Regulation  

FCA extends Panama probe

FCA extends Panama probe

The regulator has written to a further 44 financial firms to investigate their involvement in tax avoidance brought to light by the Panama papers leak, according to the Financial Conduct Authority’s (FCA) acting chief executive.

Speaking on 27 April before the Treasury Select Committee, Tracy McDermott said 20 firms were given a deadline of 15 April, with a “second tranche” of 44 told to respond to requests for information by 22 April.

It was revealed at the start of the month that a massive leak of private papers from Panama-based law firm Mossack Fonseca had implicated a wide variety of people and firms in various forms of offshore tax avoidance and evasion.

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The FCA responded by sending out requests to certain implicated companies as to what their exposure exactly was, as part of a wider investigation being carried out by HM Revenue & Customs, the National Crime Agency and the Serious Fraud Office.

Ms McDermott told MPs that at this stage it was “far too early” to give any views as to preliminary findings, noting “there’s nothing necessarily illegal about having offshore arrangements; it’s all about their purpose”.

She said enquiries were being made “with both our regulatory and our law enforcement hat on”, but that without full access to the papers, “the challenge at the moment is actually knowing where the tip of the iceberg is”.

She added: “We need to understand a little bit more about the factual position in relation to these issues before we can say it’s an enormous problem from a perspective of the legal framework.”

The 11.5m documents cover nearly 40 years, from 1977 through the end of 2015, with the International Consortium of Investigative Journalists still holding on to the source material, despite requests from both the regulator and the Government.

Adviser view:

Philip Milton, managing director at Philip J Milton & Company, pointed out that since the 2004 money laundering rules were introduced, two questions were surely raised by the leaks in terms of whether suspicious activity reporting had been overlooked.

He added: “I’d be asking whether people are going to be subjected to criminal charges over a lack of reporting under those rules, and whether there has been any actual tax evasion, as clearly this should be punished.”

peter.walker@ft.com