A Compliance Officer’s Epilogue to Panama Papers Leak

On April 3, 2015, German newspaper Süddeutsche Zeitung with the help of International Consortium of Investigative Journalists (ICIJ) leaked 11 million files from a Panamanian law firm that specializes in setting up offshore companies - Mossack Fonseca. The files contained more than 214,000 offshore entities. Analysis and investigation of these documents revealed that entities were linked to many celebrities, politicians and the other influential people.


Even though there is nothing unlawful about the use of offshore companies, this leak has shown us that many people are holding accounts and investment in safe havens. The disclosures raise the question about the ways in which the banking system has been abused.


Below are the key finding from the leaks mentioned in the ICIJ website:

  • 5 million Records, details on more than 214,000 offshore entities connected to billionaires, sports stars, smugglers and fraudsters in more than 200 countries and territories.
  • Reveal the offshore holdings 140 politicians and public officials around the world – including 12 current and former world leaders.
  • Document some $2 billion in transactions secretly shuffled through banks and shadow companies by associates of Russian President Vladimir Putin.
  • Include the names of at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing.
  • More than 500 banks their subsidiaries and their branches – including HSBC, UBS and Société Générale – created more than 15,000 offshore companies for their customers through Mossack Fonseca.
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From a compliance officer perspective, the Panama papers disclosure has exposed every bank to the following compliance risks:


Corruption Risk – The mention of large banks such as Experta corporate & trust services, Banque J. Safra Sarasin, Credit Suisse Channel Island Limited and HSBC listed in the Panama papers shows that banks are willing to provide services to clients that seek high levels of discretion, operate with experts that create and register offshore companies and find dummy directors and shareholders to take the true owners’ place on papers. With these banks taking the role as correspondent banks, there is no doubt that many of the mid to small scale banks have been exposed to corruption risk. This incident has clearly changed every bank's anti-corruption risk profile, and as such it is important to review and update the risk assessment at the earliest.

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Due Diligence Risk – The names from the Panama Papers strengthens importance and need for a more in-depth due diligence process for banks. The depth should include and not stop at, identifying not only the shareholders of a company but also identifying the shareholders of the holding company, if the company is part of a holding company. Post this incident, compliance officers should consider identifying a defined period and perform a screening of historical transactions against the ICIJ lists. Based on the results of the review, it is recommended that banks follow up with phone interviews and research into suspicious corporate relationships with a deeper dive into public records as needed. The due diligence may also be extended to hires in the bank.


AML Risk – The chances that the money associated to the entities and individuals mentioned in the Panama Papers have gone through the US banking system is very high. This calls for compliance officers to find out if transactions in the past were associated with these entities or individuals. Even though a SAR filing is not mandated at this time, The institution’s AML risk assessment should reflect the findings found during the transaction review.


Customer Risk – Customers whose names appear in the papers are not automatically suspicious. However, this could be a factor that elevates the customer risk. Additionally, customers that do not appear on the list but have transactions to or from named entities may also have an elevated risk.


Telavance is helping banks to update Risk Assessments, review Due Diligence procedures, perform KYC remediation, perform impact analysis and perform scans of the names against customers and historical transactions. Talk us to find out how we can help you assess and remediate your bank’s risk exposure with respect to the Panama Papers.