Panama Papers: What You Need to Know

Leaked documents from one of the world’s most secretive companies, Panama-based law firm Mossack Fonseca, are having repercussions around the world.

The first major casualty being Iceland’s prime minister, Sigmundur Gunnlaugsson who resigned this week. He owned an offshore company with his wife but had not declared it when he entered Parliament. Subsequently, British Prime Minister, David Cameron made a full disclosure of his financial status to avert speculation of any wrongdoing on his part.

The politicians are just two examples of high-profile global figures mentioned in the 11.5 million leaked financial and legal records published just over a week ago that also include business, sport and entertainment personalities.

The papers show how the company has helped clients launder money, dodge sanctions and evade tax. In-effect, it’s a business that has helped people from around the world break the law.

What effect will this have on offshore finance?

The Panama Papers aren’t representative of the whole of the offshore financial industry.

Most individuals and businesses are honest and pay the tax that they owe when it is due. But a small minority try to evade their taxes by hiding money and assets offshore. Offshore evasion is illegal and punishable by law. And, as the Panama Papers highlight, it’s a serious global issue that needs to be tackled head-on.

There’s a big difference between tax evasion — illegally refusing to pay taxes you owe, and then taking advantage of secret accounts to try to hide the money and get away with it — and tax efficiency, which involves transparency and disclosure and remaining within the letter and the intent of the law.

Today, most international financial centres are now well regulated, transparent and cooperative. Financial information is automatically exchanged with tax authorities globally.

At Carrick, for example, we only provide services that are fully compliant and legal which are used by clients who are simply looking for typically better returns, more investment options and greater flexibility.

Stringent three-tier compliance check

We have a stringent three tier compliance check with compliance administrators in everyone of our every offices.

They verify all required documentation is present and complete in accordance with stipulated guidelines. Then suitability of advice is verified and established, source of wealth, source of funds, as well as identification and verification of all clients in terms of FICA (Financial intelligence Centre Act).

Some of the strict rules and regulations we abide by:

• KYC (Know Your Client) — before providing advice to clients we complete a fact-finding exercise in accordance with Carrick’s procedures and regulatory requirements. We carry out a full financial review and a financial needs analysis.

• Basic Due Diligence — all new clients and new monies are verified. We also determine who will ultimately benefit from the transaction.

• Due Diligence for Companies — we obtain the Memorandum and Articles of Association of a company. Additionally, the identity of all Directors, as well as representatives, and information on the ownership structure of the company.

• Nature and Purpose of Transaction — a Full Confidential Client Questionnaire (FCCQ) is completed for every client before the start of the business relationship.

Assets held in suspect jurisdictions that do not fit with the client’s history — expenditure which is unusually high, or income which is disproportionate — can be signs of potential illicit activity.

“Carrick has adopted a compliance culture based on transparency, a shared vision and common direction. We’ve gone to immense lengths to create a shift in the compliance culture through continuous training. Everyone at Carrick abides by stringent internal policies, control systems and routines. Where non-adherence or misconduct is established it’s simply not to be tolerated.”

~ Lara Hughes

Group Compliance Manager