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.

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