Worldwide: Panama Papers May Be Just What The Doctor Ordered For The Offshore Financial Industry

Last Updated: 13 June 2016
Article by Jonathon Clifton

The release of the so-called Panama Papers has again highlighted the chasm between those wishing for an end to the offshore financial industry and those who see it playing a critical role in facilitating international trade and investment.

An outside observer is left confused as to whether the industry is perfectly legitimate or is morally and legally questionable.

For the industry's detractors the Panama Papers are another nail in the coffin of the industry. It has emboldened them to hope it will accelerate an eventual demise of the industry.

However, for the industry's supporters these leaks are an important part of the cleansing we must have. As painful as each expose might be in terms of the hit the industry takes, these purges are absolutely necessary to bring us closer to a time when the industry will be truly recognised and acknowledged for the role it plays in economically knitting together global economies and facilitating cross border trade.

We must not forget the role of Panama in this process. This nation has consistently lagged or resisted joining the rest of the international community in bringing its laws and regulations in line with global standards. So much so, that until recently some Panama service providers marketed the point that the nation had not changed its laws for decades to differentiate themselves from those operating in Jersey, the British Virgin Islands (BVI) and others where regulation has been brought in line with international norms.

Clearly possession of a strategic global asset - the Panama Canal – has to date given Panama the confidence and leverage to push back on international pressure to update its laws.

There are well over 30 "offshore" financial centres and many sovereign nations are actively trying to enter this space. Are there too many offshore financial centres? The answer is yes. Many of the smaller centres have not kept pace, either due to cost or resourcing constraints, with the regulatory change required to operate in the "new normal".

A smaller number of better regulated jurisdictions with mechanisms that balance the need for both privacy and transparency is the way of the future.

Consolidations need to take place not just at the "jurisdictional" level but also among the service providers operating at the point of sale. In too many major jurisdictions, including the United Kingdom, the United States of America and Hong Kong, corporate service providers operate in an unregulated environment. It is incumbent on the industry to work with governments and regulators to ensure regulation captures both ends of the value chain.

What remains poorly understood is the fact that the leading offshore centres – including the BVI, Cayman Islands and Jersey - now have the regulations and systems in place that its detractors could only have dreamed of a few short years ago. These jurisdictions are now at the forefront of international transparency and anti-money laundering standards. However, there remains a stubborn resistance from the industry's critics to concede this point.

We must remain focused on the real issue in this debate – the need to stymie money laundering, terrorist and drug financing and ensuring that corrupt politicians and businesspeople are not pillaging societies and corporations through illegal activity.

British Prime Minister David Cameron summed it up well in his recent comments that it is right to tighten the law and change the culture around investment to further outlaw tax evasion and discourage aggressive tax avoidance. However, in doing so there should be a clear differentiation between schemes designed to artificially reduce tax and those that encourage investment.

Where there remains a fundamental difference of opinion between industry supporters and detractors is the issue of privacy versus secrecy. I would argue that there is a distinct and legitimate difference between the two. At the heart of the issue is the question of intent. People have a right to maintain some privacy and the mechanisms coming into force across the leading jurisdictions strike a practical balance between enabling privacy for individuals and transparency for the relevant authorities to access information on the beneficial owners of companies.

The industry's critics are demanding the implementation of public registers in the name of transparency, a step that is being taken in the UK. This has been resisted by the industry elsewhere and for good reason, namely that criminals will not self-report the establishment of entities created for the purposes of crime. This is supported by Australian academic Professor Jason Sharman, who notes that the unambiguous conclusion of the World Bank Puppet Masters report is that a beneficial ownership regime, based on licensed corporate service providers, is a better solution than one based on registries of beneficial ownership.

So where is all of this heading? Those persons who have something to hide have left, or are leaving, the offshore financial industry, and this may lead to a decrease in its overall size. But for those, who are legitimately transacting international business across borders, the industry will be a far better regulated, more transparent and more resilient industry than it ever has been. The short-term pain now, may in fact be just what the industry needs to go through, to receive the recognition it deserves for enabling globalisation and providing the plumbing to the global financial ecosystem.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions