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Investigations across Europe spurred by Panama Papers

Pictured above: Activists take part in a demonstration outside the European Commission (EC) headquarters ahead of statements by the EC on the effectiveness of existing measures against tax evasion and money-laundering in light of the recent Panama Paper revelations, in Brussels, Belgium, April 12, 2016. REUTERS/Yves Herman

As the broad usage of off-shore companies has been brought to the public eye, the need for proactive measures against corruption and other illicit financial activity is apparent and imperative.

The #Panama Papers have captured global attention, as the extensive document leak has uncovered prominent use of off-shore businesses by wealthy individuals and corporations worldwide. While such off-shore companies are often not illegal per se, their use spurs suspicions of illegal activity, such as money-laundering, corruption, and tax evasion.

Documents show widespread use of off-shore companies

Specifically, the leaked documents involve more than 214,000 companies associated with Mossack Fonseca, a Panamanian law firm which specializes in setting up off-shore companies.

Multiple heads of state and their family members have been named in the documents, as well as numerous global banks. Implications of involvement on the part of several European banking bodies have many watchdog groups probing for further investigation and accountability.

Switzerland opening criminal investigation

The Swiss financial watchdog FINMA is looking into the involvement of Swiss banks with Mossack Fonseca, and a criminal investigation has been started, as there is suspicion of money laundering on the part of Swiss banks.

While Switzerland may be known as an international wealth management center, it is certainly not the only country showing concern that its banks have been dealing illicitly, after the release of the Panama Papers.

Investigations into banks throughout Europe

Apparently, the leaked documents have shown that HSBC, the largest bank in Britain, and its affiliates, have created more than 2,300 companies with the assistance of Mossack Fonseca.

While HSBC has denied using such entities for illegal purposes, suspicions have not been fully relieved. Indeed, Britain’s Financial Conduct Authority is looking closely at the country’s banks, and it has contacted 20 financial firms with inquiries into their involvement with the #Panama Papers.

In addition, France and Germany’s financial regulators are probing into the roles of their nation’s banks, and watchdog groups from Sweden, the Netherlands and Austria are investigating banks named in the leaks as well.

Indeed, the leaked information has not been taken lightly across Europe, and with the potential for more banks to be named in the documents set to be released in May, investigations are likely to increase before things settle down.

Corporate accountability and prevention of corruption

With all of these inquiries taking place, even banks which may not have been acting illegally will need to be cooperative and transparent in their operations in order to clear their name. And, it is likely that global attention to tax havens and corrupt financial activities will be heightened in the future. Thus, it is imperative that companies ensure their operations are legal and that they are preventing corrupt practices on all levels.

Training employees in the global regulations and risks of corruption is an important step in preventing corrupt financial practices within a company. Thomson Reuters offers an online training course in Anti-Bribery and Anti-Corruption, which is well suited for this purpose. The course is available in several versions, tailored to specific geographic locations, and a global version is available as well.

About the author

54eb3a3ec18e1_200wSusan Byellin is a licensed attorney at Byellin Law, PLLC practicing out of Minneapolis, Minnesota, relying on her experience to analyze and write about legal compliance topics. She graduated cum laude from William Mitchell College of Law in St. Paul, Minnesota.

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