Jean-Yves Gilg

Editor, Solicitors Journal

Panama papers: HMRC could use 'illicitly sourced' information to launch investigations

Panama papers: HMRC could use 'illicitly sourced' information to launch investigations


Clients who believe their confidentiality is assured are at increased risk of discovery, says lawyer

The leaking of over 11 million confidential files belonging to Panama-based Mossack Fonseca, the world's fourth largest offshore law firm, has highlighted that there is no longer anywhere in the world where money can be secretly hidden, experts say.

The revealing documents show in minute detail exactly how the world's wealthiest 1 per cent have manipulated the law to launder money, dodge sanctions, and evade tax.

The documents also show what is suspected to be a $2bn money laundering ring involving close associates to the Russian president, Vladimir Putin.

Also on display is information about secret offshore companies linked to Egypt's ex-president Hosni Mubarak, Libya's former leader Muammar Gaddafi, and Syria's current president Bashar al-Assad.

In a statement released following the explosive revelations, Mossack Fonseca said it has operated beyond reproach for 40 years and has never been accused with criminal wrong-doing.

The firm described allegations made by the BBC that it provided corporate structures designed to hide the identity of its clients from the authorities as 'completely unsupported and false'.

Sean Wakeman, a tax investigations partner at Crowe Clark Whitehill, said: 'The revelations emerging from the release of the files are staggering, and probably represent the biggest single advance in the fight to combat tax evasion in more than 40 years.

'Whilst there are legitimate reasons for having offshore investments, we can expect the 80 countries that are reported to have shared this information to question closely all the offshore arrangements uncovered.'

The Guardian has reported that six members of the House of Lords, three former Conservative MPs, and dozens of donors to political parties have had offshore bank accounts as well as countless other political leaders worldwide.

'We have seen many examples in recent years of overseas banks encouraging UK individuals with bank accounts to settle monies in offshore trusts and place monies in overseas bank accounts to side-step EU savings directives (and withholdings of tax at source) or to get round the UK Swiss taxation agreement,' commented Wakeman.

'Anyone in such a position must now take urgent action to make a voluntary tax disclosure to avoid hefty fines or even criminal sanctions.'

In a statement released today, HMRC said: 'HMRC can confirm that we have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation.

'We have asked the [International Consortium of Investigative Journalists] to share the leaked data that they have obtained with us. We will closely examine this data and will act on it swiftly and appropriately.'

The sheer volume of data attached to UK individuals is likely to take some time to work its way into the vaults of HMRC, but the department's IT system is expected to be more than capable of handling the information coming its way.

'The data "theft" again raises the interesting issue of whether HMRC will be able to use the information to mount criminal prosecutions on the grounds of admissibility of "evidence", added Wakeman.

'With the last major data theft from HSBC in Geneva, the HMRC was only able to mount a single successful prosecution.'

'As a matter of policy, HMRC is not afraid of using illicitly sourced information to launch investigations,' explained Jessica Parker, a partner at leading financial crime and regulatory firm Corker Binning.

In 2010, following the theft of data from Swiss Division of HSBC by an IT contractor, HMRC acquired the details of hundreds of UK tax payers who held accounts. The first prosecution relating to the material was disposed of in July 2012.

'Michael Shanley was found to have evaded £430,000 in inheritance tax; he was ordered to pay a fine equating to almost 100 per cent of the tax evaded plus costs,' said Parker.

'However, when the Swiss private bank Julius Baer suffered a similar leak in 2012 the UK government declared that it would not "actively seek to acquire customer data stolen from Swiss banks" perhaps seeking to distance themselves from the German tax investigators who paid the bank employee for the information.

'It appears from the statement released today that HMRC have no qualms about the manner in which the Panama Papers have come to light and plan on making full use of any intelligence it contains.'