Funds industry reacts to Panama leaks

Offshore fund domiciles have moved to distance themselves from the vast leak of confidential information that has drawn widespread attention to so-called tax havens.

The Panama Leaks, which have been widely covered by mainstream media outlets around the world this morning, comprise 11 million confidential documents leaked from Panamanian law firm Mossack Fonseca allegedly showing it helped clients to avoid tax, launder money and dodge sanctions.

Thus far the resulting mainstream media coverage has focused on offshore vehicles’ alleged connections with current and former world leaders – such as the “$2 billion trail that leads to Vladimir Putin”, that The Guardian outlined. However, repeated use of phrases such as “tax haven” and “shell company” in connection with nefarious activities such as tax evasion and money laundering could risk causing reputational damage to other “offshore” domiciles.

Guernsey Finance, a body established to promote the island's finance industry internationally, issued a statement to distance itself from the activities outlined in the Panama Leaks.

“The island's recent MONEYVAL report shows that we have in place a highly effective anti-money laundering and anti-terror financing regime. Guernsey also has the support of independent organisations such as the OECD and IMF who regularly reference Guernsey as a cooperative jurisdiction and one that is active in its commitment to the practical implementation of tax transparency and meeting international standards,” said Lyndon Trott, Guernsey Finance chairman.

One Channel Islands-based lawyer, who asked not to be named, dismissed the leak as a “Panama issue” likely to affect that jurisdiction only.

Meanwhile, the Association of the Luxembourg Fund Industry (ALFI) declined to comment on the issue, as it saw it as unconnected to the private funds industry.

One fund administrator highlighted the distinction between “reputable”, widely-used fund domiciles and others that could be more questionable. “We don’t have any funds domiciled in Panama. Eyebrows may get raised by LPs if a fund is domiciled in a jurisdiction that they don’t see regularly,” said Jeff Gendel, New York-based managing director of fund administration business Gen II Fund Services.

The vast cache of documents leaked from Mossack Fonseca is likely the largest leak of inside information in history, according to the International Consortium of Investigative Journalists. As the analysis continues, the fund industry will be watching and waiting to see whether any of its actors gets drawn into the story.