The Pandora Papers – A Broken System

“The FinCEN Files revealed money laundering to be a systemic problem, but the Pandora Papers and the recent resignation by the Financial Action Taskforce (FATF) chief, David Lewis, suggest a much more broken system, where regulators are barely tipping the iceberg in the fight against financial crime. The Papers also reveal a much higher power at play here – Governments; the real custodians of the financial system with the authority to drive change from the top. The industry in its entirety is failing to stop criminals from exploiting the same loopholes as those mentioned in the Pandora Papers and from continuing to cause serious social and economic harm by allowing them hide illicit gains in property. Writes Rachel Woolley, Global Director of Financial Crime, Fenergo

She also added we must also look to the facilitators, the law firms, accountants, and professional services firms that appear to be asleep at the wheel by allowing criminals to exploit the same tax loopholes as the prominent figures named in the Pandora Papers. The regulatory landscape is evolving to hold such firms to account but will they have the necessary expertise, systems and controls to effectively detect and prevent financial crime?

 Whilst these structures and offshore activity may be legal, it creates a significant burden for financial institutions that must separate the legitimate wealth from the illicit wealth in order to comply with their obligations to detect and prevent financial crime. More must be done by holding governments, politicians and the firms facilitating money laundering transactions accountable for financial crime. By introducing legislation across the board to perform enhanced customer due diligence, anti-bribery, and corruption measures for know your customer (KYC) and anti-money laundering (AML) compliance, the industry will have better oversight of the high-net-worth individuals and politically exposed persons (PEPs) who are behind the offshore firms purchasing property and intercept where needed.

 Without accountability there is no incentive to stop financial crime, especially where there are financial gains to be made in mature economies. If we don’t act now and drive change from the top down, the wider repercussions will impact every one of us as criminals continue to launder proceeds made from serious crimes, such as human trafficking and cyber-attacks.”