Wealth Industry Must Be Bolder, Better At Advocating Privacy Rights

Tom Burroughes, Group Editor, London, 29 October 2021


So far, political fallout from the Pandora Papers has been limited. 

This may be partly because there have been large leaks already and that some unacceptable forms of secrecy have gone, Rathmell said.

Switzerland’s bank secrecy laws no longer give foreigners the ability to stash wealth in the Alpine state; offshore centres such as the Cayman Islands, Jersey, Guernsey and Isle of Man, now provide public registers of beneficial ownership of companies. Scores of countries agree to transfer data to foil tax dodgers under a structure called the Common Reporting Standard (the US is not a signatory to this). The extra-territorial US tax code allows Uncle Sam to chase expat US citizens and Green Card holders to ensure that they obey tax filing requirements.

There is also a “let sleeping dogs lie” approach among IFCs and the industry when it comes to speaking out following a data dump, Rathmell said. “Offshore finance has been a bête noire…it is easy for politicians and others to make a quick hit.”

At present much of the financial services sector, including IFCs, prefer not to make vigorous protests about what has happened, thinking that they are in a no-win scenario, with the idea of avoiding giving oxygen to their adversaries, he said. 

Walk the walk, not just talk the talk
A point in question is that when the European Union, or some other group, compiles a “grey” or “black” list of supposedly recalcitrant countries, it is still necessary for rules to be enforced on the ground, Fenergo’s Woolley said. “It is the professional service advisors that are advising on these structures, often for legitimate clients looking for tax efficiency, but this inevitably opens doors for criminals.”

Fenergo does not have a “tick-box” approach, she said. It is still necessary for advisors to make judgement calls, however much data they have, with necessary controls enabling better decision-making. 

There is a lot of difference between treating a politically exposed person who has a 1 per cent stake in a corporate entity and one who has a 100 per cent stake. Some jurisdictions regard being a PEP as a permanent condition, even if the person has moved away from a position of public/political influence, she said. 

“The big challenge is that what we do as an industry is too reactive…there will be a burst no doubt of regulatory activity after these Pandora papers but very little will change in the immediate or near future,” Woolley said. 

Co-operation offers a way forward. Woolley mentioned the example of how, in the Netherlands, there are close relations between financial institutions and law enforcement, such as the police, enabling transactions to be tracked almost in real time. This does, of course, potentially compromise privacy unless safeguards apply. “There needs to be increased and improved partnership between stakeholders,” she added.


Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes