3 steps to stop secret companies

3 steps to stop secret companies

The Panama Papers investigation – an analysis by a network of news organisations led by the International Consortium of Investigative Journalists of 11.5 million leaked documents -- shows just how many rich, famous and politically connected people, from heads of state to crime bosses and business owners, hide their wealth behind the façade of secret companies.

They often do this explicitly to evade taxes and launder money from illicit activity. This can and must be stopped by comprehensive global agreements to end the use of secret companies. The investigations focussed on Mossack Fonseca, a law firm in Panama, a country known globally as a secrecy jurisdiction.

But Panama is not alone. The world is dotted with states and territories that make a specialty of providing services whose purpose is to facilitate ways to hide assets. Top secrecy jurisdictions include everywhere from British crown dependencies to US states like Delaware and Nevada, and many more in between from Andorra to Vanuatu.

Not all of what they do is illegal but so much of it is that the whole system needs changing.

Iceland protests

Transparency International has three key asks:

1. All countries should require much higher levels of transparency around who owns and controls companies registered in their territories.                          

​2. Professional enablers that are found to be complicit in corruption must be sanctioned.

​3. All countries should require any company bidding for public contracts or purchasing property to disclose on whose behalf they are operating.

In May the UK will host a global anti-corruption summit with world leaders. This presents an important opportunity to get global agreement on ending secrecy in the financial system. Now is the time to take decisive actions to close the loopholes that the corrupt use.

The Panama Papers show an array of people and banks using the services of Panamanian law firm Mossack Fonseca to register secret companies.

These include:

Mossack Fonseca denies any wrongdoing. It says “the company is no more culpable than an automobile factory that built a car later used in a robbery”.

But such excuses are wearing thin and lack logic. The law firm is more like a company that sells high speed cars with tinted windows and no number plates that then acts surprised when the cars are used by criminals.

Instead of facilitating potentially corrupt acts, all law firms and other professionals should carry out the due diligence that is needed to prevent corruption when they take on clients. While many note that their actions are not illegal, the focus should be on acting with integrity to stop corruption worldwide.

For any press enquiries please contact press@transparency.org

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