Why lawyers need to remain vigilant in the wake of the Paradise Papers
09 November 2017
by John Ahern
With the Paradise Papers data leak shining a spotlight on multinational tax avoidance earlier this week, the need for lawyers to remain vigilant when taking on new clients has risen.
What are the Paradise Papers?
’ is the name that refers to the leak of over 13.4 million files that range from 1950-2016. It’s the world’s second-largest data leak after last year’s Panama Papers leak. Of these files, 6.8 million relate to a law firm and corporate services provider named Appleby. These documents contain details of the financial affairs of numerous multinational companies including Facebook, Nike and Apple, as well as individuals including Queen Elizabeth II and Canadian Prime Minister Justin Trudeau. Other groups with leaked information also include Cambridge and Oxford University, and deceased Australian rock icon INXS frontman Michael Hutchence.
While these revelations of tax avoidance aren’t illegal (there are legal and commercial reasons why companies and individuals may choose to set up business in tax havens), if continued, there will be implications felt publicly. In Australia, if companies continue to find ways to avoid paying tax, there will be less money available for spend in public services.
How do the Paradise Papers tie in with lawyers?
The revelation of data in relation to Appleby has raised concerns amongst Bermuda Monetary Authority (BMA) officials, with regards to the firm’s AML/CTF regulations.
Publicly, Appleby have been part of an aggressive lobbying effort opposed to countries introducing more transparency in the offshore sector, claiming that firms are already doing enough. However, a report by the BMA outlined concern regarding Appleby’s behaviours, with AML/CTF at the top. These concerns have also raised further concerns about the firms’ due diligence processes and risk management oversight.
What can Australian lawyers do?
With data being more vulnerable than ever with an increased cyber-attack threat, it’s important that law firms remain vigilant. If a firm’s clients are found to have used illegal tax structures, there could be serious reputational damage to the firm.
Having a rigid AML/CTF process in place, as well as practising your KYC (know your customer) due diligence
is paramount in ensuring that you’re not supporting white collar crime.
If you’d like to know more about AML/CTF regulations in Australia
and KYC due diligence processes, read our latest eBook
‘Knowing your customer in a global world’.