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Following Panama Papers, the European Commission takes step forward on financial transparency, but loopholes remain

Tuesday July 5 2016

Today the European Commission took a step towards financial transparency proposing public registers of the real owners of companies and ‘commercial trusts’ to be included in the EU’s anti-money laundering legislation.

However, information about ‘non-commercial trusts’ will remain largely behind closed doors as the proposed rules state that in order to access this data, members of the public must demonstrate a ‘legitimate interest’.

The Commission has reopened discussions about the Anti-Money Laundering Directive after the Panama Papers scandal revealed how wealthy people, including some criminals, were concealing their identities to hide billions of euros in tax havens.

Member States will now have to agree on the new changes for them to be passed into EU law.

Tove Maria Ryding, Tax Justice Coordinator at the European Network on Debt and Development (Eurodad), said: “Today the European Commission has taken a step forward and has recognised that public access to information of this nature is crucial. However, more needs to be done to achieve true financial transparency, so we’re calling on the EU Member States to increase the level of ambition in the proposal. The Panama Papers revealed how structures set up to look like ‘family trusts’ have also been used to hide money. Until these structures are included in public registers, there will always be ways for money launderers and tax dodgers to conceal their wealth.”

Tax and transparency campaigners are also calling for changes to other clauses in the legislation that offer loopholes to potential tax dodgers and money launderers. For instance, the Directive currently includes a clause which states that if the beneficial owner cannot be identified then a member of senior management can be named instead.

Ryding said: “We believe that if a company cannot identify who the owner is, it should be closed down – not simply allowed to operate under a false name. The Panama Papers illustrated exactly how far the rich and powerful are willing to go to hide their money, so it’s important that all the loopholes are closed.”

ENDS

For more information, or to request an interview, please contact Julia Ravenscroft, Communications Manager at the European Network on Debt and Development (Eurodad) on +32 486 356 814 or jravenscroft@eurodad.org.

Notes to Editors: 

AMLD: This is the EU’s Anti-Money Laundering legislation. The latest version of the Directive, AMLD IV, was originally published on June 5 2015. It stated that EU Member States should have registers of beneficial owners of companies but that members of the public, journalists and other interested parties could only access this information if they demonstrated ‘a legitimate interest’. This rule was not extended to trusts and other legal structures. Since countries began transcribing the rules, some have made the registers open to the public anyway (in the UK this has taken place, for example, but only for companies). The definition of a ‘legitimate interest’ has been debated. Today’s decision would amend this legislation.
Panama Papers: In April this year, a massive leak of more than 11.5 million financial and legal records exposed the system which has enabled crime, corruption and wrongdoing to be hidden by secretive offshore companies. The papers came from just one Offshore law firm - Mossack Fonseca, based in Panama. The Papers’ database can be found here. They revealed:

o Mossack Fonseca used tax havens all around the world to hide the money of their customers, including inside the EU (especially Malta, Cyprus and the UK). Intermediaries based in EU countries were also among the most active users of Mossack Fonseca’s services (including several banks in Luxembourg). More info can be found here.

o British Prime Minister David Cameron had shares in his late father’s offshore trust fund Blair Holdings, and he faced questions over the issue in Parliament. This was particularly controversial as the UK government has always been against a public register for trusts.

o Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson resigned from office amid public outrage that his family had sheltered money offshore. The scandal revealed that Gunnlaugsson once owned – and his wife still owns – an offshore investment company with multimillion-pound claims on Iceland’s failed banks.

o José Manuel Soria, the Spanish Minister of Industry, Energy and Tourism, resigned after the Panama Papers linked him to offshore investments in the Bahamas, and news reports linked him to a company in Jersey.