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The “Paradise Papers”: Do You Know If You’re Exposed?

The Panama Papers were exposed less than a year ago. Now we’ve learned about the Paradise Papers – a trove of records revealing the offshore activities of some of the highest-profile corporations and wealthiest people around the globe. These records were obtained by the same German newspaper (Süddeutsche Zeitung) involved in the Panama Papers leak and were shared with close to 100 media outlets by the International Consortium of Investigative Journalists. These news organizations then collaborated on analyzing more than 10 million leaked documents that originated from an offshore services organization, a law firm, and various corporate registries.

In this latest leak, major companies, heads of state, and wealthy celebrities have again been exposed for avoiding taxation to the tune of hundreds of billions of dollars. And, as with the Panama Papers, regulatory authorities across the world will now pore over the papers for signs of malpractice – and any potential grounds for prosecution.

What is clear about these leaks is that they are forcing greater transparency. Today, tax avoidance is being exposed to and judged by the public as well as the regulators. This latest leak demonstrates awareness is growing, so businesses should be aware of their exposure and the importance of reputation protection.

Comments from then British Prime Minister David Cameron and others following the Panama Papers leak began to reflect the change in the political and public mood. The UK was among the leaders in identifying beneficial ownership, and in the wake of that leak, Cameron promised to end “tax secrecy” in the UK and described some offshore schemes that allow people to minimize their tax rates as “not morally acceptable.”

Global transparency is also growing because of regulations like the Common Reporting Standard (CRS), the Foreign Account Tax Compliance Act (FATCA), Person of Significant Control (PSC) requirements, and other rules that promote disclosure of business ownership and information disclosures like the Paradise and Panama papers.

These leaks … are forcing greater transparency. Businesses should be aware of their exposure and how it can tarnish their brands and sour customer sentiment.
 

Regulatory and social pressures mean it is more important than ever that companies doing business with third parties know exactly who the entities and beneficial owners are behind these businesses. The case is the same for certain obliged entities, such as financial institutions, to comply with Know Your Customer requirements. Without that visibility, how can you know whether you are exposed to dealing with shell companies?

 

The draft recommendations made by the European Parliament last month to the Council and the Commission following the Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion also made the case for transparency. Among several suggestions, the report stressed the need for regularly updated, standardized, interconnected, and publicly accessible beneficial ownership (BO) registers of companies, foundations, trusts, and similar legal arrangements to prevent anonymity of ultimate beneficial owners (UBOs). It also called for the lowering of the current threshold for shareholding and recommended the need to improve the enforcement of customer due diligence (CDD) checks to ensure proper assessment of the risks linked to client profiles is carried out. It recommended that responsibility for CDD sit with the obliged entities even when the checks are outsourced, that it should be clear, and that provision should be made for penalties in the event of negligence or conflicts of interest in cases of outsourcing.

Dun & Bradstreet’s data and analytics help our customers identify business ownership and legal structures and overcome regulatory hurdles. We hold shareholder information on nearly 62 million companies across the world, located in more than 150 countries. This equates to nearly 92 million shareholders, 74 million of which are people owning shares. Our global business connectivity insights can shed light on beneficial ownership and help companies increase brand protection.

With this breadth and depth of coverage and our easy-to-use tools, we help clients understand who owns organizations across the world so they can connect the dots in seconds. This enables them to see what, if any, exposure they may have within their customer, vendor, or supplier base – and helps them avoid “trial by media.”

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