It was inevitable, says Offshore Alert founder David Marchant, that the recent Paradise Papers scandal would be a major topic of conversation at the US-based investigative publication’s annual conference in London earlier this week, even though it broke less than three weeks before the conference was due to begin.
But although few at the conference suggested the Paradise Papers matter wouldn’t make life more difficult for “offshore” jurisdictions in the coming months – and many said it would indeed add considerably to the already-growing regulatory thicket they now must contend with – most of the conference focused on the other challenges those involved in offshore financial services routinely face, but which rarely make the headlines of mainstream news organisations.
Identifying fraudsters, for example, before they defraud your company, or your clients; becoming aware of the ramifications of the UK’s new legislation that makes it a criminal offense for individuals or organisations to prevent tax evasion; and how professional services providers need to prepare for the possibility of being sucked into legal cases when the actual fraudsters have disappeared with all the money, and the out-of-pocket clients’ lawyers seek restitution from anyone with any links to the deal in question.
David Haigh, a former managing director of Leeds United Football Club who had been scheduled to speak about his arrest and imprisonment in Dubai three years ago, on behalf of the Detained in Dubai organisation, was unable to make the event. He had been expected to speak about what regular visitors to Dubai and expats who live there should do to avoid getting into trouble in the emirate, and what precautions to take ahead of a visit.
Among the liveliest sessions was one that examined the “criminal” activities of Russian entities in the cross-border financial space, which featured among its speakers the widow of murdered ex-KGB spy Alexander Litvinenko. During a Q&A period that followed the prepared comments, a Russian member of the audience, whose identity wasn’t immediately known to the other attendees, challenged the speakers to defend their “lies” and “fine propaganda”.
Ahead of a session devoted exclusively to the Paradise Papers, a comment was read, in response to a request from the group managing partner of Appleby – the international law firm that saw 13.4 million confidential documents from its Bermuda office end up in the hands of the International Consortium of Investigative Journalists last year, which, as reported, formed the basis of the Paradise Papers exposé – stressing that there had been “no wrong-doing” on its part, and that the “leak” in fact had in fact been “an illegal theft”. (To read the statement in full, see page 2 of this story.)
During this session, Jude Scott, chief executive since 2014 of Cayman Finance, which promotes that island’s financial services industry, defended Cayman’s beneficial ownership regulations, which he noted had been in place “many years” and conformed to a model promoted by the World Bank.
Scott, pictured above, came to Cayman Finance after more than 23 years with Ernst & Young, and also spent time as the global chief executive of the Cayman Islands-based Maples & Calder law firm.
“There were really two recommendations” contained in a World Bank report on the matter of anti-money-laundering and related issues in the cross-border sector, Scott said, and the Cayman Islands adheres to both: “One was to use a central register for beneficial ownership”, the second one was to make use of professional services providers to oversee the register, “subject to regulation licensing and oversight.”
This “allows you to continue expanding the platform of the talent who are able to do these compliance services, but also, those organisations are closer to the transactions that actually doing, and have better insight into evaluating whether or not that really is consistent with the information they’re receiving”, Scott added.
“We’ve seen in other jurisdictions where they’ve moved to try to establish a central register, but it’s self-reporting…and the criticism of self-reporting registers is, unless you think that hardened criminals are going to certify to you that they are hardened criminals, it’s really a useless tool at preventing real, hardened criminality in a jurisdiction.”
Jude added that Cayman continues to work on perfecting its anti-money-laundering and beneficial ownership regulations “because the criminals [also] continue to evolve”.
At the end of the session, Offshore Alert’s Marchant said that his personal experience as “an investigative journalist [who is] one of the few who cover the offshore world all of the time” was that Bermuda, the Cayman Islands and BVI were “excellent jurisdictions”, and that, “the one country I consistently have problems with is the United Kingdom”.
“It’s much easier to get a court document in the Cayman Islands, the British Virgin Islands or Bermuda than [from] the London High Court, which will go out of its way to illegally deny you information that you’re entitled to,” he said.
“And the least responsive regulators are those in the United Kingdom. I’ve dealt with the Cayman Islands Monetary Authority on many occasions, and they are much more helpful and responsive than any regulator in the United Kingdom, [which have] never failed to disappointment me, even when I’ve had the most minor of requests. So it’s quite important to have some sense of perspective.
“No jurisdiction is perfect, no company is perfect. But I’m an investigative journalist, I look for financial crime. Offshore Alert has exposed countless financial crimes. But I never lose my sense of perspective.
And there’s a whole hierarchy in the offshore world, and Bermuda, the Cayman Islands and BVI are up there towards the top. And Appleby is up there at the top in those jurisdictions. My personal experience of Appleby is, this is a highly credible law firm.
“I think if any law firm’s client data was leaked, en masse, it doesn’t matter where that law firm was based – London, New York, wherever – there’s going to be embarrassing information, that’s just the way it is. But the corporate culture of Appleby, in my experience – and they once represented a party in the Cayman Islands that almost bankrupted me – is still a credible law firm.
“[Its] attorneys are experienced; they’re professional…are there one or two rogue attorneys? Perhaps there are, people trying to cut corners, trying to get ahead…but just for the purpose of perspective, it’s not like all offshore centres are bad, all offshore law firms are bad.”
Michael O’Connell, Group Managing Partner, Appleby:
“Last year Appleby was subjected to a sustained and highly sophisticated cyber-attack and our property was stolen. These are confidential and privileged documents relating to many of our clients.
“It has euphemistically been referred to as a leak. This implies that someone in my firm handed information to an outside party. That did not happen. Any such claim or assertion is false and it is grossly unacceptable for this to be repeated.
“This was an illegal theft and the stolen documents were then used by ICIJ including the journalists speaking on your panel today. This means that the journalists have made use of stolen property.
“We have engaged with the ICIJ and its media partners. We have answered their questions where it did not breach client confidentiality and we have tried to correct inaccuracies and educate where they have misunderstood the role of an offshore law firm.
“On the part of the media, there appears to have been no consideration as to whether the documents give rise to any matter of public interest or that they raise matters of sufficient importance to justify the major violation of confidence, privilege and privacy.
“It is also important to note that the ICIJ has refused to help us by returning any of our stolen property that they have in their possession, even though there is no conceivable way in which it would identify the source which naturally they wish to protect.
“It was at least made clear in media reports that Appleby has done nothing illegal. There was no wrong-doing on our part.
“However, by being prepared to use highly confidential stolen documents without justification, journalists are simply emboldening the actions of these serious criminal cyber hackers and facilitating them in future to repeat this crime. We suggest that this ought to be of primary public concern. Today it is Appleby’s stolen property, tomorrow it could be yours.
“What matters to us now is our clients. On behalf of my partners, I would also like to apologise to our clients and referrers for the inconvenience that this disruption has caused. We are grateful for the tremendous support we have received from our clients, my colleagues, our referrers and our business communities and we would like to thank them all.”