MBR_ISSUE 41_Cover_LOW

Malta Business Review
TALKING POINT
When Paradise
turns to hell:
Eruptions of the
Panama kind
By Marcela Kunova
This month marks the second anniversary of the Panama Papers, which was
the first part of an ICIJ story that put millions of documents from law firm
Mossack Fonseca into the media spotlight for public scrutiny. The revelations
made front page headlines around the world. Then in November 2017, the
second release, which was dubbed the Paradise Papers, saw many more high
profile confidential financial documents revealed to the public. MBR looks at
the impact these incidents have had on the private client industry.
According to Robin Rathmell, partner at the
US law firm Kobre & Kim, the Papers made
many clients concerned that they were
affected or that they might be next. “But also
many professionals were taken aback that law
firms systems had been compromised to this
extent,” he says.
Jurisdictions are placing a
premium on the R words:
reputation and regulation and
they are very closely linked
Marcus Leese who is a partner at Ogier in
Guernsey, agrees that the leak made many
in the private wealth industry realise just
how much personal information was stored
on computers and how vulnerable that
information was to hacking. However, he
sees both ‘Papers’ as an example of a wider
and more positive trend which has been
playing out in the industry over the past
twenty years. “That trend is a move away
from secrecy, non-disclosure, poor or nonexistent
professional advice and aggressive
tax planning in locations where services could
be provided in a commoditised way. It will
mean a better environment of disclosure to
authorities where required, good quality legal
and tax advice, and structuring driven by new
concerns such as asset protection, managing
risk and succession planning.”
Resigned to history: the eleventh
commandment – thou shall not be
discovered
According to David Kilshaw, partner at EY,
regulation is obviously one key change that
followed the publication of the Papers.
“Jurisdictions are placing a premium on
the R words: reputation and regulation
and they are very closely linked. The trust
industry is a prime example of this with
every trust company rightly keen to ensure
the structures they administer are pure in
every aspect. “The papers did not promote
a cultural shift,” continues Kilshaw, “that was
happening already, but they made sure these
issues were at the top of every agenda. We
live in a world now where sound and polished
administration is more important than clever
planning. The papers also re-enforced the
message to some taxpayers who might still
have had the old fashioned approach to tax
planning or asset protection of ‘’out of sight ,
out of mind’’ that the world is now indeed a
small place and not one where assets can or
should be hidden. The Papers happily helped
assign the eleventh commandment – thou
shall not be discovered – to history.”
Leese adds that another important, and too
often overlooked, part of change is the human
and cultural element. “It really doesn't matter
how much an organisation invests in its IT
system,” says Leese, “if staff are able to adopt
"password" as their system password or carry
files outside the office, lose laptops holding
unencrypted data or former members of
staff retain system access then confidential
information is going to be at risk . Substantial
efforts and investment in training staff and
senior management taking real leadership
and showing the importance of these issues
are all necessary.”
Generational leapfrogging as lifespans
increase
Michael Shimmin is a chairman of Fedelta, a
trust service provider based in the Isle of Man,
and he says: “The offshore industry needs
to be more vocal about how transparent
it is in order to counter the illusion that it
is used for, and complicit in, tax evasion,
especially as there are some who try to blur
Continued on pg 10
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