Panama Papers one year on: Work left to be done

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EU law updates should ensure that company owners' details are made public so that, if necessary, the money trail can be followed. [Paul Stein/ Flickr]

The EU has a duty to ensure that its update of the Anti-Money Laundering Directive requires the details of company owners to be made public, to avoid a repeat of the Panama Papers scandal, writes Emily Wigens.

Emily Wigens is the interim Brussels director of ONE.

A year ago today, the Panama Papers leak exposed one of the world’s most tightly guarded secrets, casting a bright light into the world of shady financial dealings that facilitate corruption.

The leak gave the public a rare glimpse of the underbelly of global corruption, where bankers, lawyers, and company service providers enable the corrupt to launder and hide their illicit gains. This complex web of secrecy is hurting both the EU and some of the world’s poorest countries.

The scale of the dodgy dealings exposed by the leak was shocking. More than 11.5 million files leaked from Mossack Fonseca – the world’s fourth largest offshore law firmrevealed an enormous amount of information on individuals holding offshore bank accounts and firms. They included a string of high-profile politicians who were forced to resign following the revelations.

Authorities in 79 countries have announced at least 150 inquiries, audits or investigations into cases exposed by the Panama Papers.

People were able to hide their money because the jurisdictions their accounts or businesses were based in allowed them anonymity. They put their money in ‘phantom firms’, shell companies, or trusts, where the ‘beneficial owner’ (the person who gains from the company) doesn’t need to reveal their identity.

This opaque system allows anyone to set up a company or trust yet claim zero accountability for the actions the entity takes. It’s a recipe for disaster. Their secrecy makes these entities the vehicle of choice for fraudsters, corrupt government officials, terrorists, human traffickers, drug dealers and other nefarious characters.

The anonymous owners benefit. Society foots the bill. 

The EU has the power to crack down on this abuse since much of the money associated with anonymous companies and trusts flows through banks and enablers in its member states.

The EU could require information about who owns and operates companies and trusts to be disclosed in a public register, so that journalists, civil society and law enforcement can follow the money and root out corruption. Making this information available to all would deter people from attempting to hide their ill-gotten gains in the first place.

While rich countries frequently facilitate this web of corruption, poor countries are the ones that often suffer. Every year at least $1 trillion is siphoned out of the world’s poorest countries, in part through the use of shell companies and trusts. That’s money that could be invested in health, schools and jobs in places that sorely need them.

It is in our governments’ power to change this. Right now the EU is negotiating an update to the Anti-Money Laundering Directive. If the EU is serious about leading the global fight against corruption, EU governments must back the European Parliament’s proposal to make sure who owns and operates companies and trusts is made public, preventing the corrupt from being able to hide behind an impenetrable veil of secrecy. 

Such action is not just in the interests of the world’s poorest countries, but developed countries too. Corruption fuels terrorism and instability, undermining efforts to end extreme poverty and exacerbating humanitarian crises.

Cracking down on anonymous companies and trusts isn’t just the right thing to do, it’s the smart thing to do, for the peace and prosperity of both the EU and developing countries.