This Week in AML

The Panama Papers – Where Are We Seven Years Later?

Seven years ago, the Panama Papers were published. Recent statistics show that registrations of anonymous corporations in Panama have dropped by more than 50% in the past ten years. John and Elliot discuss the impact of Papers on corporate activities in Panama and ownership transparency across the globe.




The Panama Papers – Where Are We Seven Years Later? - TRANSCRIPT

Elliot Berman: Hi John. How are you?

John Byrne: Hi, Elliot. Doing fine. How's it going for you this week?

Elliot Berman: Pretty well short week because of the holiday and, we're having gorgeous very late spring, early summer weather here in Milwaukee. That's a nice thing. It was in the low 70s yesterday, upper 70s today, and I think we're gonna be right at 80 the rest of the week with a little bit of pop up thunderstorms, but we haven't had rain for a couple weeks, so that wouldn't be all bad as long as it's not severe.

John Byrne: That's good. I'm gonna be out in Milwaukee next week. Looking forward to that. This'll be a first that I won't be jogging when it's 20 below zero.

Elliot Berman:: And you can pack a lot lighter.

John Byrne: Exactly. Exactly. Hey couple things before we talk about our topic. We had the opportunity to interview Don Ford from our advisory board, former IRS: CI chief, a couple weeks ago, and we've sent that information out on the various social platforms. Don's key points because he testified before the Senate a couple weeks ago, was about the importance of the IRS getting the funding that they needed for data analytics response time to customers and also, of course, enforcement of the tax laws, which unfortunately many a lot that are wealthy try to avoid.

This week as we're talking, it's the middle of the week, so by the end of the week there'll be some resolution to what I would argue is the manufactured debt ceiling debate continues, but one of the things that's semi positive is that the proposal that's being worked this week would cut some IRS funding, but not as drastically as people had feared. So I think the key is, and there's been some stories about this in in the Washington Post and some other places, the importance here of recognizing that the IRS produces revenue and saves us revenue for taxpayers.

And the fact that they're not going to get too much of a draconian cut is a good thing for law enforcement and our partners in IRS:CI. But I mentioned that because obviously we've talked a bit about this and Don was, as he always is very comprehensive in his comments before the Senate and shared those with us, I just wanted to highlight that as well.

Elliot Berman: Yes. And just for clarity the reduction in funding is the reduction in the additional funding that was in the comprehensive funding bill that passed some months ago. It's not a cutback in existing budget from the budget process, but the additional funding .

John Byrne: That they need. We've also talked a bit throughout our webinars and podcasts with representatives and topics from the International Consortium of Investigative Journalists, ICIJ. Who do extensive work in what it sounds like investigative issues.

And they do have parts of their staff or their board members are involved in financial crime issues. And the thing that struck both of us as something to take a couple minutes to talk about is a recent Recent study and story about Panama and the Panama Papers. The headline is, and I'll let you go into detail here, "seven years after the Panama Papers, that country sees a dramatic decrease in corporate registration."

So this was a story that was in, as I understand it, in one of the Bloomberg versions. And one of the ICIJ members did the report, but it's an analysis of the impact in Panama, obviously, as we say, seven years after the investigations that showed all of the issues related to shell companies and brass plate banks and that sort of thing.

Elliot Berman: The top numbers are that in the 10 years, from 2012 to 2022, there was a 63% decrease in registrations. Now the Panama Papers were 2016, in the middle of that and that they've had additional reductions in the past couple years. There was also recognition that there are other jurisdictions, and you and I live in one of them that actually are rated as having serious transparency issues as it relates to this kind of thing.

They cite the Financial Secrecy Index, something you and I have talked about in the past, as showing the US as top of the rankings of the most complicit in helping people hide their finances. And you and I have talked a lot about the need for global ownership transparency generally.

Coming back to Panama one more time, the other thing that's interesting is this issue of transparency in Panama was a significant piece of their most recent review by FATF and at the upcoming plenary later in June they will be one of the countries whose, progress report, should be up for discussion.

John Byrne: Two things. The report looked at Delaware and the British Virgin Islands and BVI actually had a decrease in company registrations also over the last decade, but in Delaware, 62,000 new ones in 2021.

And so one has to wonder, besides being number one in the Financial Secrecy Index, which is a bad thing. Is it because we are still awaiting the beneficial ownership registry and the debate about access and all those things that could make it clearly more difficult to create LLCs and other entities which are legal, but in some cases, as we know, get used for the movement of illicit funds.

So that was interesting. And then just one other thing that sort of made me laugh. The Panama Bar Association President said the change happened because of the reputation hit they took with the investigation and not because of the fact that there were issues there. So he claims.

I think that's, in my humble opinion, probably not what happened. But as you mentioned, FATF is reviewing what Panama's doing. There's a perfect example, by the way, of the strength of FATF, in terms of the evaluations and the grades that it gives and the impact that it has economically and reputationally if jurisdictions don't make improvements.

Elliot Berman: Yes, there are a handful of jurisdictions around the world who have opted out of the FATF of process, North Korea being, probably the poster country for that. But most countries really do care and I think Panama trying to have an effective economy where I think corporate activity was a significant piece of it really do care that they don't end up on the on the blacklist, which I don't know that they're at risk of that. But certainly wanting to show improvement and do the right thing. Coming back to the Bar Association president's comment and when we've spoken with the IC IJ folks, they've talked about the importance of local reporting and the pressure that it can bring on government officials and even government policy.

I think this is another example, the publication of the Panama Papers seven years ago. I think shined a light on things that people like you and I, who've been in the business a long time, were aware was going on and aware was going on not only in Panama, but in other places too.

But it made it clear even to the average reader that this wasn't just a passing problem. This was an engineered mechanism to intentionally hide assets and provide money launders with a platform, but one of the side effects was that it provided money launderers with a perfect platform to do their activities.

John Byrne: Yeah. I would just tell folks ICIJ' s website and their stories are extremely valuable. They cover a whole host of issues besides the offshore banking issues, human trafficking. They look at corruption issues, of course. Issues related to the abuse of antiquities and art. So there's a lot of good things there.

They do accept donations, but they're the website's free to go on and look at the storylines. And I would say as AML professionals, it should be another one in your list of websites that you look at on a frequent basis.

Elliot Berman: Agreed. And like many of those websites, you can, if you choose, sign up for notifications when they publish something new. You can get the latest information. I think it's something you've mentioned repeatedly over the years, and particularly as we've been doing this podcast, there are tremendous free resources from many organizations and it is, in addition to all the other ways that we try to keep current in the financial crime prevention space, these types of websites should be a critical part of everybody's knowledge base.

John Byrne: I agree. As we close down for this week wanted to mention that we have posted the interview that I was able to do with Jon Fishman from the Treasury Department on the de-risking strategy. We had a really robust dialogue and discussion with Jon about some of the choices that the Treasury and all the other agencies that were part of putting together the report made in terms of priorities, recommendations, and focus.

And I think you'll find it valuable. That's an issue's gonna continue to challenge us. Hopefully you also have read the report as we talked about a few weeks ago, but I think getting Jon's view on it was, is helpful to keeping that dialogue going.

Elliot Berman: On June 22nd we'll be our next AML Voices webinar, it's about models, identifying them and validating them. Something that continues to be an ongoing activity for financial services companies in the US and many other jurisdictions. And a good practice to really understand what all these tools that we use really are doing and whether they're doing what we think they are.

John Byrne: I agree. So good stuff folks. Continue to stay as current as possible. Elliot, you have a good rest of your week and we'll talk again soon.

Elliot Berman: Yes, and I will see you next week when you're here in Milwaukee.

John Byrne: Sounds great. Take care.

Elliot Berman: Yes. Bye-bye.