
The report gives the following recommendations in order to rectify the current gaps identified by the leak:
- The European Union should create a blacklist of non-cooperative jurisdictions globally, relating to objective criteria such as concealment and poor money laundering regulations.
- A 0% corporate taxation rate should be going forward considered as one of the criteria for encouraging privacy and poor regulations.
- The European Council should put strong and deterring sanctions in place against blacklisted jurisdictions, such as the suspension of third country equivalence regime in the financial sector.
- A publicly accessible register of Beneficial Owners should be set up to prevent the current secrecy and anonymity of Ultimate Beneficial Owners.
- A global company register should be established for all jurisdictions as a standard.
- A central register of bank accounts accessible to financial intelligence units and local law enforcement bodies should also be made public.
- The EU Council should implement the existing proposal on the compulsory disclosure of information by service providers and intermediaries, including increased regulation of the wealth management profession.
The report is still in the process of being negotiated, with the findings and recommendations are open to revisions until the 5th of September 2017.